How To Maintain A High Profit Margin Into A Fast Fashion Brand Zara

According to the world clothing and shoe net, although sales volume has been high in recent financial years,

There is still trouble.

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The problem ahead is how to maintain a high profit margin.

In the two quarter of the past 2017 fiscal year, the gross profit margin of Inditex group, the parent company of Zara, dropped to 54.8%, a record low of nearly 8 years ago.

Previously, the group's 2016 gross profit margin in fiscal year 57% was also the worst performance in the same period in recent years.

Of course, the euro exchange rate is affected by changes in the political and economic environment.

But the more direct reason is that Inditex has made changes in store strategy for Zara worldwide, and is still actively exploring new markets.

Take the British market as an example, according to reports, Zara British branch in the 2016 fiscal year despite the 13% sales growth, so that the sales figures fixed at 603 million pounds, breaking the 600 million pound mark, but pre tax profits have plunged sharply, from 58 million 300 thousand pounds to 32 million 900 thousand pounds.

In the relevant statement, Inditex explained that the above changes in the profit performance of the market were mainly due to the closure of some stores in the UK and large-scale investment in existing stores to merge multiple small stores into a large store and upgrade the hardware and software facilities of the store.

At the same time, relocation of branch offices in Britain also increased costs.

Zara's performance in the India market that it is actively expanding also illustrates some problems.

In October 4th, Zara launched its online shopping mall for the first time in 7 years after its entry into India.

Inditex Jes s Echevarr a, director of publicity affairs at headquarters of India, introduced Zara's new version of the online shop in India. The Zara shop in India will sell the same products at the same price and the same sales strategy with the entity store, which will enable the India market to further implement the "all channel strategy" promoted by a series of means, such as Zara, which is improving through the global stores.

It is worth mentioning that the Zara did not take the price following strategy that was used in the development of the entity store market, that is, to comply with the low price competition in the India market. When competitors such as H&M lowered their prices and sought to compete with local brands, they also lowered the pricing of commercial products.

Zara's last big price cut was in India when it opened its first store in H&M2016.

At that time, Zara reduced the price by 15% in response to the increasingly fierce competition.

This reflects how Zara controls the profit margins at the present stage.

At least in the India market, Zara now pays more attention to the long-term layout and healthy profit margins than to flattering customers at a low price to boost sales.

In addition to the UK and other global markets that are pushing store reform, Zara's investment, though it has lost short-term profits, is laying the foundation for improving long-term revenue efficiency.

In this way, H&M and UNIQLO are also adopted.

Now the fast fashion market has basically spent the time of smashing money.

Although there are still many emerging markets waiting to be discovered, in order to achieve sustainable development, the brand has obviously shifted more energy to the mature market where the intensive cultivation has been in the bottleneck of growth.

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