Why Can'T China Get Out Of Zara?

In the past few years, almost all of China made

The crisis of brand comes from its high inventory.

The result is a sharp drop in profits or profits.

In the collective haze of Chinese clothing brands, why can't China get out?

It has been a long time for the industry to ask for a long time. The background of this problem is that China's apparel manufacturing and retail industry is gradually improving, and apparel groups that have generated more than 10 billion turnover have appeared one after another.

We belong to Zara.

This word comes from Europe. In English, it is called Fast Fashion or McFashion. Mc's prefix is taken from McDonald 's, which means selling fashion like McDonald's selling fast food.

Fast fashion is characterized by many styles, low prices, and low quantity to meet the needs of consumers.

According to the world clothing shoes and hats net, Zara has undoubtedly dominated the fashion in recent years, far away from competitors such as UNIQLO, H&M and Topshop.

In 2016, Zara parent company Inditex (BME:ITX) sales increased 12% to 23 billion 310 million euros (172 billion 900 million yuan), net profit rose 10% to 3 billion 160 million euros (23 billion 400 million yuan), and two data reached a new high. In the first half of this year, Inidtex continued its double-digit growth in revenue, and continued to sit firmly in the chair of the world's largest apparel company.

In September, the founder of Inidtex group, Amancio Ortega, once again replaced Microsoft founder Gates as the richest in the world with a net asset value of US $85 billion.

Amancio Ortega became the richest in the world. In October 2015, Amancio Ortega has become the richest in the world. In fashion apparel industry, Inditex market value has entered the 100 billion euro club, second only to the world's largest luxury group LVMH.

The picture shows that the latest quarterly performance of Inditex's brand accounts for about 70% of Zara's performance.

In addition to Zara, Inditex's brand also includes Bershka, Massimo Dutti, Pull&Bear, Stradivarius, Zara Home, Oysho and Uterque.

As of the first quarter of this year, Inditex has 7385 stores in 93 countries around the world.

Zara entered China in 2006. As of the first half of 2017, Zara has nearly 700 stores in China, second only to its headquarters in Spain.

At the annual earnings conference, CEO Pablo Isla of the group talked about the Chinese market. Although no explicit figures were released, he said that the appetite of Chinese consumers is growing and is very optimistic about the Chinese market.

Why Zara?

The success of Zara has been interpreted by a large number of media. Bloomberg research and analysis points out that the success of Zara's parent company Inditex is mainly due to the flat management structure and rapid response to big data.

At this point, the quick response mode shows its advantages, that is, it can react in real time to consumers' changing tastes, and many other Chinese clothing brands can hardly do this.

Compared with other fast fashion brands, Zara's corporate culture is not so easily replicated as the latest fashion trend. This is also the key to Inditex's continued success.

In addition, about 70% of Inditex's products are produced in short term delivery, which means that Zara can flexibly design and produce according to market demand and avoid unnecessary inventory, so Inditex once again recorded the lowest inventory in the industry last year.

Comparison of supply chain between Zara and competitors

Richard Hyman, an independent analyst in London, points out that Zara's production mode has broken the traditional rules of the fashion industry and achieved the real sense of season free fashion.

Although global fashion retailing is sluggish, Pablo Isla is not surprised by the trend of growth. He admits to the outside world: "we can respond quickly to the latest data and market environment, adjust our strategy, and design team has a high degree of control over the fashion trend of the product, and the performance will not be affected by the downturn in the environment."

With the rise of social media, photo sharing is becoming more and more popular. Whether the product is fashionable or product is "good or bad" or even beyond other factors.

This explains why so many consumers complain that the quality of Zara products is not good, but they are still keen on buying a lot of clothes in Zara.

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Pablo Isla also stressed that the speed of Zara is not entirely dependent on production speed. Brand 60% comes from the supply chain of Spain, Portugal and Morocco. Compared with other brands in Asia, the pport time is greatly reduced. When competitors' new products are still floating in the Pacific Ocean, Zara's new products have already been sent to stores for sale.

Some analysts also believe that the success of Zara is also due to the recognition gained in the minds of consumers. Compared with H&M's annual income of 4%, Zara has no other advertising budget besides social media marketing activities.

For consumers, the product catalog updated two times a week is the best promotion.

Now, Zara is far away from its competitors.

Brand enthusiasts are familiar with this kind of update time. Every Monday or Friday, many people regularly check new products, whether they buy or not.

According to a European survey, the sales rate of the general fashion brand stores is 3.5 times a year, while that of Zara is 18 times.

The extreme speed created the ultimate profit for Zara.

Can Zara emerge in China?

Represented by Metersbonwe, Hai Lan home, Anta and other domestic clothing brands, China's fashion brand development mode is "celebrity endorser + Central TV advertising + agent sales channels", who is the voice of the big, who channel ability.

From 2011 to 2012, high inventory and weak retail sales hit China's garment industry.

China says it is Zara and its performance is almost in trouble.

When Metersbonwe founder Zhou Jiancheng created his ME&CITY in early years, he wanted to follow the Zara supply chain and even go deep into his factory to investigate, but the brand failed to grow as big as possible.

In apparel industry, high storage is often the most difficult problem for apparel enterprises.

It was also inventory pressure that had worn down the American Apparel. The fashion business in 2014 was forced to close nearly 800 stores due to inventory pressure.

At the end of the first quarter, the inventory exceeded $3 billion only when the announcement of the new brand image and the 600% net profit growth in the first half of 2011, increased by 600 million yuan compared with the end of 2010.

The supply chain system plays a decisive role in brand profit.

Zhou Jiancheng used to compare the United States with the fast fashion abroad: "some of their products are the same as those of the US state, and the United States has no money to make money, but they still have profits. This is a good supply chain."

Why did Zara imitate Esprit's failure?

Giordano, Baleno, and burshlung were once called the three giants of fashion clothing, and they entered the Chinese market earlier than Zara, but nowadays there is no longer a brand life.

The Hong Kong brand Giordano, founded in 1981, was listed in Hongkong in 1991 (Giordano international 00709.HK), and officially entered the mainland market in the following year, creating the first place of China's casual wear retail chain store.

In 2013, Giordano reached HK $5 billion 800 million and opened 2642 stores worldwide.

However, for a long time, Giordano's sales in recent three years have declined to varying degrees, and the inventory problem is worrying.

In 2015, the number of Giordano stores was reduced by 81, and its sub brand EULA also announced that it had stopped operating.

Today, Giordano has almost disappeared in the mainstream business circle of the first and second tier cities.

Founded in the early 80s, Baleno was acquired by Hong Kong listed companies De Yongjia (0321.HK) in 1996 and became its Affiliated Companies and subsequently entered the mainland market.

With the help of Andy Lau, Faye Wong, Maggie Cheung and other big brands of celebrities as spokesmen, Baleno has more than 4000 stores in the peak period.

But in recent years, Baleno has been shrouded in the shadow of continuous loss and pformation loss. In the past 2011-2015 years and four years, a total of 617 stores were closed, and 12 were closed on an average monthly.

As of September 30, 2015, the total number of Baleno stores decreased to 2849.

At the beginning of last year, Baleno Shanghai was sold on the cheap by the parent company Hongkong de Yongjia group. The paction price as low as 250 million yuan was a big surprise.

The fashion industry is undergoing a brutal reshuffle. Today, the market structure can be described as "ice and fire". On the other hand, the old fashions are facing the trend of closing stores. On the other hand, the fast fashion represented by Zara has seized half of the fashion industry.

In order to pform, domestic brands have introduced the Zara mode.

For example, Esprit will shorten the delivery time from 9~11 months to 3~4 months.

But there is still a huge gap between these models and product design compared with Zara.

ZARA is actually a SPA (Specialty Retailer of Private Label Apparel, private brand clothing retailer) business mode, that is, enterprises from production to retail all hand control, in order to improve the speed of circulation, reduce operating costs.

Specifically, Zara no new fashion designer from the creative, design, to plate, clothing, shop shelves, the fastest 2 weeks to complete.

This unprecedented pace of promotion is inseparable from the credit of Zara's self built factory. It is reported that Europe needs only 24 hours to reach the store, while the rest of the world only needs 36 to 72 hours. When the goods arrive at the store, they will be directly on the shelves, so that the Zara shop will always give consumers a new feeling.

In contrast, the domestic apparel brands that rely on retail wholesalers have always been the traditional "light assets" route of the garment industry, which may be a great burden.

The only job of domestic clothing Brand Company is to design new products and hold an order meeting.

Specifically, after the new product design is completed, the company often needs to go through the fabric purchase period for two or three months before making the production by the factories. During this period, the order meeting will be held, and the production will be adjusted according to the orders and orders of the branches and agents, and finally the distribution and replenishment stages will be reached.

A batch of new products will take several months to complete from design to rack.

Zara the shortest time from design to putting clothes on the counter is 7 days, usually 12 days, and about 12 thousand fashions a year.

In addition, the mode of ordering wholesale business is the main mode, and the proportion of orders that are destined for long cycle is still high.

The short supply chain makes domestic brands unable to react quickly to market changes, and is unable to timely launch products that conform to the trend of consumption.

Zara says it has an average listing of over 12000 models annually, with an average of 20 minutes to design a garment, which is more than a lot of domestic brands.

In addition, because many domestic apparel brands do not participate in the process of garment production and retail, the ability to control clothing production costs is also very weak.

According to the parties who were responsible for Esprit's business in China, Esprit's supply chain cost is about 30% more expensive than Korean clothing brand, let alone compete with Zara.

Although the domestic apparel brands are now turning to "vertical mode", we should strengthen cooperation with vertical retailers, increase sales channels such as "direct sale" and "monopoly", so as to improve product design, shipment and pricing.

But over the years, it has formed a very close relationship with many dealers. The genes of wholesale and retail are difficult to eradicate. The ability of brand building and maintenance following the department stores has become very weak.

From Zara to the store of the largest men's clothing brand at home in the world, we can see the importance of this "control ability" to the brand.

ZARA has opened more than 2020 stores in more than 60 countries, of which 90% are self owned shops, the rest are joint ventures and franchised stores.

In addition, the location of Zara is often located in the bustling business circle of big cities, and all of them are large stores. The super large experience space of 2000 square meters and constantly updated display of goods give consumers the pleasure of shopping experience while satisfying the consumption demand of one-stop shopping.

And Hai Lan's home is a "light asset" mode, which is to sell goods on the upper reaches of the supply chain, and open stores in the lower reaches, so as to achieve higher business efficiency, and stores penetrate into all the large and small cities in the country, most of which are franchised stores, which may be an obstacle for domestic clothing brands to not get up quickly.

It is worth noting that Taiping bird clothing sales increased by 7.06% to 6 billion 320 million yuan over the 12 months ended December 31st last year, but net profit decreased by 20.2% to 428 million yuan over the previous fiscal year, which was lower than expected.

For the sharp decline in profits, the company refers to the core women's clothing brand PEACEBIRD design style switching leads to less than expected sales.

Some analysts pointed out that this is probably the Pacific bird franchise, and concentrated on two or three line cities. By the end of 2016, the company had 1198 Direct stores and 2835 franchisees.

As a matter of fact, Chinese clothing enterprises, which have been drying up for a long time, often understand the risks of high inventories but can not hide the temptation of short-term interests.

From the performance of Hai Lan's home, the net profit growth rate has indeed slowed down, from 75.83% in 2014s to 5.74%, which shows that the profit growth space of the group is being compressed.

It is noteworthy that the home of Hai Lan realized the importance of speed. In August of this year, Hai Lan's home announced 100 million of its shares, known as "China Zara" UR.

Distinguished from other domestic women's clothing brands, Li Mingguang, founder of UR, has publicly stated that she is "Zara student". From the very beginning, UR has been running according to Zara mode.

Compared with the fast fashion with higher standardization such as UNIQLO and MUJI, UR pays more attention to the fast supply chain and integrates the trend of the season.

"My core competitiveness lies in the ability to create brand and brand aesthetics, which is also the core competitiveness of UR."

Li Mingguang stressed earlier in the media interview.

Now, UR will continue to grow at the rate of 60 to 100 stores per year. It is estimated that the number of stores will exceed 400 in 2020, and the business scale will exceed 10 billion.

Last year, Li Mingguang disclosed that UR's revenue was 2 billion yuan.

However, for this fast-growing clothing brand, before facing the problem of how to become "China's Zara", it still needs to solve a problem: Chinese clothing brand will enter the bottleneck after 10 billion yuan of revenue.

China's largest clothing brand, Hai Lan's home revenue in 2016 is 17 billion yuan. UR can break through the long bottleneck of Chinese clothing brand and is still unknown.

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Zara can still go far.

However, Zara is not a worry in China. Some analysts have pointed out that Zara is facing a threat in the Chinese market, and the mainstream view may not be noticed yet.

First of all, China's e-commerce and O2O (online to offline) may weaken the traditional advantage of this fast fashion giant.

Fashion retailers are the primary source of change in e-commerce and online to offline activities in China.

First, fashion retailers are changing the way consumers interact with consumers.

Consumption is no longer just a walk into a shopping mall, and then into a good store, and now consumption experience has become a combination of shopping malls and smart phones and online ecosystem.

What will be the eventual evolution of this offline and online blending mode is yet to be seen, but China's retail industry is one of its biggest goals.

Besides, the apparel supply chain has been affected by new technologies and may even change.

This brings the question: can the fast fashion global operation mode be reformed through technology? Can Chinese companies acquire the traditional advantage of fast fashion giants through technology? From this year's Tmall double 11 data, we can see that Zara has no advantage and is left behind by its competitors, UNIQLO and some domestic brands.

It is worth noting that Zara can not get the same profits in China from the data, especially at present, it is not sure that it can also see the increase of customers' arrival in Chinese companies, which leads to the rise of brand value.

China's fashion cycle has been very fast. Apparel brands actually carry out most textile production in China. Therefore, it is not clear whether Zara can maintain a high income and total profit margin in China, and the total profit margin in other parts of the world is generally 60%.

Another point of view is that Spain's Inditex group is too slow in management and Zara has been doing well in Spain for a long time, which can lead to complacency.

It may not be able to adapt to the fierce competition of brands such as Alibaba and other electronic business platforms, while Amazon is currently invading the clothing market. In just a few years, its market share has reached second place.

It is a disturbing fact that there were no online stores in Zara until around 2010, when Gap opened online stores for 10 years, until 2014 when Zara opened online shops in Tmall.

Zara's inventory and logistics management are first-class, but the reaction rate to e-commerce is incredibly slow. That's why e-commerce and O2O crisis mentioned above are likely to happen.

What is more noteworthy is that according to data monitoring, the price of clothes sold by Zara in the Chinese market has decreased by 10% to 15% since this year. This may reflect from the side that the group did not achieve the expected growth rate in China, and began to feel intense competition with the rise of domestic clothing brands.

Put aside the fast fashion and blindly pursue the speed and ignore the "plagiarism accusation". From a practical point of view, the fast fashion industry's survival rule is not the fastest, only faster.

Even Zara, at any time, is faced with a sense of crisis that is not fast enough.

Some analysts point out that in addition to products, the competition for fashion retailing will be more competitive in the future. Zara has no reason not to be vigilant.

If Zara becomes conservative one day, there must be a new brand to knock it down.

More interesting reports, please pay attention to the world clothing shoes and hats net.