Has Zara Reached The End Of The Road?

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The group announced its 2017 fiscal year earnings report. In the 2017 fiscal year ending January 31st this year, Inditex group's sales volume was 25 billion 340 million euros, an increase of 9% over the same period last year, saying goodbye to the two digit growth for several years, and the growth rate slowed slightly.

Although the performance is still better than many peers, the market has responded strongly to the "decline in data indicators" as a popular fast fashion leader Zara.

According to the world clothing and shoe net, in February 23rd, the Inditex group released its annual performance forecast for 2017, a sharp drop of 7.06% on the day and 5 billion 900 million euros after the market value was evaporated. In March 14th and March 15th, the Inditex group's stock price fluctuated again, first experiencing panic selling, followed by a large single disk, with an amplitude of over 10%.

The decline of Zara in the beginning of 2018 led to a deep discussion and debate among the peers, industry experts and capital markets. Once the group experienced "the most difficult year", did they go to the end of the road?

Investment bank

"Old method" failure gross profit margin continues to decline

Morgan chase analyst Chiara Battistini has previously judged that sales in the second half of the fourth quarter of Inditex will slow down.

In his view, whether Zara's promotion in the fourth quarter of 2017 or the company's concentration at the end of January 2018 will release the depressed demand of consumers.

Such an action can make the company's sales increase, but there will also be "worries behind the scenes".

He said, "with low inventory into the new fiscal year", it will make the company's consumption demand grow for a long time, continue to lack strength, and the "huge pressure" of gross margin can be foreseen.

In addition, he also observed from the macro perspective that Inditex may face the risk of fluctuations in the euro exchange rate.

About half of the company's sales come from countries and regions outside the euro zone.

Many Asian and Latin American currencies follow the US dollar, which means that "strong euro and weak dollar" will also have a negative impact on Inditex.

As a result, JP Morgan expects a huge pressure on Inditex gross margin, which will reduce the company's revenue forecast by 5%, while reducing the target price of the share price from 38 euros to 35.5 euros.

Berenberg bank analyst Michelle Wilson also analyzed in the research report that, in addition to the traditional problems, Inditex is also facing some "new threats", such as ASOS PLC and Boohoo.com PLC and other retailers at the end of last year, recorded explosive growth.

Even if Inditex has a world-renowned, efficient and efficient supply chain system, it can not stop the trend of "new and old".

At the same time, most investment bankers also point out that the weaker stock price is an attractive buying opportunity, and perhaps there will be a case of capital inflow boosting stock prices.

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Self rescue

The electricity supplier must be chosen to reform and innovate.

In the Zara2017 annual report, one of the details that deserves special attention is that the main driving force of Zara's sales growth is the electricity supplier channel. Its revenue growth is over 40%, and its total revenue has reached 10%.

The industry believes that this data index has fully illustrated the market value of the Internet for fashion apparel brands.

However, in terms of the Chinese market, Zara has taken the path of electricity supplier on the right track, or has gone through the mode of "self built" to "enter into cooperation".

In 2012, Zara opened its e-commerce business in China, mainly adopting the way of self built electric business.

But in October 2014, it chose to enter Tmall because China's online business did not meet Zara's expectations.

Zara's old rival, H&M, was also a "self built platform" persistent faction. In the most important Chinese market, in 2018, H&M finally chose Tmall to open up the electricity supplier business, and it was officially settled in March 21st this year.

In addition to touchscreens, various investments in new technology can be described as multifarious and gimmicks.

It is reported that Zara will launch the AR (augmented reality) technology in 120 flagship stores in the world in April. When consumers download the specified App, close to the AR window in the store, the mobile phone will simulate the scene of the model trying on the clothes in the window.

Consumers can decide whether to place orders directly according to the AR simulation effect.

In addition to AR technology, Zara announced in March 9th that it would introduce robots to 80 stores in the United States to improve the efficiency of consumers' "online ordering and offline picking".

In the future, consumers will be able to receive online orders through machine scanning code in physical stores, saving the time of queuing at counters.

Prior to Zara, the Japanese brand Uniqlo, which is good at using electronic technology to interact, set up "smart buyers" electronic screens in some stores as early as 2017. According to their own calculations and reports, these "intelligent buyers" brought up 15% of the actual shopping conversion rate of UNIQLO.

In addition, it is another kind of operation that many brands seek to develop.

In the past year, the outstanding performance of H&M group is COS and Old Navy developed by GAP group.

According to relevant data, sales increased from US $132 million to US $625 million in the 6 years from 2009 to 2014, and nearly 5 times that of COS.

H&M Group expects that COS will enter the club of 1 billion dollars this year, and has the potential to become the second largest brand besides H&M.

And Old Navy, the "Old Navy", became the "pillar" of the GAP group with low performance in 2017. In the first and second quarters of the year, Old Navy is the only brand that has grown. Therefore, in September 2017, the GAP reform group issued a "reform order". Old Navy became the key support object, and even had the possibility of catching up with the "main card".

Expert

Consumer demand for personalized fast fashion still needs "precise layout".

"Now I dare not buy it."

Miss Lu, a shopping mall near the Zara store in Beijing, told reporters that at the beginning of the year, she bought a silk dress with a printed shirt. She could not wear it in less than a month. The skirt was washed once, and the color distribution was uneven. The stitches on the waist also shedded half, while the shirt was partly off the edge of the lotus leaf, causing serious jump in some areas.

Miss Lu said, "before buying Zara and H&M, the main thing is to look at the new styles, the price is less than the big ones, and the quality is also good.

But in the last two years, the clothes of these brands can not be worn several times. In my view, the cost performance is much lower than before.

"Consumers are increasingly demanding personalization, which is the root cause of the slow growth of fast fashion."

Ji Ming, an industry expert, said that after all, the domestic brands were constantly trying to imitate the products, technologies and logistics of fast fashion brands, which made more and more homogeneous products on the market and carved up the original market territory of fast fashion brands.

Cheng Weixiong, founder and chairman of Shanghai Liang habitat brand, pointed out that fast fashion brand "express" is more responsive to fashion trends and fast listing. Among the similar brands, rapid response management of flexible supply chain is the most powerful core competitiveness, followed by strong Gate store management. Standardized stores facilitate process control such as commodity planning, design and development, production procurement, logistics distribution, daily marketing, etc., to grasp user experience needs from bottom to top, do well in product development, capacity planning, new product listing rhythm, inventory control and promotion.

This "fast" is a model that domestic garment enterprises are eager to learn.

The sharp fall of Zara in 2018 is mainly reflected in the investors' concern about the short-term growth of the brand, because in the past year, the layout of the brand in the market development, store development and landing operation of the brand is lower than that in the market, so it appears rather weak and volatile in the stock market.

"Any brand has peaks, valleys, ups and down, which is very normal. Don't jump to conclusions."

Cheng Weixiong believes that from a long-term perspective, we should still correctly see that fast fashion brands are represented by Zara, and the collaborative development relationship between brands, products, stores and consumers is orderly. The current Zara mode is only a few fur and leather products that our domestic brands have learned.

In fact, their most powerful point is the use of new technologies, such as the recent new technology AR also has landing applications in Zara. This "advancing with the times" and the implementation and implementation of the site can still win more space for their development. The rational and precise layout of these details is worth studying and learning from domestic brands.

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