ZARA'S Involvement In The Price War "Quick Fix" Is Not Working.

The deeper panic of ZARA is the "quick but not broken" panacea.

Fashion is a feeling.

The way that little white-collar workers maintain sense is to visit ZARA from the mall opposite to the company, and easily get the most in trend of the season from shelves.

Starting from the opening of the first store in Shanghai in 2006, ZARA gradually accumulated the trust of many girls and quietly molded their consumption habits: opening the wardrobe, many clothes were classified as "season throwing" or "annual throw", but it did not affect the girls to enter the store when the next fashion trend came, and to pay for the same brand.

"This year, its clothes are super cheap, and I can't control myself if I catch up with the discount."

Wu Ning excitedly said, two days ago weeds list made her feel that she made a big profit: less than 100 suits and high heels. This season just looked out of the skirt discount only 79; the casual T-shirt, the price is very beautiful, as long as 49 yuan.

Out of the long row of fitting and checkout teams, the pleasure of buying and buying is conductive to the whole body.

But calm down, I can't help wondering: why is ZARA so cheap?

Involvement in the price war

Industrial assembly line, mass production, good cost performance - ZARA uses McDonald's way to sell "fashion fast food" to the whole world.

It pursued the ultimate high efficiency: entering China for 12 years, ZARA maintained a two digit growth rate in most of the time. It used 100 billion yuan to throw away Louis Weedon, Gucci, Hermes and other old companies, becoming a new tycoon in the traditional clothing industry.

Data show that ZARA parent company Inditex Group sales reached 25 billion 300 million euros in 2017, and the group's pre tax profit of 4 billion 300 million euros, of which ZARA was 16 billion 620 million euros in net sales and 3 billion 24 million euros in pre tax earnings, ranking first among sub brands.

Opening the business map, China's position is very important. As of the end of January 2018, Inditex group opened 593 stores, including 183 ZARA shops, the total number being second only to the headquarters of Spain.

However, in recent years, ZARA has to face more and more customers from the bustling stores, such as UNIQLO, H&M and MUJI.

Data from Euromonitor show that between 2012 and 2016, the market share of ZARA, UNIQLO and H&M H&M increased rapidly in China.

However, since 2014, UNIQLO ranked second in the ZARA market, second only to China's local brand, Hai Lan's home.

China's market share of three major brands in 2012-2016 years

With the influx of many merchants, the fast fashion market is rapidly saturated, and the movements of the major brands have long been discerned in order to maintain or even compete against the market share in fierce competition.

Since 2015, MUJI has cut 20% of China's more than 260 categories of commodities by expanding its consumption level through price advantage.

Mango also announced that its leisure series had cut its price by about 15%.

H&M has been attracting attention from cross-border cooperation to improve the cost performance of goods.

UNIQLO is also implementing full price reduction measures.

In the 2017 double eleven shopping carnival, UNIQLO occupied the first place in women's clothing sales, and sales in just one minute broke through billion level.

Its more than 500 stores nationwide support Tmall's orders and stores themselves, and the pace of online and offline channel integration is also ahead of ZARA.

Ryui Masa, CEO of fast retailing group of UNIQLO parent company, said that the environment of fashion retailing is now very difficult. It is a mistake for companies to raise prices in this environment.

A ZARA store clerk told the weekly magazine that according to her observation and understanding, in the face of fierce market competition, the price of clothing has been reduced by nearly 15%-20%. Through the discount activities under the online and offline synchronization, the discount can continue to gather a group of consumers.

Looking back over the past ten years, the fast fashion brand has been racing around and has boundless scenery.

And now the new consumption trend shows that a change is inevitable.

With the improvement of consumption ability, Chinese girls are becoming more and more popular on the road to fashion. Their consumption is becoming more and more cautious and their loyalty is getting lower and lower.

ZARA has always flaunted the concept of "fashion" between the stars, the common and the big names, which only appeals to customers who pursue cost-effective.

From the middle style and the price to the heavier quality, the girls need to answer the question of how to find a balance between the price and the quality of ZARA.

According to TechOrange, it has been reported that from 2017 to now, fast fashion has experienced an unprecedented recovery in the unprecedented luxury market.

According to a report released by Bain, luxury goods sales in China reached 142 billion yuan (US $22 billion 70 million) in 2017, an increase of about 20% over 2016, the biggest increase since 2011.

When the millennial generation becomes the main consumer force, they will no longer be satisfied with the short pleasure of fast fashion, but may become the main driving force for the growth of luxury consumption.

Only the fast fashion brands that are "fast" and "low" can survive the pformation and upgrading, and we must find new breakthroughs.

Betting on electricity providers to survive

The price cut Wu Ning felt was just a sign of ZARA's slowing down.

Over the years, ZARA, H&M and other fast fashion brands have taken up as many market share as possible, taking the expansion strategy of fast shop based in the world.

In the past 12 years in China, ZARA has continuously increased its goal of opening stores, and most of the 183 shops are in the second tier cities with higher consumption.

After running all the way, the rising performance met the turning point.

Since 2013, the gross profit margin of Inditex group has been declining continuously, and its profitability has continued to shrink.

Its sales grew by only 9% in 2017, saying goodbye to its two digit growth.

The first quarter of 2018 is even more optimistic.

According to the results of the report, the sales growth of the group narrowed to 2% from 14% last year, and the net profit increased by only 2.23% to 669 million euros (about 5 billion 37 million yuan).

The growth of the two key business indicators is in the doldrums, which confirms that the fast fashion leader is no longer in the past.

In the same period, the management of the company said that it was suffering from tremendous competition pressure from other network retailers and suffered a painful period of pformation.

As physical retailing began to lose momentum, shops that stride to expand became the burden of restricting business.

In 2016, Inditex group proposed a plan to slow down the expansion of the entity sales network in order to find a better balance between entity and online sales.

In a report on Inditex, Ou said that the specific strategy is to focus on developing flagship stores and online businesses.

Close the smaller stores, bring the small storefront customers to the line, and use flagship stores to support brand assets.

ZARA's growth in China has slowed to 10% in the past few years, to 6%-8%.

In early 2017, the biggest flagship store in China was closed.

The store, which is located in the core area of Chengdu's urban area, occupies three floors, with a total area of more than 3000 square meters.

Because the actual volume of passenger traffic is far from expected, five years later, we have no choice but to shut down.

As of the end of April, the Inditex group had 7448 stores in 96 countries and regions in the world, with a reduction of 27 in only one quarter.

JP Morgan publicly cracked down on the development of the fast fashion industry in the world. In February 23rd this year, it pointed out that because of the frequent discount and promotion of ZARA, the company's gross profit was under "tremendous pressure", and the target price of Inditex was reduced from 38 euros per share to 35.5 euros per share.

The company's share price plunged 7.1% on the day, a 3 year low and the market value evaporated 5 billion 900 million euros.

The loss of wealth is also reflected in the list of rich people.

Amancio Ortega, the founder of the world's richest Inditex, has been on the top of the Bloomberg list for the 4 time. Now it is only sixth, less than Bezos and Mark Zuckerberg.

Inditex group CEO Pablo Isla revealed that the company's performance slowed down compared with the same period last year, mainly due to the strategic adjustment of offline entity store network and the impact of continuously closing redundant stores.

The group's e-commerce business continued to maintain steady growth.

Management said that the electricity supplier channel has become the most important driving force for performance.

The pulling effect of online channels has emerged.

In 2017, online sales contributed nearly 2 billion 530 million euros in revenue, accounting for 10% of total revenue, with an increase of 41%.

Online shopping service has expanded to 49 market.

According to the cloud consulting analysis report, sales of Tmall ZARA in the first quarter of this year increased by 56% over the same period last year.

Zara2018 Q1 Tmall core industry sales overview (Note: brand other non core industries are not included)

Better management is bringing ZARA back to life, but its winning edge is facing unprecedented challenges.

Fast logic is broken

Only 399 can bring back a small fragrant wind coat from ZARA. What Feng Yuan looks up to is that Chanel store is almost the same style and style, with 200 times the price tag.

Despite the huge gap, she comforted herself.

A lot of similar styles can be found on the ZARA shelf. Nearly two weeks, there are new shelves and more than 18 thousand styles every year. It can be made in 7 days, 14 days in the world and 30 days in the cabinet.

Analysts once said that no competitor could completely replicate the business model of Inditex group, nor could it keep pace with its update.

ZARA satisfies the freshness of girls like Feng Yuan, but all the original designs obviously can not keep up with the fast-paced supply chain.

"We do not produce fashions. We are just

ZARA's plagiarism is a long history.

The objects include Balmain, Valentino, Celine, Balenciaga and a number of independent designers, causing the dissatisfaction and boycott of the majority of fashion circles.

The law stipulates that if an item is protected by copyright, it can not be functional. This loophole has left much room for ZARA plagiarism.

In Europe, ZARA pays tens of millions of euros to the top brands every year.

But it did not give up this design pattern. Obviously, the profits earned from it were much higher than the amount of fines.

Compared with the annual income of 253 billion euros, this amount of compensation is negligible.

Such a day may soon come to an end.

Recently, the parent company OTB of Diesel and Marni has had the result of the design plagiarism lawsuit against the Inditex group for 3 years. The judge of Milan decided that ZARA would lose the lawsuit. Copying the copy would become a dead end.

The deeper panic of ZARA is that the quick cure does not work.

In the business model based entirely on customer needs, ZARA has built up a huge system that can respond quickly to customer needs, with shops as its core.

Every week, sales data and customer needs are sent back from the store to headquarters. The design department designs the style according to the needs, then submitting it to the commercial department to evaluate the cost and price, then start to plate, sample the garment, pfer the factory production, and finally store it in the super large logistics warehouse.

ZARA can deliver all products to all European stores within 24 hours and send them to all stores within 48 hours.

Speed is the most fundamental winning weapon.

In the meantime, ZARA will shift its focus from shop to Internet, and its sensitivity to customer demand is bound to decrease.

Coupled with a limited practice of plagiarism, long design process and slow response to customers will directly affect the customer experience, and the strong supply chain advantage can be rewritten, and ZARA will be reduced.

Face up to competitors' competitiveness.

The core of the "fast" logic is changing, and the old ZARA is showing signs of weakness.

Will it continue to occupy the girls' wardrobe after it slows down?