Zara'S Parent Company Changed Hands, And The Former Giants Bid Farewell To The Golden Age.

On Thursday, Inditex Isla chairman and chief executive officer of Pablo Isla announced that she would resign as chief executive, and CEO will continue to be chairman of the group.

The resolution will take effect after approval by the board of directors and shareholders in July this year.

Pablo Isla became chief executive of the world's largest fashion group in 2005 and replaced Amancio Ortega as chairman in 2011.

In 2017, PabloIsla was voted the best CEO in the world by Harvard Business Review.

Under the leadership of PabloIsla, the Inditex group, led by the core brand Zara, is expanding rapidly in the world, especially in the Asia Pacific region.

18 years later, the Inditex group chose to change hands. Does that mean that Zara is eager to adjust its strategy as a remedy for the curtain call of the golden age?

Growth stall

Inditex group was founded in 1963 by Oman Theo Ortega (AmancioOrtega), the richest man in Spain. It has eight brands such as Zara, MassimoDutti, Pull&Bear, Stradivarius and so on.

Despite its multi brand strategy, its core brand is still Zara, contributing nearly 70% of its total sales.

With the insight into the psychology of female consumers, Ortega created the world's largest fashion group by combining light and extravagant design with cheap and fast turnaround mode of production. It once surpassed Bill Gate to reach the world's richest man.

But in recent years, under the attack of fast fashion and cold current, the traditional clothing retail giants such as Inditex are also hard to do well.

Zara's parent company Inditex released its 2018 earnings report. In the 2018 fiscal year ended January 31st, its annual net sales amounted to 26 billion 145 million euros, an increase of 3% over the same period last year, and net profit increased by only 2% to 3 billion 440 million euros.

In the 2015 fiscal year, the profit growth rate was 14.9%.

Previously optimistic online sales channels, though recorded an increase of 27%, contributed 12% to total revenue, or about 3 billion 200 million euros, but still fell sharply compared with the 41% rise in the 2017 fiscal year.

In addition, the Inditex group's performance in Spain also began to decline from 2015.

In 2018, the group's revenue growth in Spain was 3%, compared with 4% in 2017 and 6.2% in 2016.

As of the end of the reporting period, Inditex group has 7490 stores in the world. In the past year, 370 stores have been added, of which nearly 80% are outside Spain, facing the pressure of exchange rate fluctuations and rents rising.

In 2018, the group's store rents increased, and the rental cost increased by 1.4% to 2 billion 392 million euros (18 billion yuan) compared to the same period last year, accounting for nearly 10% of its total revenue.

Obviously, as the retail growth channel loses momentum, the physical store has become a huge burden to crush Zara.

The former throne is facing a crisis of encroachment. It is imperative for a fast fashion industry to fight for it.

Accelerate the pformation of e-commerce

Faced with doubts from the market, Inditex chose to use online channels as the preferred way to restore high growth.

The promotion of Carlos Vrespo is one of the measures within the group.

CarlosVrespo joined Inditex group in 2001 and is mainly responsible for supervision, management, IT, logistics, pportation, procurement and sustainable development in the position of chief operating officer.

In the future, he will report directly to PabloIsla and discuss with him the overall development strategy of the company, which is fully responsible for the group business.

Citibank analyst AdamCochrane told Reuters that "the company's overall strategy and implementation plan have not changed."

Pablo Isla admits that Zara and other brands are being threatened by changing consumer habits and online retailers such as Amazon. He stressed the core role of CarlosVrespo in digital strategy pformation and group sustainability.

At present, the main brand Zara has opened its business in 202 markets.

Last year, PabloIsla announced that Inditex intends to fully realize digitalization before 2020, and open up offline store inventory and e-commerce platform.

It was not until 2014 that Zara opened its online store in Tmall, which has lagged behind many competitors.

CoyeNokes, partner of OC&CStrategyConsultants, a management consultancy, has said that Zara is lagging behind the digitalization of its apparel counterparts, accounting for only 12% of online sales, while the average online sales of its competitors are between 20% and 30%.

However, for the Inditex giant ship, whether Carlos Vrespo can bring changes to the company may not be able to get instant results.

Challenges

At the beginning of this year, Zara replaced the brand new logo, more compact and feminine, revealing the signal that the brand will pform to high-end market.

With its "first-class image, second rate design, three quality and four price", Zara has been highly sought after in China since its entry into China in 2006.

China was once one of the fastest growing markets in the Zara layout.

According to Inditex2018's earnings report, China's market has grown over the years, contributing 364 million euros to Spain's second largest market after Spain. Spain has contributed 1 billion 650 million euros.

"Fast" was once the Zara's kingly way. Now, the trend of Chinese market is changing faster, and a little carelessness is abandoned by the times.

Fast fashion is highly competitive and consumer loyalty is low.

Zara has catered to the contradiction between the "cheap and fashionable coexistence" of the younger generation of consumers, but has not kept pace with the upgrading of consumption. That is, the growing consumers have higher requirements for design and quality, and competitors such as UNIQLO are taking advantage of the gap.

The long tail effect of the Chinese market is highlighted, and the clarity of consumer demand particles has increased.

To add insult to injury, in July 2018, the parent company OTB of Diesel and Marni had a result of the design plagiarism lawsuit against Inditex group for 3 years, and Zara lost the lawsuit.

This is the first time that Zara has failed in such cases.

This means that the killer of Zara has been counteracted.

Zara launches more than 18 thousand new models every year. From design to store cycle is only three weeks. All original designs can not meet such a business mode. Plagiarism has become a natural choice.

A cold spell is sweeping the fast fashion field. In addition to Zara, H&M and GAP, it is also in decline. NewLook, Forever21 and Topshop have been evacuated from China. UNIQLO is also accelerating pformation. Every company remains the desire to survive in crisis.

From the trend of stock prices, in 2011 ~2017 June, Inditex climbed to its peak, but after that, the share price began to decline. As of May 23rd, Inditex group's share price fell 1.98% to 24.79 euros, and its market value was about 77 billion 200 million euros, compared with the peak period of June 2017's stock price, it dropped 30%.

Zara, who has entered the bottleneck of growth, will face the turning point?