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Spain-based Inditex, owner of the Zara chain, may be the planet's largest clothing retailer, yet it's no world-beater when it comes to online commerce. Inditex Chief Executive Officer Pablo Isla, who has overseen a big store expansion in Asia since taking over six years ago, is out to change that.
Last September, Inditex launched a shopping site for Zara in Spain, the United Kingdom, Portugal, Germany, Italy and France. On Sept. 7, it will start accepting online orders in the United States, featuring such items as $79.90 super-skinny jeans aimed at Zara's target market of teens and young women.
Inditex has long used purely promotional websites to draw attention to its Zara product lineup as well as other company-owned chains such as Bershka and Massimo Dutti. Its Facebook page has nearly 10 million fans, and Inditex introduced a smart-phone app more than 18 months ago that allows consumers to browse new clothing arrivals.
However, selling goods online, something San Francisco's Gap has been doing for more than a decade, is only now becoming a key part of its strategy to expand sales in the United States. Inditex has about 50 Zara stores versus the 200-odd outlets Swedish rival Hennes & Mauritz (better known as H&M) has opened in the States so far.
"Zara's move online in the U.S. is overdue - it's the largest online apparel market in the world," says Sucharita Mulpuru, an e-commerce shopping analyst at Forrester Research. The "Web is a great strategy for them. It's much cheaper with their nationally recognized (Zara) brand to launch a Web store than to invest in real estate in 50 more malls in the U.S."
While the Inditex store network may be modest, the Zara brand is well regarded among the core 25- to 35-year-old consumers the company hopes to reach online. At the same time, Isla continues to chase growth in fast-growing developing markets. Inditex, which overtook H&M as Europe's largest retailer in early 2006, has opened 150 stores in China over the past five years. The company's sales have grown 53 percent since early 2007. Last year, it generated 89 percent of its sales in Europe and Asia and the remainder in the Americas.
Some analysts think Inditex's expertise in distribution and inventory management will serve the company well as it pushes online in the United States. Inditex's biggest brand, Zara, refreshes collections twice a week, despatching products quickly from distribution centers throughout Spain. The company encourages store managers to share shoppers' comments and fashion suggestions with designers rather than letting biannual fashion shows determine the trends for the next year.
The Spanish retailer's online business is likely to be more profitable than H&M's, according to Simon Irwin, an analyst at Liberum Capital in London, who estimates Inditex's annual online sales will be $2 billion, or 7 percent of group sales by January 2014. Inditex can deliver products from its distribution centers in Spain to the United States within 48 hours and will use existing facilities. By contrast, Irwin says, H&M will have to invest in distribution in the United States, since it doesn't make its own clothing and relies exclusively on suppliers.
For the moment, Inditex is not planning to expand aggressively its network of stores.
"In developed markets there is no need to rush expansion," says spokesman Jesús Echevarría. "We think it is the right time for us to expand online in the U.S."
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