Zara, a high-end fashion brand, is looking to expand its business in China. The company has refined its strategy to market in China and is aiming for more upscale stores to tap into the country’s growing luxury market. This shift in focus comes as competition from Chinese rivals heats. With a population of 1.4 billion, China is a key market for any retailer looking to expand their business. Other fashion brands should watch closely Zara’s move as they compete for a piece of this profitable pie.
An already well-implanted company
Inditex is present in 88 markets through 6,393 stores and still wants to open about 50 more stores by the end of the year. Moreover, the firm is present online in 25 countries including 21 in European ones, Canada, and the USA in America, and China and Japan in Asia. Mexico and South Korea are now being considered by the company and will be soon reached via the Internet. The group is very much aware of where the most potential lies: China, its second-biggest market after Spain.
To strengthen its position in the Middle Kingdom, Zara is now considering and planning to join the giant online mall: Tmall. The brand has already an online website in the country (launched in 2012) but with the expansion of e-commerce in China, and the importance of the second and third cities in the Mainland, Zara doesn’t have much of a choice.
The huge opportunity of Tmall
Let’s remember the importance of Tmall in the Chinese world, being run by Alibaba, it generates €177 billion of transactions and hosts 231 million active users. It is more than Amazon and eBay combined! As Burberry and Asos realized, Zara can’t miss this opportunity. Especially when McKinsey Global is recently saying that the online retail sales in China will fluctuate between €310 and €480 billion by 2020. It represents more than the American, the Japanese, the UK, the German, and the French market combined.
The benefit of Tmall is that it allows the brand to keep control of everything except the payment. The image of the brand will not be tarnished and the Chief Executive of Inditex Pablo Isla, says: « It is nothing different to online sales through our own webpage […] It is like opening a store in a shopping mall, so it’s very, very consistent with our image ». Zara will be using their own prices and own logistics so Tmall is promising. Moreover, it will help the brand to reinforce its 457 stores which represent already about 5% of its sales.
A hesitation that is no longer relevant
Even if Inditex already uses another site such, as ASOS or Pull & Bear, to sell their product, the brand is less disposed to do the same on the Chinese Internet. Nevertheless, they know that e-commerce is highly underappreciated but could represent a quarter of the fashion market. This is the reason why Zara will launch on Tmall for the autumn-winter 2014 collection.
The brand has a lot of market expectations and hopes for its high-margin garments and centralized logistics to make more profit than it has ever done before. After all, it already benefits from its own Chinese website so implanting Tmall is the next logical step to reaching the population and especially the Mainland. However, the competition is the same and the brand will have to stay alert to the other similar brand that will follow their example and try to win some share of the brand.