ZARA Closed Shop, Forever 21 Bankruptcy Fast Fashion Why Slowly Out Of Fashion?

It is already a common understanding that fast fashion business is not easy to do. Not long ago, Forever21 filed for bankruptcy protection as a fresh example. A series of preludes such as discounts, clearance and closing shops did not surprise the outcome.

And 36 krypton found that fast fashion head card ZARA recently also closed two Beijing core business circle stores, one is the Dongzhimen Raffles shop, the other is the new Dongan store in Wangfujing. It is understood that the two shops have been closed for more than two months, the reasons for specific shops are unknown. The new store is in the decoration stage, and the merchants are lululemon, DIESEL and LANCOME respectively.

One guess is that the lease will not renew after the expiration of the lease. ZARA entered China in 2006. According to 36 krypton, fast fashion brands signed contracts with shopping centers between 10 and 15 years ago.

"Shopping centers are constantly new things, so it's very normal not willing to give the best location and the largest area to fast fashion, especially in the front line shopping malls." A senior commercial real estate practitioner told 36 krypton.

Whatever the specific reason, the store is not going well. In fact, ZARA has long started to "get rid of the burden". In February 3, 2017, the closure of the nation's largest ZARA flagship store in Chengdu attracted a sigh of regret. Last September, the closure of ZARA's first store in New York shocked the fast fashion circle.

ZARA is no longer ZARA.

It is an indisputable fact that the revenue growth of Zara parent Inditex group has slowed down in recent years.

Since the 2015 fiscal year, Inditex group's net profit growth has been declining year by year. In the 2015 fiscal year to 2018 fiscal year, net profit rose from 14.9% to 2%. The figure of 2% has a lot to do with the slump in the Chinese market. In the past two years, the average selling price of Zara in the Chinese market has fallen by 10% to 15%.

ZARA's H&M is not good either. Between 2012 and 2016, H&M's operating margin dropped from 18% to 12.8%. In order to ensure profitability, H&M group decided in early 2017 to abandon the target of adding new 10%~15% stores every year, and vigorously develop the business of e-commerce, which was also closed in 2017 in China's landmark Xidan Joy City store.

Even in the three quarter of 2018, H&M inventories accounted for 33.5% of total sales, which exceeded the warning line of 30% of the clothing enterprises' health stock rate. H&M had to burn the sky inventory, resulting in a 41% drop in corporate profits.

For fast fashion brands, the expansion of stores directly affects year-round sales and profits. But between 2016 and 2018, the number of ZARA stores remained unchanged at 193, 199 and 195 respectively. It is worth noting that in the 2018 fiscal year, the number of Inditex stores closed in China for the first time was higher than the number of new stores, that is, the first negative growth.

In contrast to ZARA and H&M, another fast fashion brand is UNIQLO. From 2015 to 2018, UNIQLO increased 246 stores in China, 15 times the number of ZARA, and 1.4 times that of HM, including all COS brand stores.

Behind the rapid expansion means better performance growth. The data of the first three quarters of fiscal year 2019 issued by UNIQLO parent company XXX group are very good evidence. Data show that consolidated income, revenue and pre tax profits, net profit of the parent company has set a record high, mainly due to the strong growth of the brand UNIQLO in the Chinese market.

By contrast, ZARA has no bright data. The golden age of ZARA seems to have passed forever.

Back in 2006, ZARA opened China's first entity store in Shanghai to let the Chinese see what the real Fashion is. What is even more shocking is that this store created a staggering sales of 800 thousand yuan per day in the Spring Festival, when the same sales volume of Chinese clothing brands was 10 thousand yuan.

ZARA took a fancy to the huge consumption potential in China and opened the crazy enclosure mode. Inditex annual report shows that in 2008, ZARA had only 23 stores in China, and increased to 44 in 2009. In 2011, the number of new stores opened in ZARA in China reached 120, and it expanded to second tier cities such as Harbin and Kunming.

It can be said that the Chinese market before and after 2010 is the period when the fast fashion brands are red. At that time, the domestic original brand was in the initial stage, and the electricity suppliers did not sell clothes.

According to relevant statistics, as of December 31, 2013, ten fast fashion brands opened nearly 1000 stores in China. Among them, 82 new stores were opened by UNIQLO, the total number of stores reached 257; H&M opened 62 stores, and the total number of stores reached 176; GAP opened 28 new stores, and the total number of stores was 71; ZARA opened 18 new stores, and the total number of stores was 137; the number of new stores opened by MUJI was 42, the total number of stores was 100; C&A opened new stores, 9 stores, and stores were crowded;

What can not be overlooked is that behind this crazy expansion there is support from the major commercial complexes, and it will be recruited at low rent, hoping to drive department stores, restaurants, theaters and so on by the younger consumer groups behind them.

The golden age of ZARA is a landmark in the city. It expresses the link between the city and the outside world, and is a symbol of the city's foreign culture. At this stage, the Growth Logic of garment enterprises is also promoted by channels, and more stores can grow faster. But the premise is that there is no risk in the profitability of the shops and the rate of return on investment.

In recent years, the narrowing of store expansion and the slowdown in revenue growth also mean that ZARA is facing a painful period of development, and the development of a flat and plain land has been frozen in the "golden age" of the thing that is scarce. After all, from 2009 to 2019, the development of mobile Internet in the past ten years has brought about tremendous changes in China's land.

ZARA can not meet the consumption upgrade of this session.

"Keep up with fashion, Europe and the United States full of wind, style, new fast, low prices" are all the key words of ZARA's rise. It is also the necessary weapon for the five time that Amancio Ortega, the founder of his parent company, has been put on the richest position in the world. However, the supply chain system of ZARA is also difficult to PK in the "algorithm era" of the wild army.

36 krypton released "hug Li Jiaqi, take money to make money is a serious matter" has reported on the new supply chain system, the logic behind the net red live sale is that it does not stock up, only produces one sample clothing, the net red live all sorts of try on to explain, then the consumer favors the order to buy the "pre sale", then according to the order data lets the factory fast deliver the goods.

If there are ready-made fabrics, they will be made in half a day. Because we need to replace some old ones with new ones every day, we need to complete the whole new cycle in 7-10 days, and we need at least 300 items for each stock.

This magic system is closer to consumers and directly reflects the needs of consumers, and this mode completely disintegrates the underlying logic of "born in the form of money and dies from inventory." More importantly, it is cheaper.

Consumers are also changing. In November 2017, a survey report from the first financial business data center showed that "after 90 and 00, the sensitivity of international brands has been reduced" has become the key word.

Compared to the "fresh first experience" of fast fashion after 70 and 1980s. Most of the post-90s, 00 after the unique aesthetic, street brand is not too cold. Pursue individuality or pursue basic funds.

"Do not buy ZARA is no difference in style." after 80 years, white collar Sun told 36 krypton, "the children who are around me are buying less. They are more individualized and differentiated. They will buy clothes that contain their preferences, idols or opinions, such as clothes in Tokyo's ancient shops, or single products from foreign buyers' stores sold in the Italian coffee shop."

Sun also mentioned, "if you don't pursue values, your friends will tend to buy basic funds. For example, the post-90s coworkers have relatively high oranges, so they like to buy UNIQLO U series men's clothing, even if they don't feel like bumping shirts."

In fact, this is not a case. According to DT finance, "the style is not as good as the rival 1/5, why does UNIQLO run faster than ZARA" reported that the two hot brands of Tmall flagship store, UNIQLO and ZARA, were the most popular products in May.

This also confirms that ZARA is difficult to meet the needs of consumers' personalized clothing. Moreover, the arrival of consumer escalation has made consumers reject those fast fashion consumables which are of poor quality and can only wear one season.

The idea of "buying less and buying better" has become a new shopping slogan. This idea is more popular among the middle class under the influence of fashion KOL.

Another factor worth noting is that other categories are rising, handbags, shoes, street signs and sportswear brands, which are diverting the budgets of consumers.

According to DDT's report last year, ordinary consumers spent 5.9% of their spending on clothing, but by 2017, this proportion has plummeted to 3.1%.

For low-income people, the average expenditure of women's clothing is especially low, and the rise of footwear expenditure is the only bright spot. Compared to the seasonal clothing of fast drying type, shoes and handbags are more value for money and attract more consumers' investment.

In addition, there are some new brands emerging vigorously. For example, the Canadian Yoga brand symbolizing the middle-income class lululemon.

According to fashion business express, lululemon has gained 48% of its share price since the start of this year, thanks to its strong growth. 36 krypton observed the opening of lululemon in Beijing. At present, there are four stores in Beijing Sanlitun, Qiao Fu lawn, Wangfujing APM store and Yedi harbour shopping center.

Interestingly, the site of Raffles ZARA store in Dongzhimen is being replaced by lululemon, and the fifth shops of lululemon are opening soon. For shopping centres, they also need new leading brands to attract consumers.

At another site at ZARA, Diesel is now being renovated. Coincidentally, last year, Diesel and Marni's parent company took action against the Inditex group's design plagiarism, and the court ruled that Zara had lost the lawsuit. Although this substitution is a coincidence, "one win, one lose and one go" is also quite interesting.

ZARA strong desire to survive, vigorously layout of the electricity supplier

In the face of the bottleneck of development, ZARA did not sit still, but actively transformed the layout, and achieved preliminary results this year. INDITEX in the first quarter of fiscal year 2019, group sales grew by 5% to 5 billion 927 million euros, and net profit increased 10% to 734 million euros. Although sales are still lower than the 14% growth in the same period in 2017, it has improved considerably compared with 2% in the same period last year.

The digital rebound is mainly due to the global expansion of digital business. In the first quarter of 2-4 months, the group's brands such as Massimo Dutti, Pull&Bear, Zara Home and Oysho were launched in Morocco, Egypt, Lebanon, Israel, Serbia and Arabia, the United Arab Emirates.

ZARA has long defined the expansion goal of the e-commerce business: it will open its brand e-commerce business in various markets around the world by 2020, and increase services such as the return of stores under the online shopping line. Just this year, ZARA launched the global online shopping platform zara.com/ww, covering 202 countries and regions in the world.

Prior to this, ZARA parent Inditex has sold a lot of real estate to expand its business. At the end of 2017, Inditex Group signed a leaseback agreement with 16 buyers in Spain and Portugal, with a total transaction volume of $472 million. The aim is to invest more money in expanding online businesses in Spain. ZARA's ambitions in the field of e-commerce are obvious.

In order to fight well online warfare, slowing down the speed of opening stores has become a strategy of the group. In 2019, the group's store strategy was to close down the poorly performing entity stores. Perhaps the closure of two stores in Beijing is also a diversion of ZARA online strategy.

The layout of ZARA's e-commerce in China started in 2012. It adopted the mode of self built electricity supplier, and then entered the flagship store in Tmall in October 2014. Coye Nokes, partner of OC&CStrategyConsultants, a management consultancy, has said that Zara has fallen behind with the digitalization of apparel partners, while online sales account for only 12%, while the average online sales of competitors are between 20% and 30%.

And for better digital transformation, ZARA's parent company was replaced by the end of May this year, COO Carlos Vrespo took over CEO. Pablo Isla, the group's CEO for 14 years, said Carlos Vrespo is a key figure in the group's digital strategy, which will help its brand to achieve faster next year's goal of providing e-commerce services in all regions of the world. Moreover, in response to anxiety, ZARA changed its Logo at the beginning of this year.

Offline stores are also trying new stores. At the end of January last year, ZARA opened an online flash store in London, England, where the site was not sold, it could only be purchased online, and it could also deliver service on that day. ZARA CEOPablo Isla, the parent company, thinks that the launch of flash shop is another milestone in the integration strategy of Zara online and offline businesses. In 2018, ZARA also landed the first retail concept store in Shanghai.

In order to find new growth points, ZARA also integrated the Zara Home of home accessories to enhance synergy, and cut into the hot beauty market and launched parity makeup.

The transformation is serious, but whether we can keep pace with the times, the enemy will have to see the vision and the executive power if the enemy goes through the wild market of the sinking market and the small circle of the personality market.