NEW DELHI: Spanish fast-fashion brand Zara can now be literally weighed in gold in India as its average sales per store has soared much above other top apparel brands to be at par with the country’s largest jewellery chain Tanishq.
With annual sales of Rs 405 crore, each of Zara’s nine stores in the country on an average made Rs 45 crore last fiscal, over six times more than the country’s largest apparel brand Louis Philippe and a tad higher than the country’s largest department chain Shoppers Stop.
Inditex Trent, the joint venture between Zara brand owner Inditex and Tata Group’s retail arm Trent, clocked 56% growth in sales without any new store addition in the year ended March 2013, according to its latest annual report.
The latest numbers belie the initial opinion that the charm of the world’s most popular ‘fast fashion’ brand in India might wane away with time. It hasn’t happened in three years. In fact, Zara has reported high doubledigit growth in same-store sales in a market where most retailers struggled for a single digit like-to-like growth due to a slowdown in consumer spending in aspirational goods. Experts say what worked in Zara’s favour in India is pretty much what works for the brand elsewhere — affordable, copycat versions of the latest fashions and making them available to shoppers in double-quick time.
“The brand is aspirational yet easy on pockets for most urban consumers,” Ruchi Sally, director at boutique retail consultancy Elargir Solutions, says. “Its price tags are similar to what other international or even premium Indian brands have, but at that price-point the merchandise is trendier than others,” she adds.
Globally, Inditex controls almost every bit of Zara’s operations from design to distribution to a large chunk of manufacturing. If a new style is not a hit within a week, it goes off the shelf. Even popular styles don’t stay long. There is no warehousing, and reorders are rare.
Zara is also known to keep real estate costs in control. India is no different. “Zara is a tough negotiator,” says a mall owner in the National Capital Region. It demands fit-outs and floorings, the person adds. With revenue sharing becoming a part of most lease deals, developers prefer brands like Zara that bring in much more revenue per sq ft than a traditional department store or hypermarket.
For instance, at the Select Citywalk mall in New Delhi, anchor tenant Pantaloons, spread over 25,000 sq ft, generates average monthly sales of Rs 4 crore, while Zara doesRs 7-8 crore a month in its 16,500-sq ft store, trade insiders say.
A person aware of the plans of Inditex Trent says the firm would open more than 18 stores in the next three years and expand into smaller cities such as Mangalore, Surat and Indore. Analysts say it won’t be easy. “The challenge for any international brand would be the route from India to Bharat as they try to gain scale,” Debashish Mukherjee, partner at AT Kearney, says.
Shoppers in small cities may not have the same attraction for Zara despite having the propensity to spend on international brands.
In 2012-13, Inditex Trent reported a loss of Rs 10.08 crore on its proposed store in Phoenix Market City mall at Kurla, Mumbai, which it had to completely redo with a new concept due to continuous water leakage, the company said in its annual report filed with the registrar of companies. It did not provide any profit or loss figure for the entire year. The company had made profits ofRs 38.3 crore and Rs 22.5 crore in the previous two financial years.
Source- Economic Times