As post-Labor Day America thinks fashion (back to school and Fashion Week), it's prime time for Zara, the Spanish Goliath of "fast fashion," to make its digital push into the U.S. market in an effort to challenge its rivals Gap and H&M.
Starting today, Zara.com directs US visitors to the brand's American e-commerce site, a move it's promoting on Twitter with a #DearAmerica hashtag and a "Dear America" online exhibition of 50 photographers' takes on the 50 US states.
Zara launched in the US in 1989 with a New York outpost on Lexington Avenue, and today operates stores in over 30 US cities. In comparison, H&M has 200+ and Gap more than 1,000 US stores.
Parent company Inditex SA's press release notes that the new US online platform is "Zara’s first outside Europe, where shoppers can already buy online in 16 countries. Zara recently celebrated the first anniversary of its online shopping launch on September 2."
The company also notes that the retailer is "very active in social networks. Of its over 10 million Facebook fans, more than 400,000 are located in the US." H&M accrued 617,000 online visitors in July while Zara’s numbered 189,000 according to Nielsen, and other U.S. competitors are taking a piece of the online pie like Abercrombie & Fitch with Q2 sales of 11% of total revenue. Gap, a decade into online receives 9% of sales from its website.
Zara may be playing catch-up online, but it has a key advantage: stringent control over the production process and an accelerated timeframe from trend to creation to stores. (US e-commerce partner Quiet Logistics is no doubt trying to replicate the in-store brand experience and customer service online.)
Its "fast fashion" magic: “Store managers communicate directly with Zara designers and feed them data on what sells well and what doesn't," the Wall Street Journal notes. "If managers say a polka-dotted-black dress is flying off the racks, it is able to turn around quickly and churn out polka-dotted dresses in other colors and have them in stores in a matter of weeks.”
Inditex has honed a production model leveraging logistics and technology to mine POS data from consumers worldwide enabling the brand to manufacture and deliver new product in-store efficiently as well as expand its online presence with similar exigencies.
Spain remains its global hub, with 49% of higher-end product cut and finished there while 34% of basic items are outsourced to Asia and 14% to Europe including Turkey. "For us to enter a new country has a very small cost because, with our twice-a-week delivery model we have few start-up costs. We don't need large logistical infrastructures, marketing departments or big central operations. The model allows us to have a light structure, and that applies to online as well," Inditex Chairman and CEO Pablo Isla told the WSJ.
"The priority at this moment in terms of growth is Asia and Europe, but on a medium and long-term basis the U.S. market is also very important for us,” he added. Inditex purchased the former NBA Fifth Avenue store for $324 million to build its flagship U.S. Zara store.
Zara’s clothes sell on average between $50-$80 but prices vary from country to country. Japanese customers pay half as much as Europeans, while in China, higher prices are perceived as part of the appeal according to Luca Solca of research firm Sanford Bernstein in the Economist. “Solca says the 60% price differences Zara maintains between some countries are unsustainable—but 30% may be quite possible.”
Spain will remain the home-base for this company founded by Amancio Ortega who started making clothes in 1963 in a rented garage. He still owns 59% of the company which now counts 5,000 plus stores in 77 countries and will open 80 more in China this year. “We’re not thinking of replicating the brain in Asia, though maybe logistics,” says Isla.
On the all-important fashion front, meawhile, it's broadening its appeal to a youthful demo, as seen in its Fall/Winter 2011 trailer below.