Zara Owner to Close 1,200 Stores worldwide

After recording no losses since 2001, The Spanish group Inditex, which owns Zara brand, is paying the price today in a historic sales drop. The company announced that it is going to close 1,200 stores to focus on its online sales and its largest distribution points.

 

Numbers have dropped. With Covid-19 health crisis, the owners of Zara experienced sales drop of 44% and a loss of 409 million euros in the first quarter of 2020; as a result of stores’ closure due to lockdown, which at its peak time, affected 88% of the outlets. However, sales have never stopped on the group's online websites, which have limited the crisis without putting an end to the drop.

 

A Timid Influx

It is the first time that the Spanish group has recorded a negative balance since its IPO in 2001. Last year, the retail giant announced profits of 734 million euros. Although online sales increased during lockdown by 50%, however, it is not sufficient to fill this significant gap, nor the long queues waiting in front of Zara’s shops after lockdown lift. After the re-opening of stores, the influx of consumers remained timid; the first numbers showed a 59.8% drop in attendance at the fashion stores during the first week after lockdown compared to the same period in 2019.

 

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Innovation

The Inditex group announced the closure of 1,200 outlets among its smallest stores in Europe and Asia. On the other side, Inditex CEO has announced the opening of 450 higher quality, larger stores in premium locations. The group, which was launched in 2012, is planning to boost their ads in order to strengthen their brands’ online presence.

 

The Spanish group plans to boost its online business by injecting 2.7 billion euros by 2022. With this money intended to strengthen e-commerce platforms, Inditex hopes to give a boost to Zara's digital sales. It targets 25% by 2022, compared with 14% in 2019.

 

Innovation will also take part of this sum.  For instance, Zara will be given an“in-store mode” on its mobile application. This feature will allow you to consult store stocks in real time for online purchase and pinpoint the precise location of a specific item within a given store. It is a digital investment to be made in order to strengthen the brand's most important points of sale and to progress with digital tools’ help.