Zara becomes the fastest apparel brand in India to cross $100-million sales mark


July 16, 2015

Sagar Malviya, The Economic Times

Mumbai, 10 July 2015

Spanish fashion brand Zara has become the fastest apparel brand in India to cross the $100-million sales mark, five years after it opened its first shop here.

Inditex Trent, the joint venture between Zara brand owner Inditex and Tata Group’s retail arm Trent, posted 24% annual growth in sales for the year ended March 2015 at Rs 721 crore ($114 million), Trent said in its annual report released on Thursday. In FY13-14, it had sales of Rs 580 crore. However, sales growth has nearly halved from a year ago period when, it was 43%.

Plans are on to open a few more Zara stores in India over the next three to four years in the major cities, the report said. The primary challenge to faster expansion is the availability of high quality retail spaces, which can be expected to generate reasonable sales throughput, it added.

With 16 stores now, average sales per store of Zara is about Rs 45 crore a year, far more than top apparel brands such as Louis Philippe, Levi’s and Marks & Spencer, and even slightly higher than department store chains Shoppers Stop and Lifestyle. Its closest rivals in India — Benetton (wholesale) and Levi’s — had posted around Rs 599 crore each in sales a year ago and haven’t declared their FY14-15 numbers yet. Analysts don’t expect them to overtake Zara though.

“Zara has set a benchmark in terms of both growth and profitability. What has helped it is the brand’s desirability and connect with consumers,” said Devangshu Dutta, chief executive at retail consultancy Third Eyesight. Industry executives said Zara’s per-square-feet sales must have dropped as the novelty factor fades off in bigger markets, especially in Delhi and Mumbai.

Most of Zara’s back-end and merchandise sourcing are handled by Inditex, while the Tata expertise is mainly for identifying real estate and locations. Inditex Trent has replicated in India a model that has worked for Zara globally — creating affordable, copycat versions of the latest fashions or designer wear and making them available to shoppers in double-quick time. Inditex controls almost every bit of its operations, from design to distribution.

If a new style is not a hit within a week, it goes off the shelves of over 2,000 Zara stores worldwide. The brand will face intense competition from similarly-priced, fast fashion rivals such as Gap, which entered a month ago and H&M, which will launch stores soon. As the world’s second most populated country, India is an attractive market for international brands, especially since youngsters in the country are increasingly embracing western-style clothing.

(Published in The Economic Times.)