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July 16, 2016
Sagar Malviya, The Economic
Times
Mumbai, 13 July 2016
Spanish
fashion brand Zara posted its slowest sales growth in India during the
year ended March, indicating that its novelty factor may be waning as
consumers shift to global rivals such as H&M and Gap, which entered
the country last year.
Inditex Trent, the joint venture
between Zara brand owner Inditex and Tata Group’s retail arm Trent,
clocked a 17% sales growth to Rs 842.5 crore during FY16, Trent said in
its annual report on Tuesday.
A year ago, its revenue
increased 24% to Rs 721 crore. Zara’s sales growth has been tapering
off after stellar performances following its entry into India in 2010.
It posted a profit in the first year of operations and doubled sales
every two years.
The joint venture plans to open more Zara
stores in India over the next three to four years in the major cities,
after two additions last year took its total outlet count to 18, 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,” Trent said.
Zara’s
average sales per store was about Rs 47 crore last year, exceeding
those of top apparel brands such as Louis Philippe, Levi’s and Marks
& Spencer and even slightly higher than department store chains
Shoppers Stop and Lifestyle.
“When
Zara entered, the novelty factor was humongous but now there is a
certain familiarity with the brand. Also, it has moved beyond marquee
locations. In addition, aggression by ecommerce companies intensified,
too,” said Devangshu Dutta, chief executive officer at Third Eyesight,
a retail and consumer goods consulting company.
As
the world’s second most-populated country, India is an attractive
market for US and European brands, especially with youngsters
increasingly embracing westernstyle clothing.
Zara, owned by
Inditex, the world’s largest clothing retailer, is facing competition
from similarly priced, fashion rivals including Gap, H&M and
Aeropostale, which entered India last year.
US clothing brand
Gap sold apparel and accessories worth Rs 23 lakh daily on average in
June in its first month of operations in India, surpassing all other
retailers in the country in terms of sales per square foot. Swedish
company H&M clocked more than Rs 1.75 crore in sales on the opening
day of its first store in India, almost double what its largest rival
Zara sold on its inaugural day five years ago at the same location,
Select CityWalk mall.
While sales growth of both these rivals
may ease after the initial launch-related surge, experts said the
market has room to expand. “Given the response we have had for global
brands launched last year, it indicates preference for wellknown
international brands,” said J Suresh, managing director of Arvind
Retail, which holds the licence to sell brands like Gap and US Polo.
Most
of Zara’s back-end logistics and merchandise sourcing are handled by
Inditex, while the Tata expertise is mainly for identifying real estate
and locations.
(Published in The Economic Times)
