Zara a Spanish fashion brand has set a benchmark in terms of both growth and profitability. Five years after it opened its first shop in India today Zara has become the first apparel brand in India to cross the $100-million sales mark.
Inditex Trent, the joint venture between 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 that 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%.
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 â€” Benetton (wholesale) and Levi's â€” 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 plans to open a few more stores in India over the next three to four years in the major cities. The primary challenge to faster expansion is the availability of high quality retail spaces, which can be expected to generate reasonable sales throughput.
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 â€” 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
Devangshu Dutta, chief executive at retail consultancy Third Eyesight said that it was brandâ€™s desirability and connect with consumers helped Zara to achieve the sales mark.
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.
India, the world's second most populated country is becoming an attractive market for US brands, as it has increasing number of youngsters who have started taking up western-style clothing.
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