The Spanish fashion brand Zara has recently been the subject of widespread speculation on various social media platforms, with rumors suggesting the brand may be exiting the Chinese market following the closure of several stores across multiple cities. Fans of the brand have expressed their regret and confusion, wondering if Zara is indeed planning to leave China.
Zara, a leader in the fast fashion industry and part of the publicly traded Inditex Group, has been known for its strategy of placing stores with affordable products next to luxury brands like LV and Gucci, showcasing its once-thriving popularity.
On April 7, a reporter from National Business Daily, posing as a consumer, inquired about the recent store closures with Zara staff, who confirmed the closure of stores in Shanghai Baoshan on April 2, and in Dongguan and Huizhou on March 31. The staff member stated that Zara currently operates 87 stores regularly.
At its peak, Zara operated 183 stores in mainland China. However, within just six years, the number has decreased by nearly a hundred. Not only in China, but Zara's global store count has also seen a net decrease of 74 stores over the past year, even though its fiscal year 2023 sales increased by 10%. Zara's founder, Amancio Ortega, continues to rank on Forbes' Global Billionaires List, moving up one place from 2023 with a net worth of $111.2 billion.
As Zara closes stores to "preserve" profits, the question arises whether this strategy can be sustainable in the long term. Zara, along with other well-known fast fashion brands like Uniqlo, H&M, and Gap, is also facing a "midlife crisis."
In the past two months alone, Zara has closed nine stores in mainland China, reducing the number of stores by more than half. National Business Daily reporter confirmed through Zara staff that the brand recently closed shops in multiple cities, including Huizhou and Dongguan, with both being the only stores in their respective cities and having been open for over ten years.
Regarding rumors of Zara's gradual withdrawal from the Chinese market, staff mentioned that there is currently no information available.
Inditex's latest fiscal year report shows that as of January 31, 2024, Zara had 1,811 stores worldwide, with 118 in Spain and 96 in mainland China, making it the brand's second-largest market. However, only 87 stores are currently in operation in mainland China, indicating that nine stores have closed in just over two months.
Experts suggest that the pace of Zara's closures has caught up with its early expansion. Luxury brand expert Zhou Ting noted that offline-driven brands are bound to undergo closures, especially fast fashion brands that expanded rapidly in China in previous years.
Zara's "big store" strategy to preserve profits has been seen as a retreat to advance. Despite store closures, Zara's focus on online sales has led to a continuous increase in revenue. The brand has started live streaming on TikTok, featuring clothing showcases and behind-the-scenes content. Zara is expected to close more stores and undergo digital transformation in the remaining outlets.
Amancio Ortega, founder of Inditex Group, remains on the global billionaires list, reflecting the success of Zara's strategy. Ortega's journey from a humble background to becoming a global retail magnate is legendary.
As fast fashion brands like Zara face a "midlife crisis," the competition in the Chinese market is shifting towards leading fashion trends and extreme cost-effectiveness. The success of these strategies depends on the brands' ability to rejuvenate their image and highlight product innovation advantages.
