A decade of Zara in online: what Inditex has achieved and the 3 great challenges ahead - Zara online decade Inditex achievements challenges - It was the month of December 2011 when the artists Alejandro Sanz and Antonio Carmona presented in the Zara store located in Gran Vía Madrid a solidarity act, in what was an unprecedented event in the textile group, given to make discretion its best flag. The key that explains it could be 11 months ago.

On January 10 of that same year, Amancio Ortega sent a letter to his then nearly 110,000 employees. In it, the founder of Inditex proposed the election of Pablo Isla, at that time vice president and CEO of the group, as executive chairman at the next shareholders ' meeting.

"One of the great successes of Inditex is that transition and that silent transfer from Ortega to Pablo Isla transmitting and preserving his culture," says Jose Luis Pavia, who was executive director of Lefties for 5 years. This discretion that is supposed to the group is not incompatible with the fact that there has been room for change, challenges and the occasional, albeit minimal, failure.

In fact, there have been several challenges that Isla has had to face in this period: from weathering the Spanish economic crisis of 2012 to achieving a symbiosis between the physical and the online channel. Of course, nothing can be extrapolated to the economic impact and unprecedented that would bring with it the emergence of COVID-19.

And yet, the textile giant has managed to get out considerably unscathed and even reinforced from all the challenges it has faced. The numbers confirm this: its sales have climbed since 2011 just over 6,600 million euros, to stand at 20,402 million in 2020.

Zara online decade Inditex achievements challenges

Similarly, the start of 2021 has only reflected the resilience of the Galician group, which between February and April increased its sales by 50%, to 4,942 million euros and earned 421 million. 98% of its stores are open and in May its turnover even exceeded that of 2019, which continues to confirm it as one of the largest fashion distributors in the world.

In Spain, following the financial crisis of 2008, a sovereign debt crisis followed in 2012, pushing Spain to the limit. The then president of the Government, Mariano Rajoy, had to ask the European Union that same summer for funds to finance the bailout of the banks and gave way to the adjustments and austerity policies that would mark a whole era.

Inditex had come to close an incontestable fiscal year in 2012: its net profit grew by 22%, to reach 2,360 million euros, while sales did the same with 16%, to reach 15,946 million euros. A similar progression would not be witnessed again: the crisis made landfall in Spain and began to wreak havoc on the group's accounts.

In the first half of 2013, the company's domestic market went from generating 21% of total revenues to 19.3%. In its biannual report, the company went a little further and put a figure to the decline. Turnover in the domestic market fell by 4.4% to 1,585 million euros.

Zara online decade Inditex achievements challenges: The deterioration implied something else: the Galician company lost ground in its country to its eternal rival. The Swedish chain H & M recorded in summer 2013 the largest increase in sales in Spain since the crisis broke out in 2008. The turnover of the Swedish group grew by 10%, to 1,539 million Swedish kronor (about 153 million in euros).

Inditex ended its fiscal year 2013-ended in January 2014-with a clear slowdown in its growth. It only earned 1% more than a year earlier (2,377 million euros) and its sales advanced a discreet 5%, to 16,724 million euros. However, a decisive revolution was brewing.

10 days was the deadline the group offered for home delivery of its items in 2007. Now, the group strictly complies that they are received the day after the purchase —even, in some cases, on the same day.

Zara online decade Inditex achievements challenges

This is just a sample of the giant steps that the Galician group has taken in the field of online. The group launched into e-commerce in October 2007 and, interestingly, it was with its home division and not with Zara,its flagship.

Zara started its online journey in 2010 in Germany, Spain, France, Italy, Portugal and the United Kingdom. Only one year later, with Isla already at the head of the multinational, digital sales landed in the United States and, 12 months later, it does so in a market as transcendental as the Chinese one.

"We will continue to implement online sales progressively in all the markets in which we are present with stores," Isla explained in 2013. He kept his word: today Inditex sells in 216 markets through its online platform.

Luis Lara, who was the international director of the group for 5 years, calls the incursion into the online channel "the greatest success". Nor does it overlook the fact that this landing occurred later than in other companies. This is the case of Mango, which would be launched online 10 years earlier –in 2020, the channel billed 766 million euros, 42% of the total turnover of the group. "It was done when the company was ready for such a challenge," explains the expert on the late entry of the Galician company into the digital universe.

"It took time to do it but, when it did, there was a before and after", agrees Belén Valiente, consultant specializing in e-commerce and fashion. The expert adds that the textile giant has been able to capitalize on the advantages of both channels and achieve commercial benefits, but also reinforce brand, which, in her opinion, has put him at the head of the largest in the sector.

Zara online decade Inditex achievements challenges experts thoughts

Both experts are not wrong. It mattered little that digital hatching was made to wait. If in 2017 internet sales accounted for 10% of the group's net transactions-some 2,533 million euros -, the outbreak of the pandemic would even leave behind all the group's forecasts. The mission was that in 2022 online sales represented 25% of turnover. Today, it constitutes 32% or, what is the same, 6,612 million euros.

Lara recalls the failed launch of the network Often in early 2000. "He did not find his way," he reflects. In 2006, Inditex made the decision to close the brand specialized in the male audience and focus on the rest of firms. Valiente mentions other examples, such as when some stores became part of the home division or Kiddy's Class.

"It cannot be considered that there has really been a failure for the standards in which it moves," the expert considers. In the last 10 years, the failures have been very residual, although the group has not been alien to them. Most have arrived this past year, when the pandemic disrupted everything that seemed set in stone.

Last January, Inditex announced the decision to lower the blind of its physical points of sale of the Pull&Bear, Bershka and Stradivarius chains in China to step on the accelerator in the online channel. The group planned to close 93 facilities located in Mainland China. This withdrawal occurred 11 years after entering the Chinese market with young fashion brands. Zara, for her part, remains unbeatable.

In the results of the first fiscal quarter of 2020-from February 2020 to January 31, 2021 -, with the pandemic causing the first losses for the textile giant, the group launched a plan to absorb 1,200 establishments. Although this movement was not new, it was a more serious proposal to reconsider the role of its physical stores.

Zara online decade Inditex achievements challenges

Specifically, the worst part was taken by Spain, where between 250 and 300 stores would be absorbed. The latter was another setback for the group.After an agreement between the company and the unions, the maintenance of employment during this process was prioritized and the relocation of the affected workforce was expedited. Of course, with several conditions: a maximum of 25 kilometers was set for these transfers and the same working conditions.

The process continues, but not without controversy: workers continue to denounce that the agreement regarding relocations is not being fulfilled. The Comisiones Obreras trade union considered that the" insufficient quality " of the vacancies offered was behind the fact that 25% of the people affected by the closures had opted for the termination of their contract.

The operation is nearing completion. According to a statement from this union, Inditex will make 56 store closures in Spain this summer, which will affect 475 employees. At 30 April, Inditex operated 6,758 stores, which is 654 less than a year ago.

The arrival and global expansion of COVID-19 drew a horizon never seen before. In the first results of the year, the group made losses of 409 million euros, the first in its history as a company since it went public in 2001. Despite everything, the fiscal year ended with a profit of 1,106 million euros, 70% less than a year earlier and the lowest annual profit since 2006.

Lara, a professor at ISEM Fashion Business School, believes that the pandemic has been a historic challenge for the sector worldwide and also for Inditex: "Never before has such a high number of stores had to close so long". During the first quarter of the year, 88% of the group's network was closed.

Zara online decade Inditex achievements challenges 20% fall

Despite everything, the former manager stressed that the group's sales " had only fallen by 28%", below the average of the sector, but with inventory ratios and profitability better than its competitors. In fact, the textile trade closed its most complicated year with a fall in sales of 41%, to 10,619 million euros and with 14,800 stores less.

Pavia tells as an anecdote that last Christmas he called Ortega to congratulate him on Christmas, as he usually does every year and mentioned how complicated the year they left behind. The surprise came when the founder of Inditex conveyed his optimism and told him that it was a year to improve and discover what could be done to overcome the situation. "This is the spirit of the group: every day is a new opportunity to do things better," he says.

Pavia believes that the group's biggest challenge now lies in how to deliver greater sustainable returns to its shareholders. "10 years ago it was relatively easier to grow with the pace of openings. Now the online channel is more profitable and cheaper than a store and there are many physical points left over, " he says.

Thus, small proximity stores would no longer make sense within the group's model: "The future is fewer stores and larger to replicate the same offer that there is online". The key, in the opinion of the executive, would be that the user's demand now happens to find in a physical point the same thing that could have a click.

Zara online decade Inditex achievements challenges Lara thoughts

Along the same lines, Lara believes that the mission ahead is to develop what is known as the Inditex Open Platform. The last frontier of retail evolution. This, he says, will allow them to incorporate layers to achieve– finally-omnichannel and put "put emphasis" on the 8C of retail: customer, connection, content, community, curation (selection), customization, circularity and culture.

For his part, Valiente puts the focus on the obligatory need to redirect the business towards responsible consumption. "Fast fashion is not compatible with sustainability: the key is not to use sustainable materials, but to consume less. This requires better qualities, more timeless fashion, and Inditex's core business is still fashion to consume, " he says

"I'm looking forward to seeing the outcome as if it were the last chapter of one of my favorite Netflix series," jokes the consultant about everything that remains to be done within the textile giant. In fact, she is fully confident in what she will achieve, and she thinks so because these last 10 years represent, without a doubt, the best guarantee.

# Zara online decade Inditex achievements challenges #