Zara Defies The Retail Downturn Odds

For the last few years, the retail industry has been in a whirlwind of change.

As hundreds of brick-and-mortar locations have been closed around the country from Macy’s, J.C. Penney and Staples, there is an unexpected merchant that’s not going without a fight.

In its Q1 earnings report, clothing store Zara’s parent company, Inditex, reported a net profit of $733.3 million, an 18 percent increase from 2016. Zara also saw its total sales jump by 14 percent.

Other clothing chains like J. Crew are reporting record-level consecutive quarter sales losses, but Zara takes a different approach to ensure its success. All of the retailer’s clothing is made in Spain and other countries close by to enable quick feedback from store managers on trends around the world. Zara’s designers are constantly developing new pieces of clothing and shipping them out in small batches. Every store thus is always being refreshed with the latest fashion trends.

Macquarie Group analyst Andreas Inderst commented on Zara’s approach to fashion innovation in its physical and online space. “This works online as it works offline. People are drawn to the homepage of Zara because they offer newness, which most other fashion retailers are not able to offer because of long lead times and the slow reaction to current demand.”

By integrating its physical stores with its eCommerce platform, Zara has found the “secret sauce” of what the retail industry needs to prevent brick-and-mortar total shutdown.



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