Pablo Isla explains his online strategy for Inditex
The Inditex group’s e-commerce websites received a total of 2.9 billion visits in 2018, 500 million more than in the previous year and 900 million more than in 2016. These skyrocketing figures have been accompanied by a record number of orders made over the internet – 9,500 in one minute – and explain the consistent online sales growth seen by the group. Last year, Inditex’s digital sales rose 27% to 3.2 billion euros, proving the effectiveness of the company’s integrated retail model. Indeed, online sales now account for 14% of the group’s total sales in markets where it has introduced its integrated model, and the company’s CEO Pablo Isla is aiming to expand the system across its entire brand portfolio in every country around the world by 2020. Here, FashionNetwork.com analyses the key points of Isla’s strategy for the coming years, as he aims to make Inditex a “fully integrated and fully digital” company.
In March of last year, Inditex revealed one of its best kept secrets. The group, which until that point had not disclosed detailed results for its brick-and-mortar and digital stores, reported the figures generated by its online channel for the first time ever. At that time, the company’s e-commerce sales totalled 2.5 billion euros, accounting for 10% of its total revenue. Since then, the group has upped its game. In September, the company’s CEO revealed his objective to expand all of the group’s e-commerce platforms to every country in the world by 2020, and in November Zara kicked the project off by launching its global digital store in 106 markets. In 2019, both the company’s online and brick-and-mortar sales increased 7% in constant currencies between 1 February and 9 March.
The objective of these operations is to develop a completely integrated, digital and sustainable network of stores by 2020. “We believe that an integrated focus is the most suitable one,” said Isla during the presentation of the company’s annual results at its HQ in Arteixo, La Coruña. “We understand that stores help online sales and online sales help stores,” he added, explaining the model in which the group invested 1.6 billion euros in 2018. On the subject of the company’s choice to launch its e-commerce platform in every country around the world, Isla explained, “the global online launch isn’t so much about a particular objective for sales volumes, as it is about making this service available to all of our customers.”
An integrated model with no barriers between brick-and-mortar stores and e-commerce
In this way, the synergies between Inditex’s physical and online channels aim to remove the barriers between the two formats. And in Pablo Isla’s opinion, the store of the future will be both physical and digital. A clear example of this approach is the company’s integrated stock management system which works through RFID, its connected checkouts where customers can pay for online orders made in store, and instantaneous collection and returns systems, as well as its automated online order collection points, which have already been installed in Zara Stratford in London, Zara Haussmann in Paris, Zara Vittorio Emanuele in Milan and Zara Bilbao. “Around a third of online orders picked up in store and 60% of order returns take place in Zara locations,” the CEO pointed out.
Currently, the group’s flagship brand is managing its stock through the company’s integrated system in the 49 markets where it has both a physical and an online presence. Elsewhere, Massimo Dutti, Pull&Bear and Uterqüe have already implemented the radio-frequency identification system, which is being rolled out progressively at Inditex’s other brands. Explaining the convenience of using both models, Isla pointed out that “the cost structure of e-commerce is different from that of physical stores,” highlighting that while the digital channel does not involve personnel and occupancy costs, logistics and transport costs need to be taken into consideration. “It’s different but no less profitable for the company. Our margins don’t decline,” he said, reaffirming the “27% online growth” experienced by the group.
As an essential part of the development of this integrated model, all of Inditex’s chains have continued to incorporate new services, such as same-day delivery, which is available in metropolitan areas including Madrid, London, Paris, Istanbul, Shanghai and Taipei, and was introduced to Sidney, Warsaw, Toronto, Moscow, Mexico City and New York in 2018. Furthermore, the company has also now introduced next-day delivery in Australia and Canada, having previously rolled the service out in Spain, France, the United Kingdom, China, Poland and South Korea.
When taking stock of Inditex’s results, it’s important to look to its competition and compare its progress with that of other fast fashion giants. Primark has thus far maintained its policy of keeping out of the e-commerce tussle, preferring to double down on its brick-and-mortar network. As for H&M, the group’s online sales grew 22% in 2018 to 30 billion Swedish kronor (3.0 billion euros), accounting for 14.5% of the company’s total sales. In 2017, 45% of the retailer’s investments – around 600 million euros – were dedicated to developing its online capabilities. In the same year, Catalan fashion brand Mango saw its online sales rise 15.4% to 339.2 million euros, representing 15.5% of the company’s total revenues.
A made-to-measure strategy for each brand
Although all of Inditex’s banners share a common roadmap, each one of them operates independently in accordance with its own specificities. Zara, for example, continued its international expansion with the introduction of its online platform to Brazil on 20 March, and has plans to launch up to 57 integrated brick-and-mortar stores in the country. During its Spring campaign, the group’s flagship brand also launched its e-commerce platform in the United Arab Emirates, Saudi Arabia, Egypt, Indonesia, Israel, Lebanon, Morocco, Serbia, South Africa and Ukraine. The fast fashion chain, which recently revealed its new logo, also renovated its e-commerce platform and mobile app in 2018, adding new tools, such as “corner shops”, which allow users to search new trends. Following the announcement that it is being folded into its mother brand, Zara Home will also begin the gradual introduction of some of its products to the Zara online store as of the upcoming Fall/Winter season.
On the other hand, Massimo Dutti, which has also recently reimagined its logo and its mobile app, and Uterqüe both launched their global stores earlier this year, a move which has allowed them to introduce their offerings to 106 new markets. Inditex’s most high-end brand also recently expanded to Mexico and has entered into partnerships with e-commerce giants such as T-Mall for its distribution in China, and Zalando. Finally, Pull&Bear arrived in the US in mid-February with the launch of its own e-commerce platform in the country, while Oysho has rolled out a dual platform featuring a classic storefront and another separate front for its “Oysho Sport” section, reflecting its strengthened positioning as a sportswear brand.
Diversification and dedicated content on social channels
Inditex isn’t falling behind with its projects for social media either, having recognised the importance of the channel for both its online and brick-and-mortar businesses. The social profiles of the group’s eight brands have grown from having 85 million followers in 2016 to 143 million at the end of last year, and have attracted some 22 million followers in the space of only twelve months. Stradivarius has been the most active chain in terms of collaborations with international influences, while Pull&Bear and Bershka have generally concentrated on partnerships with celebrities, as shown by their collaborative collections with superstar singers Rosalía and Miley Cyrus, respectively.
As for Zara, the chain which reported 18.0 billion euros in revenues last year has opted to gradually diversify its Instagram profiles. The original “@zara” profile has now been joined by “@zarakids”, dedicated to the brand’s childrenswear offering; “@zaraman”, the launch of which coincided with the unveiling of a menswear collection celebrating the bicentenary of Madrid’s Prado Museum; and the most recent addition to the retailer’s social media suite, “@livingzara”. This innovative, collaborative project will see Zara confide the task of taking photos to a series of influencers and micro-influencers, who will adapt the brand’s new pieces and collections to their own individual styles.
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