Zara Parent to Close 1,200 Stores and Invest $3 Billion in E-Commerce

[Andy Black]

Anyone got links to articles of other big businesses doing this?

“Zara-owner Inditex is closing up to 1,200 smaller-sized stores, as the fashion giant unveils a proprietary digital platform and pivots to accelerate its digital transformation.“

Zara Parent to Close 1,200 Stores and Invest $3 Billion in E-Commerce

Zara-owner Inditex is closing up to 1,200 smaller-sized stores, as the fashion giant unveils a proprietary digital platform and pivots to speed up its digital transformation. Learn how it expects RFID and proprietary IT architecture will help it meet soaring online demand.

risnews.com

 

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[jmin]

Anyone got links to articles of other big businesses doing this?

“Zara-owner Inditex is closing up to 1,200 smaller-sized stores, as the fashion giant unveils a proprietary digital platform and pivots to accelerate its digital transformation.“

Zara Parent to Close 1,200 Stores and Invest $3 Billion in E-Commerce

Zara-owner Inditex is closing up to 1,200 smaller-sized stores, as the fashion giant unveils a proprietary digital platform and pivots to speed up its digital transformation. Learn how it expects RFID and proprietary IT architecture will help it meet soaring online demand.

risnews.com

No links, but I find this really interesting.

I visited a Carhartt store before lockdown and noticed how few products they have in their stores. It made me think of Apple's approach to stores - having them there for an experience and to demonstrate the brand, but not necessarily with intent to sell.

I expect to see more brands reduce store numbers and have physical locations as more of a 'showroom' than a salesfloor.

Maybe not Primark though

 

[Deleted78083]

The slow death of mainstreet, i remember reading about how malls were transforming from shopping experience to entertainment, and how mainstream was going to die. What will all these shops become though? Cafes and restaurants?

 

[mikey3times]

Bonobos has an interesting concept where their stores are only for trying the clothes on. You place your order in-store and it gets shipped to you. Then, they keep all your size info in the system for future purchases so you never have to remember your sizes.

Another interesting thing Soccer.com used to do was keep track of your shoe size and then they could tell you what other sizes to select. This is helpful since sizes from different brands can vary by a half size. I might wear a 10.5 in Adidas, but an 11 in Nike. Their system had all the comparisons baked in.

I think these are the kinds of things that will let the brands break free of Amazon.

 

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[pumpking]

Wayfair has also done some experiments with physical stores as a means to showcase some of their top selling items, and kiosks where people can browse their site to make more purchases.

 

[mikey3times]

There are lots of “try before you buy” products out there. Mattresses come to mind. Here is a wild, out of the box thought...

There was a huge uproar a few years ago about the mattress affiliates. I wonder if you could open a storefront with all the mattresses (Casper, Purple, etc) and let people test them. Then you place the order “in store” and get the affiliate commission.

I know they give 100 night refunds, but that is still a huge hassle that keeps me from trying them. I would feel better if I could test a mattress for 15 minutes (so I know I’m close) and then have the 100 night full test.

Obviously, the numbers might hold you back, but you could figure out special deals with the companies. Regular mattress retailers should add these to their lineup and take in some extra affiliate commissions.

 

[MrTrash757]

The slow death of mainstreet, i remember reading about how malls were transforming from shopping experience to entertainment, and how mainstream was going to die. What will all these shops become though? Cafes and restaurants?

I’ve had a crazy idea that go beyonds just entertainment, and also expands into the soon to be empty offices in some areas.

Convert it all to residential with dedicated WFH space, and combine that with entertainment,shops and restaurants.

The zoning and design of these structures are just a few of the problems.

 

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[The-J]

Fast fashion is a shitty business to be in. One bad season can ruin your entire year. If you have solvency problems, then one bad season can shut the whole thing down. Your margins are razor thin and your ability to sell product depends entirely on whether or not you meet fashion expectations for that season. Worse yet, if you can't sell product in one season you have to destroy it, otherwise it's going to flood the secondhand market causing further problems for the business.

I don't buy that this is Zara trying to be "digital forward" or "reacting to COVID". Zara and other brands in the space have been having some serious issues in the past 2 years. Zara's closing stores because it has to. Just my take though.

 

[Ocean Man]

I'm curious to know what is the return of 3 Billion? I mean that's a substantial amount of money to invest in e-commerce. Does anyone have any idea how that money is actually used?

 

[Lyinx]

I'm curious to know what is the return of 3 Billion? I mean that's a substantial amount of money to invest in e-commerce. Does anyone have any idea how that money is actually used?

if they close 1200 small business locations, and put that money towards e-commerce, and sell the same amount (or less) then they will most likely break even in a few years
$3 billion / 1200 locations = $2,500,000 (2.5 million$$$) per location

if each location had 10 employees, getting paid $12.50/hour x 40 hours week x 52 weeks year (just shooting numbers) then their cost for labor only is at $260,000 per year
if 30 employees, that would be $780,000 per year
Rent for the building = $$$$$
electric = $$$/year per location
shipping to that location from dist network= $$$
insurance/liability for that location = $$$
renovations = $$$
loss of items (theft) = $$$

upside? loss of overhead and higher efficiency....
on the downside, loss of physical sales.....

I'm sure their data/numbers guys know more about their store costs than we do

 

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[Lyinx]

Does anyone have any idea how that money is actually used?

advertising
new fulfillment center (s)?
better designed website
automation?

 

[Choate]

The first paragraph of the article mentions that they will be opening 450 new locations. These 450 stores will be absorbing the 1,200 smaller stores they are closing. Not only that, but it will be fitted with their latest sales integration technology. All current employees will be offered new positions. Furthermore, specifically:

€ 1 billion to boost online
€ 1.7 billion to integrate the store platform
"... proprietary digital platform, a tailor-made IT architecture for the integrated store and online business model, which will be completed by 2022 "

What I find most interesting is that they are building such a cutting edge e-commerce platform that it is only 60% complete and they estimate it will be done by 2022. There was no current solution that could handle their e-commerce and store sales the way they wanted it to so they had to go out and create it... and it has taken years to build. It will also tie into production, the latest trends, customers being able to check stock in stores, etc.

This is really cool. It's not just closing stores because of profitability or the pandemic, but re-defining their brand and setting themselves up for the future. Years ago in college, I did a two-month long massive case study on the supply chain and logistics of Zara; and to see this now, I'm not surprised at all. They have always been ahead of the curve and this is just another example of how.