Business planning, Finance, Growth, Legal

Zara launch set to impact local retailers

Michelle Hammond /

Local retailers are being warned to brace themselves for the impact of fast-fashion chain Zara, which has brought its aggressive pricing and unique business model to Australia.

 

The internationally-acclaimed Spanish retailer opened its first Australian store in Sydney’s Pitt Street Mall today, with retail experts urging retailers to watch out.

 

Brian Walker, managing director of The Retail Doctor, says local fashion retailers should be concerned about Zara’s entry into the market.

 

Walker believes the new Zara store will clock up sales of up to $45 million a year thanks to the strong recognition of the brand among Australian consumers, many of whom have been introduced to the brand overseas.

 

He says it will be interesting to see how local businesses react to Zara’s model, which is based on an extremely short supply change, allowing the company to get catwalk-inspired designs into stores within two weeks.

 

The chain is part of retail clothing group Inditex, which has its own factories and distribution facilities in Spain and a team of around 200 designers.

 

This allows the chain to constantly refresh its designs, with stores typically receiving small batches of items twice a week.

 

Its annual range of clothing is between 12,000 and 15,000 items, much larger than the range any Australian fashion retailers can offer.

 

“I think this is the start of the retail revolution, in particular with regards to fashion,” Walker says.

 

“We’re a country that, because of geographic isolation, has not experienced that kind of retail. You look at Zara’s competitors in Australia – they will take three or four months to get product through their stores.”

Zara’s other competitive advantage is its pricing, with early reports indicating jeans will sell for around $70 while dresses and coats will go for around $130.

 

Retail expert Kevin Moore says he is surprised by Zara’s pricing, given its Sydney store is surrounded by some of the most expensive brands in the world.

 

“Clothing prices in Australia have been always more expensive than in Europe and North America, but it’s good to see they are staying true to their brand,” he says.

 

Walker says Zara is sending a strong message to the Australian market in that it will be “very, very aggressive”.

 

“They are out to win market share and they are out to win dollars,” he says.

 

Zara also has a Melbourne store in construction, although an opening date appears to be some months away based on the progress of the build.

 

Walker expects Zara won’t really hit its stride in Australia until it has three or four stores here, which might give locals retailers some breathing space.

 

One positive for local retailers is that the launch of Zara stores will entice shoppers back into city centres and big shopping centres and away from online shopping, at least temporarily.

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