At numbers 64 and 66 Juan Flórez Street, in A Coruña, the first store in the history of Zara keeps its doors open.
The store, opened in 1975, was the first of the almost 5,700 that make up the Inditex group network today, although the passage of time has made it a rare bird within the current proposal offered by the Galician textile giant.
With less than 400 square meters of surface, it seems a miniature next to the 6,000 of the last large store inaugurated by Zara in Spain, located in Seville and opened in November, or the 8,000 that make up the one located in the Plaza de Spain from Madrid.
In times when the textile industry looks closely at every move of Chinese online operators, such as Shein or Temu, capable of selling clothing at knockdown prices, a large part of Inditex's financial success continues to reside in the operation of its physical store.
Precisely what its Asian rivals do not have.
The company founded by Amancio Ortega, today chaired by his daughter Marta, presented record results this week, with sales of 35,947 million euros, and profits of 5,381, in both cases with double-digit annual increases, despite having 123 fewer stores than in the previous year.
Store sales, which represent three quarters of total turnover, grew by 8%, a significant percentage taking into account the size of the company.
If compared to 2019, the year prior to the pandemic, the increase in income generated in the physical channel is 11%, but with 1,777 fewer establishments and a 10% lower commercial area.
At the same time, the average space per store has grown from 600 to 800 square meters.
Inditex has fewer stores, but they are larger… and they sell more.
“Our project is based on identifying the best locations that allow us to offer our entire range of products with differentiated spaces, such as footwear, accessories, or cosmetics,” its CEO, Óscar García Maceiras, summarized last Wednesday.
Now a Zara store must be located on an emblematic street, and it must fit everything: fashion for men and women, collections for children and teenagers, sportswear, cosmetics, lingerie, footwear, self-checkouts, large fitting rooms and automated lockers. to collect online orders.
And, in some specific cases, small cafes.
“Our strategy includes openings, renovations and relocations of stores in the best locations, and the launch of new services that elevate the shopping experience,” described the executive.
More sales per square meter
This change in the model began more than 10 years ago, under the command of former president Pablo Isla. The plan was to open large spaces that would absorb the activity of small nearby stores.
The model has evolved to the current proposal, with the aim of keeping the store alive and giving customers new reasons to visit it.
The strategy works: in 2023, each square meter of Inditex commercial space generated income of 5,900 euros, 23.4% more than four years before.
“This, in the distribution sector, tells you that the model has a long way to go,” analyzes Philip Moscoso, member of the governing council of IESE and professor at ISEM Fashion Business School.
“They have always been clear that they should spend money in their stores.
Now with larger spaces, with more digital elements, more technology and without the online channel cannibalizing physical sales, one of the great fears in the sector,” adds the expert.
More information
Inditex increases its sales in Spain by 13% despite reducing the number of stores to levels from 20 years ago
García Maceiras: “We are a reliable value for shareholders and investors”
In fact, the large size of the new establishments that Inditex opens is also related to providing service to the online channel.
They are stores, but also warehouses from which to dispatch orders made from the digital platform.
“The back room works wonderfully well for them,” explains Ramón Solé, director of the Luxury MBA at EAE Madrid.
“All management and logistics systems are the heart of the company.
The level of error is minimal, whether in shipping to the store or to the online customer,” he comments.
A machinery that allows it to resist the current difficulties that appear better than its rivals.
From the bottlenecks in the supply chain that were generated after the pandemic, to the current Red Sea crisis, through the war in Ukraine or the fierce Chinese competition.
While large international groups such as H&M or GAP suffer in these environments, Inditex announces million-dollar investments.
In 2024, 1,800 million to continue optimizing its network of stores and improve online integration, to which another 900 will be added to gain logistical capacity, a figure that will be repeated in 2025 to open four new warehouses, three in Spain.
More growth
“We see strong growth opportunities in all our markets,” insists García Maceiras.
Inditex does not appreciate its roof.
He sees potential in emerging markets such as the United States, where this year he will open Zara stores in Los Angeles and Las Vegas, and Massimo Dutti in Miami;
also in mature ones like Spain, where in 2023 it grew more than 13%;
or Germany, where it has just opened its first Stradivarius stores and this year it will do so with Oysho.
And in 2024 it will continue to venture into new countries, such as Uzbekistan.
This diversity of brands, each aimed at a type of audience, is another of its strengths compared to Chinese proposals.
“Lefties, Bershka or Stradivarius compete with more affordable price ranges, but now they also have spectacular stores.
Inditex covers many fronts with very powerful brands, and is differentiating itself from the competition with a fashion proposal of higher quality in design and value,” says Ramón Solé.
With all these ingredients, the future trend indicates that it will continue to be one of growth.
Financial firms such as Goldman Sachs, JP Morgan and Jefferies have raised the target price of Inditex's share, which is trading at record levels, in view of the potential of its strategy.
“There is nothing to indicate that the model can be exhausted,” says Philipe Moscoso.
“They have a culture, perhaps imbued by their founder, of continuous improvement, of not falling into complacency.
“That differentiates them,” he adds.
The expert does see aspects that are still susceptible to improvement.
For example, that the consolidated success in its traditional markets is replicated in the same dimension in Asian countries or the United States;
an objective marked as a priority by the group.
And above all, do not fall into relaxation.
“Companies of this type cannot think that, because they are so good at what they do, they have the right to always do well.
Or to ignore the good that others do.
In sustainability, for example, Inditex is relying on external knowledge, investing in startups.
“They must remain willing to look outside.”
Because they haven't stopped looking upwards.
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