How to Leverage Chinese Ecommerce to Become a Top 10: The Rise of Zara
Some months ago, we identified some Insights on ZARA in the Chinese digital market that came to underline its first steps on Chinese Ecommerce and the main reasons which led the company to choose Tmall as its official flagship store.
Zara´s stay in China began ten years ago and would not be long before the Management decided to set up its own online shopping website The Zara China and publish an M-shop called Zara.
What has been the result of the policy undertaken in recent years?
The unstoppable rise of Zara
After its landing in Shanghai, Zara currently counts with 182 stores in China. The brand is undergoing a process of rapid expansion, but gradual: after settling in major cities, continues to expand its business model in medium-sized cities –Second and Third Tier cities-.
The expansion of Zara in China occurs while increasing its international presence; the company is already present in 90 countries with a network of 2.170 stores…and there are still much more worlds to conquer.
In a curious twist of fate, while Zara undertakes an ambitious international growth -focused on Asia-, some others Chinese counterparts are the ones which starts their landing in Europe. It is especially noteworthy the case of Chinese Mulaya. Born in a spirit reminiscent of Zara, it advances rapidly in the West as a flagship Chinese in women’s clothing.
Ten years to become one of the 10 most recognized brands by Generations Y & Z
It would be this August when the Chinese RTG Consulting launched its latest study 2016 RTG Brand Relevance Report. The Report comes to underline the relevance that some brands reach between so-called Generation Y and Generation Z in China, their consumer behavior and lifestyles.
Surrounded by Chinese –Xiaomi, AliPay, Wechat, Taobao- and some others well-known international brands –Apple, Adidas, Nike, Uniqlo, H&M, Converse, New Balance-, Zara has entered into the Top 10, after becoming the sixth Most Recognized brand in China for the generation under 36 years.
But results are better for the Spanish company when we dive into Clothing brands. If we look at the survey results, we find that young Chinese place Zara as the second most-recognized brand in their industry, just behind Adidas.
China is already the second most important market thanks to ECOMMERCE
Its huge success in China is due to the combination of three main factors we describe below more in detailed:
- Zara offers a constant renewal and an affordable luxury as concept.
- Zara decided to start playing at the Chinese ecommerce scene by the hand of Tmall.com, instead of trying to build its own infrastructure to cover the entire Chinese market.
- Its Electronic commerce policy not only supports the growth of its own Digital industry, but also the Company growth as a whole: it has become a safe way to promote the brand in places where physical presence does not yet exist.
After going through critical situations in its implementation process in China, the company has adapted to the specific conditions of the market to which it is addressed. Zara not only has understood that nowadays, any approach to the Chinese territory must have a policy consistent with the preferences of the target population and be brave and fast to react to local consumer tastes, but also that Ecommerce has become the board in which the battle occurs, an step into future and the key that makes the difference.
All we can we do for you
Inevitably, the present is already future and both are settle on the virtual world. Knowing the ins and outs of the digital industry, take advantage of Ecommerce for the growth of our business and not give up a proactive marketing policy are the keys for successful development in the country.
In the company, we have the experience of an expert team. We are used to deal with the constraints of the Chinese market and we seize opportunities.
Let us team together. Visit us in 2 Open.
Insights on ZARA in the Chinese digital market
Since first arriving to Shanghai in 2006, ZARA has had incredible achievements in the volatile Chinese fashion industry. Etam and Ochirly used to be considered as the “King and Queen” in this sector with the vast majority of the market share, however ZARA’s arrival crashed down this obsolete structure. In 2014, ZARA reached the top fashion brands in China, earning twice the revenue of Etam.
-Zara’s first Chinese store at Nanjing West Street in Shanghai.
In the same year, ZARA opened its official flagship store on T-mall. This is not the first step ZARA takes towards the Chinese digital market, in 2012, ZARA set up its own online shopping website “The ZARA China” and also published an m-shop application“ZARA”.
-ZARA China carries on with clear style.
-ZARA’s mobile application for IOS.
Despite all of this, the big brand’s official website is often tasteless, sort of similar to the one from Dell. Dell’s official Chinese website actually used to be the largest e-commerce platform, however, nowadays it has become a more passive marketplace. Apple is also a good example to illustrate this, its official e-shop is beautifully decorated, nevertheless, Chinese users rarely to buy any products on it.
The main reason for this is because e-commerce not only involves the build up of a simple website. It requires collaboration throughout the supply chain, especially the logistics, and of course, the follow-up services.
For many international brands, including ZARA, the option of building up the infrastructure to cover the broad Chinese market is perhaps not as profitable. Thus, it is essential, and more appealing, to cooperate with the third-party platform like T-mall.
-The frontpage of ZARA on T-mall
Why did ZARA choose T-mall?
Many people thought the main reason was that ZARA wanted to catch up with the “11.11” festival on T-mall, which is the Chinese version of Black Friday. However, based on the opinions of many insiders, the market and the decrease on revenue in 2013 forced ZARA to set a foot on e-commerce.
-In 2013, its growth rate of net profit was less than 1%, which was its worst performance in the past five years.
-For the first quarter of 2014, its revenue increased by 4.3%, but net profit fell -7.3%. In contrast, in the past three years, it has maintained double-digit growth in net profit. When the results were published, Citigroup cut its TSP down from 130 to 120 euros.
-In May 2014, the monthly sales reached 60 million yuan, and consequently in June, the headquarter announced the plan to cooperate with T-mall, saying the shop would officially be settled soon.
-As for 2015, the growth rate on revenue increased 20%, and the market performed positively.
We can safely determine now the main reasons why a big company like ZARA entered the Chinese e-commerce scene. They can be summarized as the following:
- E-commerce is a leading trend of buying behaviour in China and the amount of people buying things online is rapidly increasing.
- This is a good way to promote ZARA itself on second and third tier cities, as it seldom makes advertisements.
- The Chinese e-commerce contributes to the highest growing rate of GDP in the world.
- The business model of T-mall and its fellow platforms just fits the needs of ZARA – Small amount but multiplicity.
All in all, e-commerce seems to be the way to go in China and who else to help you than 2 Open. Our goal is to understand our clients business needs in order to provide the best possible services. If you have any questions or require any information about our services, please do not hesitate in contacting us, our group of specialists will happily assist you.
This article was edited by Andres Arroyo Olson from 2 Open.