Fashion retail Zara to shut operations of 1,200 stores around the world, as the owner tries to accelerate the online sale of the clothing brand due to the havoc caused by the COVID-19 pandemic. The stores which will stop functioning are mostly concentrated in Asia and Europe but the 107 Inditex stores situated in the UK are supposedly going to run smoothly.
The Spanish company Inditex founded by Amancio Ortega, which also happens to be one of the world's largest clothing retailers, stated that it is trying to boost the online sale of the clothing brand because the Coronavirus pandemic has affected up to 44 per cent of the offline sale between February 1 and April 30, the first quarter of the financial year 2020. It further stated the retailer will "absorb" around 1,000 to 1,200 stores around the world, with losses faced from older shops including different brands like Bershka, Massimo Dutti and Pull & Bear other than Zara.
Inditex also said that "headcount will remain stable," as the staff will be given other jobs related to dispatching online purchases, etc. The number of stores around the world will be reduced from 7,412 to something between 6,700 and 6,900 after the retailer closes down the stores in question. This will also include the opening of 450 new stores.
The company reported a net loss of over 409m Euro during the first quarter of the year. Around a quarter of its stores remained closed up till June 8, due to the lockdown. "However, online sales growth made up for some of the sales weakness," said Inditex. The online sale of the clothing brand went up to 50 per cent year-on-year during the first quarter and up to 95 per cent in the month of April.
Inditex said it will try to improve the online sale of the clothes all the more as it faces difficult challenges from high street competitors like H&M, Uniqlo owner, online-only rivals such as Asos and Boohoos in the UK which has fairly done well even during the lockdown. In the new plan proposed by Inditex, larger stores will be the pillars of distribution hubs for online sales and the online sales will account for over 25 per cent of the total sale by 2022, as compared with 14 per cent which accounted for the total sale in the financial year of 2019.
Inditex plans on spending 1 billion Euros on promoting and re-configuring its online sales by 2022 and 1.7 billion Euros on the offline stores in order to function better with different websites for faster deliveries and real-time tracking of products.