Is Zara owner Inditex taking online retail more seriously?

Zara and Massimo Dutti parent company Inditex said this week that 2014 was a year in which it invested in growth, with the fashion retailer reporting a 5% jump in like-for-like sales and net profit increasing 5% to €2.5 billion.

Much of the investment made in the 12 months to 31 January 2015 – €1.4 billion to be precise – was directed towards store modernisation, process automation and its logistics platforms, but the year also saw Inditex enter two major new eCommerce markets.

Online retail operations were launched in South Korea and Mexico in 2014, bringing the organisation's e-tail footprint to 27 markets, while there are plans in the pipeline to go digital in Taiwan, Hong Kong and Macao in 2015.

This week's trading statement from Inditex indicated that the bulk of its capital expenditure continues to be earmarked to new store openings and the refurbishment and expansion of existing establishments, but the company – which was relatively late to online retailing when it launched its inaugural transactional website in 2010 – arguably has significant potential to become one of the world's major eCommerce players.

Daniel Lucht, research director at retail analyst group Research Farm, said that the Zara owner took online retailing "a lot more seriously in 2014", as it moved to compete with the rise of Asos and Zalando, as well as the likes of Myntra, Vancl and the various Rocket Internet platforms.

However, with the company catering for one-third of the 88 global online markets, Lucht argues that there is "clearly a lot more to do".

"Crucially it's not only Zara but the other Inditex labels – Oysho, Massimo Dutti, Pull & Bear, Berskha, Stradivarius, Zara Home and Uterque – that need a digital push," he told Essential Retail.

"Arguably the company has a great opportunity to cross sell on the front-end and to streamline the operations and logistics of the standalone brands on the back-end and we have not seen that much from Inditex in this respect."

Inditex ended 2014 with 343 more stores that it had at the end of 2013, bringing its full estate to 6,683 establishments in 88 markets. Some noteworthy openings included flagship Zara stores in Zurich, Madrid and Hong Kong, as well as a Pull & Bear store in Milan, a Massimo Dutti in Vienna and a Bershka store in Turin.

New stores planned for 2015 include prominent openings on London's Oxford Street and on Barcelona's Plaza Cataluña.

There are no signs that the retailer's main priority will be diverted from the opening of bricks and mortar stores at any time soon – and besides the group reported 8% growth in net sales to €18.1 billion for the year, so is showing encouraging growth – but Lucht suggests there is significant potential for the business to take the online world by storm.

"If there was enough backing and investment from the company and the focus would shift somewhat from physical stores, then Inditex could really transform the dynamics of the online clothing industry," he argued.

"While Inditex is closing smaller outlets and updating flagship stores by making them fit for omnichannel requirements, for customers as well as from a logistics and stock replenishment standpoint, the company really should concentrate more on eCommerce as a sales channel in its own right. A combination of its own sites and a presence on marketplaces, such as Tmall in China, could then serve as a model, where the business should head to in future."

As a nod to the group's growth over recent years, Inditex also announced this week that it has approved a profit sharing plan for staff members who have worked for the business for more than two years. Employees across its various departments will be rewarded for their contribution to group, with the new programme set to benefit 70,000 people worldwide.

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Research Farm