Spanish fashion giant Zara will begin operating an online store in Israel today using a mobile phone app and tomorrow on a website. The Spanish retailer will provide home delivery to its customers in 3-6 days for a NIS 30 charge and free of charge for purchases of over NIS 200. Zara is also allowing its customers to collect the products they ordered at 10 of its 25 physical stores in Israel.
Zara's timing, however, is unfashionably late, and the company is not offering service value in comparison with its local and international competitors operating in Israel.
It has been nearly a decade since the Spanish chain, owned by the Inditex group, a public company, began operating ecommerce websites, which it deployed gradually. In March 2018, Zara began operating online stores in Australia and New Zealand, and expanded its activity to Brazil in March 2019. This month, it is launching online activity in Dubai, Egypt, Indonesia, Lebanon, Morocco, Saudi Arabia, Serbia, and the United Arab Emirates.
As of now, Zara is only permitting online sales of fashion goods for men, women, and children. This excludes its Zara Home products. This policy contrasts with its competitors' websites, including those of British company ASOS, which offers home products, and Israeli company Terminal X, which offers products by Fox Home and new chain Anthropology.
Zara's prices through its app and online are the same as in its physical stores.
In a presentation to investors published by the group for 2018, Inditex said that part of its model is globally deployed delivery on the same day or the day following an order. As of now, however, the delivery time that it is offering in Israel falls far short of both this standard and the value now being offered by local players like Terminal X and Adika, which deliver on the day following an order. ASOS, which is popular with Israelis, takes up to five days to deliver in Israel. The cost of Zara's delivery is also inferior to the free delivery offered by retailers such as ASOS, Terminal X, and Adika.
News for the local market?
It is hard to disassociate Zara's new online activity in the Middle East from the recent measures by Amazon and the latter's entry into additional countries, as well as the crisis in the local fashion market and the difficulties of older companies in adapting themselves to the technologies and changes in consumer habits.
Tamir Ben-Shahar from the Czamanski Ben-Shahar consultant firm says, "There is nothing really important here. Zara came late to the party and has mis-forecast the market trends for the past several years." He added, "Keep in mind that online is not just another distribution window. In order to succeed, you have to be in the online store, have products that do not exist in the physical store, or provide a buyer experience with respect to convenience, delivery times, and price."
Ben-Shahar added that another challenge was the gap between the prices in Israel and overseas purchases: "The price gap between the same product in Israel and in Barcelona varies from 15% to 30%. Many Israeli consumers know that in another month, they will be in Spain, so it's worthwhile for them to wait and buy at a cheaper price."
Nevertheless, this is Zara, the world's largest and strongest fashion chain, a particular favorite of Israelis. Zara's sales in 2018 exceeded €18 billion, nearly 70% of Inditex's entire sales, so the introduction of sales through mobile phones and online is of importance to the local market.
27% increase in online activity
How significant is online activity now? Inditex's online sales totaled €3.2 billion in 2018, 27% more than in the preceding year. The group's online sales accounted, reaching to over 200 markets worldwide, accounted for 12% of its total sales.
Zara, founded in 1975, operates 7,000 physical stores in 96 markets. Public retail group Inditex operates 7,490 stores worldwide, including 79 in Israel. In addition to Zara, Inditex owns brands such as Pull&Bear, Massimo Dutti, Bershka, Uterque, Oyshko, Stradivarius, and Zara Home.
The Israeli franchise for Zara and other brands belongs to Joey Schwebel under the Gottex Brands group.
Published by Globes, Israel business news - en.globes.co.il - on May 15, 2019
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