Zara parent Inditex, the world’s largest publicly traded fast fashion company by sales, is taking on China’s Shein, which is sweeping everything in its path.
Faced with pressure due to its economical prices and shipping products directly to the consumer, without physical stores, Inditex decided to expand the store network of the “Lefties” brand.
Zara has become less competitive on price since Inditex began raising prices on its core brand to protect margins from inflation and as part of a shift to more expensive customers. At the same time, however, the Spanish company is quietly increasing its economic series, which are aimed at the younger Gen Z consumer public, ot.gr reports.
What is Lefties?
As Reuters reports, the expansion of Lefties, which sells €17.99 jeans, €7.99 dresses and €5.99 handbags, is a key part of that strategy.
Lefties, which began life as an outlet for Zara’s surplus products, now has stores in 17 countries, including Egypt, Mexico, Romania, Saudi Arabia, Turkey and the United Arab Emirates.
Its growth shows that Inditex wants to gain a foothold at the value end of the market, even as it has successfully boosted the profits of Zara, which is much bigger than Lefties in terms of sales and store count.
Lefties is growing in its home market of Spain, as well as Portugal, at a time when many consumers have cut back and Shein’s low prices are putting pressure on Zara and Sweden’s H&M.
In Spain, where Lefties has 25 stores according to its website, it has grown from about 3.5 million customers in 2019 to 5 million customers in 2023, putting it just behind Shein with 5.2 million, based on estimates by Kantar.
Shein’s role
Lefties’ presence in many emerging markets suggests it’s a way for Inditex to cater to shoppers who may be less willing to spend at Zara, said Swetha Ramachandran, a portfolio manager at Artemis Fund Managers in London, whose fund invests in Inditex.
Shein’s impact on the fast-fashion market, and how Inditex can best compete with it, are recurring themes in meetings with Inditex management, Ramachandran added.
The not-yet-listed Shein is the world’s largest fast fashion retailer with an estimated 18% market share, according to Coresight Research.
The number of Shein shoppers in Spain has risen to 5.2 million in 2023 from 421,000 five years ago, but the Chinese group still lags far behind Zara and Primark, according to Kantar’s market estimates.
Despite having no brick-and-mortar stores, it is implementing a strategy of pop-up stores across Europe this year, having done pop-ups in cities such as Berlin, London, Paris and Rome last year.
On Instagram and TikTok, Lefties employs similar strategies to Shein, using micro-influencers in most of its posts – in contrast to the high-fashion aesthetic of Zara’s social media marketing.
The merry-go-round of competition
Lefties is still grouped under the Zara umbrella in Inditex’s financial reports, meaning its results are not public. According to the parent group, the brand has been offering its own collections for women, men and children for more than two decades.
“We don’t have a lot of visibility on it, but I think it’s doing wonders because it’s the only brand in the low-cost segment with a good online service,” Patricia Cifuentes, a senior analyst at Bestinver Securities, told Reuters.
“In Spain, competitor Primark does not offer home delivery, while Shein takes 10 to 12 days to deliver orders, making Lefties a strong competitor,” Cifuentes explained, adding that Inditex is biding its time by keeping them private brand performance.
“It usually takes time for a retailer to reach critical mass and therefore proper profitability. In addition, there is an advantage in keeping the results hidden from competitors for the time being,” he added.
In Portugal, Lefties attracted even more shoppers than Zara last year, according to previously unpublished Kantar estimates.
“The set of competitors is still pretty impressive because of their prices,” said Grace Su, a San Francisco-based portfolio manager at Clearbridge Investments, whose fund also owns shares of Inditex.
Last year, Lefties opened its first stores in Romania and Turkey and added stores in the United Arab Emirates, where it operates through franchise partners.
This is even as Zara and other Inditex brands, including Bershka and Pull&Bear, shrink their store numbers worldwide. Overall, Inditex had 585 fewer stores on October 31, 2023 than a year earlier.
In Spain, like Zara, Lefties is focusing on big stores in big cities, with its largest flagship store opening in Madrid in late 2022.
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