Zara Parent Company to Close Up to 1,200 Stores Amid Post-Virus Push Online

The logo of a Zara store, an Inditex brand, is seen in central Madrid on Dec. 13, 2017. Susana Vera/File Photo/Reuters

The parent company of Zara, a major fashion retailer, said it is permanently closing as many as 1,200 smaller-sized stores while opening 450 new ones “fitted with all the latest sales integration technology” as the pandemic accelerates a budding trend away from brick-and-mortar toward online sales formats.

Inditex, which owns Zara and seven other brands, said in a statement Wednesday that it will cut between 13 and 16 percent of its global retail outlets, or between 1,000 and 1,200 stores.

“Most of these smaller stores are older stores belonging to brands other than Zara,” the company said, adding that it plans to ultimately have a total global network of between 6,700 and 6,900 stores.

The move is part of a new plan, dubbed “2022 Horizon” (pdf), under which it seeks to “accelerate and broaden its forward-looking digital transformation strategy,” which amounts to a tech-driven push onto mobile and online platforms while deemphasizing physical stores.

“The overriding goal between now and 2022 is to speed up full implementation of our integrated store concept, driven by the notion of being able to offer our customers uninterrupted service no matter where they find themselves, on any device and at any time of the day,” said Pablo Isla, Inditex’s executive chairman.

People shop at a Zara store in New York City on March 15, 2019. Brendan McDermid via Reuters

Inditex plans to inject a range of fancy technologies into its business model through a capital expenditure of 2.7 billion euros ($3.06 billion). These include machine learning models that will help optimize stock, an analytics engine developed with the help of MIT to estimate new product distribution, and “enable a personalized store-customer relationship.”

The notion of a more personalized shopping experience, a pervasive trend in retail, in Inditex’s case involves some form of in-app proximity alerts that will suggest to in-store customers the presence of nearby garments that complement what they’ve already bought, provide them with “targeted fashion trend info” while guiding them to recommended garments, and let them book fitting rooms using their cellphones.

The company hopes that the new tech and strategy will allow it to generate over 25 percent of its total sales from online business by 2022, up from 14 percent today.

Inditex reported a net loss of 409 million euros ($462.5 million) for the first quarter of 2020 compared to a net profit of 736 million euros ($835.5 million) for the year-previous quarter.

First-quarter sales dropped 44 percent to 3.3 billion euros ($3.8 billion) from a year earlier.

Still, shares edged up in morning trading in Europe after the company said online sales jumped 50 percent in the first quarter of the year and were up 95 percent in April alone, with the company also announcing that it intends to pay its ordinary dividend to shareholders.