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Shopping Centers Today -> February 2006
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SPAIN’S ZARA FINDS FANS APLENTY IN LATIN AMERICA’S MALLS
By María Bird Picó
If the shopping center in Latin America had to pick one word for sensation, there’s a good chance it would be “Zara.”
This flagship brand of Spanish retail group Inditex is the first choice for Latin American malls looking to diversify their tenant mix. Zara now resides in 76 centers throughout the region.
The fashion retailer peddles two winning traits for a mall: up-to-date fashion and low prices, sources say.
“Zara is a phenomenon,” said Edgar Rodríguez, director of operations in the shopping center division of Mexico City-based Grupo Frisa. “They hardly advertise but still generate store traffic by word of mouth and the image they have built among their fans.” Mall executives considered it a milestone for Central America’s retail industry when Zara entered Panama in 2002, and the chain now has one store each in Costa Rica, El Salvador and Panama.
“We have plans to extend our presence to other countries, such as Guatemala and Honduras,” said Raúl Estradera Vázquez, a spokesman for Madrid, Spain-based Inditex. The Costa Rica store opened last year at Multiplaza Escazú, in the capital city of San José.
The industry is abuzz with reports that Zara is about to enter Peru and Colombia, but Estradera will not confirm that.
“We would love to have Zara in Peru,” said Juan José Calle, president of the Asociación de Centros Comerciales y de Entretenimiento del Perú. (Association of Shopping Centres and Entertainment of Peru). “It is the foreign fashion retailer with the best positioning in the international market. It already has followers here without a store or advertising.”
Inditex now has 99 stores in total in the Americas. In addition to its Zara stores in Latin America, the company also has 18 Zaras in the United States and 14 in Canada. Besides Zara, Inditex operates the Bershka, Massimo Dutti, Oysho, and Pull and Bear brands in Latin America. The Central American stores are operated by a franchisee — El Salvador-based Grupo Simán, a major department store operator. The only other store franchised in the region is a Zara in the Dominican Republic. In fact, only 10 percent of Inditex stores worldwide are franchises.
Inditex posted $711 million in sales for its stores in the Americas in 2004, amounting to 10.5 percent of its total sales worldwide, says Estradera. He declined to provide specific sales figures for Latin America, however. International store sales in general account for about 55 percent of the company’s total sales.
For all that, Estradera says the company will be focusing on Europe for growth in the foreseeable future. Following the appointment of a new president in 2005, Inditex has launched an ambitious plan to double sales in five years. The stores closer to its European home base can deliver on this faster. The company’s stores in Europe, excluding Spain, account for 38 percent of its total sales and registered the healthiest growth in 2004, according to Inditex’s annual report.
It is no surprise that Inditex is making Latin America a lower priority for growth for now, says David Peña, a retail sector analyst at Caja Madrid Bolsa, a Madrid-based investment firm.
“It is true Latin America is a relevant region but not the most relevant for Inditex right now,” observed Peña. “The currency devaluations in some of the countries, such as in Argentina, Venezuela and Mexico in particular, affected the way they regard the region. The risk profile has changed.”
Peña says only 7 percent of Inditex stores are in Latin America. The region does not reach the 10 percent mark in the sales pie, he added.
One more sign that the region has lost its allure, he says, is that between 2003 and 2004 the 2,250-plus-store Inditex opened only 28 stores in Latin America, “an insignificant figure for a company used to opening 400 stores in a year.” Further, he says, it is easier logistically to concentrate on markets closer to home. “When it comes to fashion seasons, the Northern Hemisphere and the Southern Hemisphere are not a good marriage,” said Peña.
Inditex is focusing on growth in France, Germany and Italy. The company says it also wants to expand in the U.S. and Asia. Last month Inditex launched its first store in Monaco, a Zara in one of Monte Carlo’s exclusive shopping areas. It also entered Indonesia and the Philippines last year, putting it in 60 countries in total.
Latin America sales may constitute a small share of Zara’s overall pie, but for malls in the region the retailer can serve as bait for youthful, fashion-conscious shoppers.
“We have been told by Inditex executives that some of the Zaras in Venezuela are among the highest grossers in the world,” said Arnold Moreno, president of Cámara Venezolana de Centros Comerciales, Comerciantes y Afines (Cavececo) Venezuela’s Chamber of Shopping Centers, Retailers and Affiliates. Zara offers affordable and fashionable clothes that may not be of the highest quality but are quickly snapped up by shoppers who are constantly updating their wardrobe, he says.
Though on paper Latin America’s economic statistics may be reason to pause, Moreno says he believes a sizable underground economy makes up for it.
Zara opened its first Latin American stores in Mexico in 1992 and went to Argentina six years later. The company entered Venezuela in 1999 and then Brazil, Chile and Uruguay. Puerto Rico saw its first Zara in 2001.
Most Zara stores measure between 1,200 and 1,500 square meters. “Zara is a major hit,” said Gonzalo Quinteros, shopping center director at Compañía Parque Arauco, which owns Parque Arauco and other malls in Chile. At Parque Arauco, Zara has a 1,700-square-meter store that rings up $1.48 million per month in sales. “It has a knack for capturing into its fashions what the 30-and-under age group is looking for and offer it right away at a very competitive price.”
Quinteros was one of the executives who persuaded Inditex to come to the southern cone in the first place — no easy task, given the different seasons that run concurrently in the Southern Hemisphere and Europe: When the retailer launches summer clothes in Europe, it is rolling out winter clothes across the ocean.
After Mexico, with 37, Brazil is the second-biggest Zara market, with 13, followed by Venezuela, with eight (Venezuela also has eight Bershka and six Pull and Bear units). Argentina has six, Chile has five, and Uruguay has two.
“They are professionals and good operators and performers,” said Reginald Barnes, director of corporate relations at Brazil-based Grupo Multiplan, a major owner and manager of shopping centers. “They know how to adapt their merchandise to the Brazilian market.”
Zara was less known in Central America, but this has not deterred shoppers from buying since day one, says Joaquín Gutiérrez, regional manager of international franchises for Grupo Simán.
“Zara is a phenomenon in Central America for the same reasons as in the rest of the world: Stores are stocked with new merchandise twice a week, which stimulates clients to visit several times throughout the year,” said Gutiérrez.
In April Simán will open the first Bershka in Central America, in Galerías, a mall in San Salvador that houses a Zara. Bershka targets the 13-to-25 age group.
Inditex now has seven other fashion brands, but Zara still accounts for the lion’s share of income and sales. And this lion’s roar now reverberates across much of Latin America.
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