The owner of the Zara brand sees solid profit growth from online sales

The Spanish retail giant Inditex, owner of the Zara brand, reported on Wednesday a solid profit growth in the past year, highlighting additional investments in the development of integrated stores and online sales. The net profit of the Spanish company rose by seven percent in 2017, to 3.37 billion euros. The growth is solid, but weaker than in the previous two years.

Their revenues increased by nine percent, to 25.3 billion euros, of which 10 percent was generated from online sales. Inditex notes that last year they invested 1.8 billion euros “in further development of integrated stores and the online sales model and in modernizing technology,” the statement said.

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The development includes services such as online ordering of clothing and its pickup in stores, which is carried out at fully automated points in several stores. Part of the invested amount was spent on expanding the system of electronic chips on labels that enable very precise tracking of sales and inventory status.

Inditex CEO Pablo Isla told reporters that such a system allows for “complete inventory integration,” meaning that the group can “offer products in online sales that we have in stores.” In 2017, the company opened 183 new stores, bringing their total number to 7,475. Sixty percent of sales were generated in European markets, Inditex notes.

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The company, headquartered in Artix in northwest Spain, produces more than half of its clothing in factories located near major markets – including its home Spain, Portugal, North African countries, Turkey, and Eastern Europe. This business model allows them to deliver clothing to stores much faster than competitors whose priority is low production costs and reliance on subcontractors in Asia. This, in turn, means that Inditex can respond more quickly to changes in consumer tastes and avoid excessive inventory buildup.

Zara’s clothing can thus go from designer sketches to stores in two weeks, while H&M takes six months for the same process, AFP notes.