Zara opens its doors, aggressive pricing and fast-fashion model to test local rivals

World-famous fast-fashion chain Zara has finally opened the doors on its first Australian store in Sydney’s Pitt Street Mall, unveiling aggressive pricing and a business model likely to test Australian fashion retailers.

The new 1,400 square metre store attracted a number of celebrities at its launch last night, although a few curious competitors – including Mark McInnes, the new head of retail at Solomon Lew’s Premier Investments – also queued for a glimpse. Today, people are lining up around the block for the chance to be among the first customers to purchase from the store.

Retail consultant Brian Walker of The Retail Doctor says local fashion chains – a group that includes Witchery, Portmans, Cue and Sportsgirl among others – have plenty to worry about.

“If you are a retailer that’s spent 10 years in Sydney and you haven’t innovated or refreshed your offer, look out.”

Walker believes the new Zara store in Sydney will clock up sales of $40-45 million a year thanks to the strong recognition of the brand amongst the Australian public.

He is most interested to see how local companies react to Zara’s model, which is based on an extremely short supply change, which allows the company (owned by Spanish fashion giant Inditex) to get designs “inspired” by fashion shows into stores within two weeks.

“I think this is the start of the retail revolution in particular with regards to fashion,” Walker says.

“We’re a country because of geographic isolation that has not experienced that kind of retail. You look at Zara’s competitors in Australia, they will take three or four months to get product through their stores.”

The other feature is competitive pricing. Early reports suggest jeans will sell for $69, dresses at around $129 and coats at a similar range.

Retail expert Kevin Moore of Crossmark says he is surprised with Zara’s pricing, given their Sydney store is surrounded by some of the most expensive brands in the world.

“Clothing prices in Australia have been always more expensive than in Europe and North America but it’s good to see they are staying true to their brand. The prices in Zara Australia will be similar to every other Zara store in the world.”

Walker says the chain is sending a message to the Australian market.

“They will be very, very aggressive. They are out to win market share and they are out to win dollars.”

Zara has a Melbourne store in construction, although an opening date would appear to be some months away based on the progress of the build.

Walker expects that the Spanish giant won’t really hit its stride in Australia until it has three or five stores here, which might give locals retailers some breathing space.

One positive for local retailers is that the launch of Zara stores will drag shoppers back into city centres and big shopping centres – and away from online shopping, at least for a time.

“This will bring experience retailing back into the city centres,” he says.

Kevin Moore says Zara will concentrate on “destination shopping” for the foreseeable future because zoning laws will make it difficult to expand quickly.

However, he expects the chain will use its website as a tool for building Australian sales rapidly.

“Their online site I think will go crazy. They may be the first of the global retailer that actually does more money online in Australia than their stores do.”

Zara’s parent company Inditex, which is listed in Europe, was founded by Amancio Ortega in 1963, making robes and lingerie from his house and selling them to local shops.

But it was not until 1984 that the business was really set on its current growth trajectory. It was in this year that he met José María Castellano, a local professor and computer boffin who joined Inditex and helped develop a business model that allowed clothing to go from drawing board to shop floor in as little as 10 days.

In February, Ortega’s fortune was estimated at $31 billion.