Can Zara Parent Company Change CEO To Break Through Online Bottleneck?

The global fast fashion industry is entering a bottleneck period. Many enterprises are facing reform and challenge. Recently, the Spanish fast fashion brand Zara parent company Inditex group formally approved the proposal of chief executive officer Carlos Crespo to become the CEO of the group. The former CEO Pablo Isla will continue to be the chairman of the group. It is understood that after taking office, Carlos Crespo will work with Pablo Isla to develop a global strategy for Inditex group, and supervise the management of business technology, IT security, logistics and transportation, procurement and sustainable development. According to the insiders, at this stage, Inditex group, represented by Zara, is facing difficult challenges. The group chooses to change CEO at this time to change the whole. With the trend of Inditex in the past two years, Inditex will vigorously develop e-commerce and other businesses after replacing the top level.

　　 Replace key figures

The announcement that Inditex group had changed CEO had been implemented recently. Inditex group formally approved the proposal by the chief executive officer Carlos Crespo to become the CEO of the group at the shareholders' meeting. In May of this year, Inditex announced that CEO would be replaced. It is understood that Carlos Crespo joined the Inditex group in 2001 and is mainly responsible for supervision, management, IT, logistics and sustainable development.

Pablo Isla became chief executive of the group in 2005 and replaced Amancio Ortega as chairman in 2011. Some analysts believe that after 14 years, Inditex group chose to replace the top decision-makers at this time, proving that Zara and other brands are facing tough challenges.

According to fashion business reports, Pablo Isla has said that Zara and other brands are being threatened by changing consumer habits and online retailers such as Amazon. Carlos Crespo is a key figure in the group digital strategy and has a wealth of relevant experience. The appointment will help its brand to achieve faster next year's goal of providing e-commerce services in all regions of the world.

In the past two years, the performance of Inditex group has been slowing down. According to the 2018 fiscal year data released by the group, the sales volume of the group increased by 3% to 26 billion 100 million euros, an increase of 4% compared to the sales volume, a further slowdown of the 9% increase in the 2017 fiscal year, a 56.7% gross profit margin, and a net profit of 12% to 3 billion 400 million euros, which is the worst profit growth in the last ten years. Even in the 2018 year of fiscal year, sales growth in the 27% fiscal year is only 27%, accounting for 12% of total revenue, or 3 billion 200 million euros, far behind the strong growth of 41% in fiscal year 41%.

Pablo Isla said in its 2018 earnings report that the group's performance in the past year has not deviate from the right track. Apart from opening new retail stores and launching intelligent App, its brands are also trying every kind of daring innovative initiatives. The group is constantly digitization and "making itself faster" through continuous introspection.

For Inditex group why decided to replace CEO and other issues, Beijing Business Daily reporter also contacted Inditex responsible person, but as of press time before the other side has not responded.

　 Plan global touches

Over the past two years, Inditex has continued to accelerate the layout of the Chinese market and focus on digital development. In 2018, Zara's sister brand Uterq u E announced its entry to Tmall and maintained the world's first synchronization. After that, Inditex intends to further expand the number of online sales brands worldwide. Pablo Isla said that before 2020, Inditex will sell all its brand products on the global online channel, including the market without physical stores.

It is understood that by 2020, Inditex's plan is that all brands will adopt integrated inventory management systems in all entities with physical stores. The system will solve the problem of online customer orders and store inventory. So far, Zara has integrated inventory management in 25 markets, including Spain, France, Italy, China, the United States, the United Kingdom and Mexico. Inditex believes that since the radio frequency identification technology (RFID) has been fully deployed in Zara and Uterq u E, the overall layout of the integrated inventory management system can be realized.

In fact, this technology has been promoted in other brands of Inditex worldwide. It is expected that the whole group's production layout will be completed before 2020. In addition, Inditex also plans to operate all the shops in the world according to eco efficiency before 2020. Compared with traditional shops, the scheme can save 20% of energy and water, up to 50%. At this stage, the plan has been implemented in Inditex 80% stores, of which China's regional stores have achieved 100%.

Zhang Peiying, Honorary Advisor of the China luxury Confederation, said Inditex's move is to further expand the online layout to compensate for the gradual decline in comparable store sales. "It is precisely because of the growth in online performance and the slow growth in the sales of offline stores that Inditex has announced the new global online plan."

　　 Digitalization is the key to fast fashion

In fact, more than Inditex, many fast fashion brands have focused on online business. H&M launched its flagship store in Tmall in 2018 and opened the third party online self shop for the first time. GAP also opened WeChat mall in mid 2018. Besides buying goods, it also viewed clothing inventory through "scanning code for clothing" and could find nearby stores.

In the view of Lai Yang, a research fellow and a vice president of the Beijing Business Economics Association, it is precisely because of the low cost of online construction and the increasingly high service age, digital technology has gradually become the main research object of fast fashion brands. At this stage, the new technology of science and technology has become a major trend in the development of enterprises. In the past, the use of new technology usually invested a lot of capital research and development, resulting in many enterprises prohibitive. But with the development of technology, online technology can reduce the cost of artificial operation and increase the speed of purchase, thus bringing a good shopping experience for consumers.

Zhang Peiying also believes that for the fast fashion enterprises that have been slowing down year by year, the development of digital wave is very important. In the past two years, digitalization has brought great benefits to both Inditex and H&M. However, at the same time of increasing digitalization, enterprises should also increase the offline experience, while maintaining the advantage of fast fashion "fast" because the store experience helps consumers to enhance brand image. When New Look, Forever 21 and other brands are gradually away from the Chinese market, the fast fashion brand represented by Zara must accelerate the transformation so as to usher in a new round of transformation.