Zara's parent company Inditex will be investing €2.7 billion (US$3 billion) into its digital capabilities, with €1 billion (US$1.1 billion) pumped into bolstering its online business and €1.7 billion (US$1.9 billion) in upgrading its integrated store platform and deploying advanced technology solutions. This comes as Inditex saw a strong growth of 50% in its online business, during the first quarter of 2020, specifically increasing by 95% year-on-year in April.
Pablo Isla, CEO of Inditex, said this strategy is a culmination of the project the company has been investing in steadily since 2012. "The overriding goal between now and 2022 is to speed up full implementation of our integrated store concept,” he added.
According to a press release, Inditex expects online sales to account for over 25% of its total sales by 2022, as compared to 14% in 2019. This increase will be underpinned by an integrated online-store network that is nimble, sustainable and smart. It also plans to fully develop and implement its proprietary digital platform name "Inditex Open Platform", which will be the basis of the online operating system over which all of the integrated digital operations related with the Group's eCommerce will run on.
The digital platform was configured in 2018, and is currently 60% operational. The company said the platform is implemented through microservices to help the specific needs of every department or area involved in the process without changing the whole system. In a presentation deck seen by Marketing, the digital platform will enable the development of made-to-measure tailored projects in response to specific business needs.
With the Inditex Open Platform, Inditex can feature the latest fashion creations on any device in real time, track demand with no time lags, manage stocks with the utmost efficiency, and accurately fine-tune production. Customers can select a store through the app or website, and have the whole selection of available items displayed in the feed. Customer can also purchase online and pick up their products in-store on the same day, as well as book their fitting room. Inditex said the platform will also enable it to improve customer experience and keep its inventory updated in real time.
Additionally, Inditex plans to close between 1,000 and 1,200 of its smaller-sized stores which account for 5% to 6% of the Group's total sales. According to the company, these stores are less well-positioned to offer the new customer experiences it looks to offer. It is added that these stores are older stores belonging to brands other than Zara. However, headcount is said to remain stable across the Group. Inditex said it will offer all staff members in the affected stores positions to cover the needs generated by online integration such as dispatching online customer items from store. It added that this is something the Group has been doing since 2012. Besides Zara, Inditex's list of brands include Pull & Bear, Massimo Dutti and Bershka.
Inditex reported a 44% decrease in sales, with as many as 88% of the Group's stores being closed at some point during the COVID-19 pandemic. Earlier in March, Inditex temporarily closed 3,785 stores in 39 markets as an impact of the COVID-19 outbreak. The company also saw a decrease of 4.9% in store and online sales between 1 February and 16 March 2020, as said in a statement on its website. Between 1 and 16 March 2020, store and online sales decreased by 24.1%. Inditex said then that the decrease in sales is caused by external and temporary factors, and it does not change the company's long-term vision for its business model, fundamentals, and growth potential.