Zara seeks to distance brand from HK protest controversy

BEIJING - Spanish apparel giant Zara, seeking to avoid becoming embroiled in controversy over protests in Hong Kong, issued a statement on Chinese social media late on Monday expressing support for China's sovereignty over the Asian financial hub.

Zara made its statement after the Hong Kong newspaper Ming Pao asked in a headline whether the closure of four of the company's Hong Kong shops on Monday was in support of a strike call by students, a question that was seized upon by mainland social media users.

Zara, owned by Inditex, said it supported the "one country, two systems" policy under which China rules Hong Kong, and had not supported strikes.

It was not immediately clear why Zara closed the stores on Monday, as reported by Ming Pao, although shops in Hong Kong have often shut their doors when protests are taking place nearby.

Zara did not immediately reply to an email seeking comment.

The brand became a top trending topic on China's Weibo social media platform, with one hashtag "Zara statement" viewed more than 170 million times as of Tuesday morning.

On Monday, thousands of Hong Kong university and school students boycotted class and rallied peacefully for democracy, following a weekend marred by some of the worst violence since unrest escalated more than three months ago.

Foreign brands are under increasing pressure from Chinese consumers and regulators to fall into line on contentious issues around Chinese sovereignty and its territorial claims.

Last month, a number of Chinese brand ambassadors of fashion labels from Coach to Givenchy severed ties with the companies over products which they said violated China's sovereignty by identifying Hong Kong and Taiwan as countries.

Last year, Zara was criticized on Chinese social media for placing Taiwan, a self-ruled island that China sees as a break-away province, in a pull-down list of countries on its Chinese website. 

source: news.abs-cbn.com

Zara and H&M shore up defenses as internet threatens

CORUNNA, Spain - Logistics investments, new technology... Faced with fierce online competition from the likes of Amazon, affordable fashion giants Zara and H&M are shoring up their defenses, trying to use their stores to boost internet sales.

Separated by thin partitions, 15 little photo studios used exclusively to update the website line up in a corner of Zara's huge headquarters near Corunna in Spain's northwest.

Under a constant barrage of camera flashes, models strike pose after pose to get seven photos showing the piece of clothing under all angles.

In total, 1,500 photos are put on line twice a week to match the speed at which articles of clothing are replaced in-store.

AMAZON, ALIBABA COMPETITION

"Online sales are becoming an element that is contributing significantly to the company's growth," said Pablo Isla, CEO of the Inditex group which owns Zara among other brands like Massimo Dutti, said this week at the annual results' presentation.

In 2017, these represented 10 percent of sales, a figure unveiled this week after years of secrecy over a crucial sector that Inditex only entered in 2010, on the late side.

Sergio Avila Luengo, an analyst at IG Markets, said gaining "more visibility online" was the main challenge for Inditex if it wants to remain "competitive on the long term".

He said the retail giant started having trouble clearing its stocks for the first time in 2017 due to competition from Amazon, which sells everything from books to clothes.

For its part Sweden's H&M, Inditex's arch-rival, has recognised that a drop in profits in 2017 was due in large part to online competition.

The clothing market "is in big transformation," CEO Karl-Johan Persson said in February.

"It is happening fast and it is challenging everyone.

"We know about the big online platforms, I'm thinking Amazon and (China's) Alibaba, affecting our industry," he said, adding smaller niche online players were also "a force to be reckoned with".

In the United States, Amazon was in 2016 the top online clothes vendor.

It holds 11 percent of the global clothing market, and this is expected to rise to 19 percent in 2020, according to data compiled by Bloomberg.

German online clothing and shoes platform Zalando and Britain's Asos, meanwhile, saw their European sales leap 25 percent and 34 percent respectively between 2012 and 2015, according to the Ecommerce Foundation.

MAJOR LOGISTICS CHALLENGED

Faced with this threat, H&M devoted 45 percent of its investment to internet in 2017, or close to 600 million euros ($736 million), for a new photo studio and personalized apps for its clients.

Inditex is also investing, but would not unveil how much.

Both groups are gradually offering the possibility for next-day or even same-day delivery of online orders, as well as the possibility to easily pick up and return clothes to stores.

These services may be crucial for customers but they represent a major logistics challenge, especially when faced with Amazon which already has "a much bigger logistics structure, already adapted to all sorts of different products," said IG Markets analyst Avila Luengo.

As it counter-attacks, Inditex has opened 19 warehouses in the world dedicated only to the internet, which are managed like stores. H&M is soon to follow suit.

Both are also taking advantage of their thousands of stores, including for client delivery.

When online sales are launched in new markets, "we get to profitability really quick," H&M financial director Jyrki Tervonen told investors in February.

He said this was "thanks to the fact we already have a store network, we are a well-known brand, appreciated among the consumers."

Inditex has invested a lot in the renovation of its stores, removing the smallest ones in favour of huge flagship shops in city centres.

Both groups are implementing systems to avoid missing out on a sale if for instance the size isn't available for a customer, by telling him or her that the item is available online.

Gildas Minvielle, head of the economic observatory at the French Fashion Institute, said their strategy was to combine both sales methods.

"Distributors that develop their stores and their online sales perform quite well," he said.

source: news.abs-cbn.com

Facebook founder's wealth jumps tremendously in 2016

Forbes Magazine announced its annual list of the world's richest persons on Tuesday (March 1), which was topped by Microsoft founder Bill Gates for the 17th time.

Gates has held the number one spot 17 of the last 22 years, according to the magazine, although his wealth has shrunk to $75 billion (USD), down from $79.2 billion last year.

Spanish retail giant Amancio Ortega came in second, with a net worth of $67 billion. Ortega is best known for his fashion chain Zara.

The Oracle of Omaha, Warren Buffett remained in the third spot, despite the fact that his net worth dropped by $11.9 billion to $60.8 billion.

Mexican telecom giant Carlos Slim dropped two spots to number four, after his wealth decreased by $27 billion, to $50 billion compared to 2015.

Amazon.com founder and CEO Jeff Bezos moved up ten spots to number five, his net worth now estimated at $45.2 billion.

At number six is Facebook founder Mark Zuckerberg, who is the biggest gainer on the 2016 list. Zuckerberg's fortune is up $11.2 billion for a total net worth of $44.6 billion.

The richest woman in the world is French cosmetics giant L'Oreal heiress Liliane Bettencourt, with an estimated net worth of $36.1 billion.

This year, the magazine says 1,810 billionaires made the list, down from 1,826 in 2015. Their average net worth is $3.58 billion, down $280 million from $3.86 billion in 2015.

The United States has the most billionaires with 540, followed by China with 251, Germany with 120, India with 84 and Russia with 77.

source: www.abs-cbnnews.com

Facebook's Mark Zuckerberg is now world's 4th richest man

Facebook Founder Mark Zuckerberg is now the fourth richest person in the world, shoving Amazon CEO Jeff Bezos aside.

According to Bloomberg, the 31-year old is sitting on a fortune worth $50 billion by close of trading Tuesday.

Meanwhile, Microsoft Founder and philanthropist Bill Gates remains the world's richest person with a net worth of $78.7 billion.

Zara fashionista Amancio Ortega of Spain is number two with $69.3 billion.

While Wall Street wizard Warren Buffett is third with $59.6 billion.

-Mornings @ ANC, February 4, 2016

source: www.abs-cbnnews.com

Is this Spanish clothing brand the next Zara?

BERLIN - Spanish fashion label Desigual is accelerating its expansion in Europe and emerging markets, seeking to ride predictions of fast growth in women's apparel while also taking the colorful brand into new areas like perfume and shoes.

The Barcelona-based company has gained a reputation for bright garments and bold marketing, offering free clothes to shoppers who arrive in their underwear to special sale parties.

After expanding outside Europe three years ago, it is now targeting sales of 1 billion euros ($1.4 billion) this year - from about 820 million in 2013 and 440 million four years ago - and plans to add 100 stores a year for the next three years.

It is all part of managing director Manel Jadraque's master plan to build a powerhouse brand to rival those of French luxury group LVMH, where he worked for a decade before joining Desigual as director of operations in 2004.

"In the next three years we plan to grow about 20-25 percent a year. The big idea is to double the company every four years," Jadraque, 44, said in an interview during Berlin fashion week.

Consultancy McKinsey predicts the global women's apparel market will grow almost 5 percent a year by 2025, up from a historical average of just over 3 percent, with emerging markets accounting for over half of sales from 37 percent now.

"The market for fashion will double in the next 10 years," said Jadraque, who was wearing one of Desigual's trademark asymmetrically patterned shirts. He said he saw room for competition between 20 companies like Zara-owner Inditex , which has grown fast to become the world's biggest clothing retailer with more than 6,000 outlets.

Hence Desigual's move into cosmetics, homeware, sports and shoes in the last two years as well as its drive to open stores in travel locations like airports, train stations and hotels.

"It is an upgrade for the brand to be in more channels," Jadraque said. "For a brand, the most important factor is to have presence in the market."

EVERY WARDROBE IN THE WORLD

Founded in Ibiza in 1984 by Swiss designer Thomas Meyer - still the company's sole shareholder - Desigual says its mission is to put at least one item into every wardrobe in the world. To that end, as well as growing its existing 400 stores, it plans to multiply concessions in department stores and increase Internet sales to a quarter of total turnover from about 10 percent now.

Jadraque, who took over as managing director in 2012, said Desigual would concentrate on locations where the brand is doing best after expanding to 60 new countries in three years.

"We want to focus on fewer countries but on penetrating more," he said. "Asia is tough. They have different tastes from Europe but South America is doing well."

Jadraque, who planned to visit potential new locations during his visit to Berlin, still sees plenty of room to grow in Europe and will be making a big push in Germany this year, where he plans to add 20 more stores to the current 40.

Desigual, which currently sources about 80 percent of its goods from China and India, plans to increase production in Europe as it seeks to improve quality, he added.

Jadraque was optimistic about the economic recovery in Spain, where Desigual expects to hire 200 of the 1,000 new staff it wants add to its team of 4,000 employees this year.

"The Christmas period was the best of the last four years," Jadraque said, adding growth would be slow this year but should pick up in 2015.

"This crisis transformed the mindset of people in Spain. Companies and managers are focusing on exports ... emerging markets, innovation. A lot of things are happening."

source: www.abs-cbnnews.com

Can Esprit become the next Zara?

HONG KONG/MADRID - Esprit Holdings' chief is doubling down on a bet to fix the struggling clothing retailer he took charge of a year ago by revamping its existing business model and recreating it in the image of his former employer-now-rival, Zara.

Jose Manuel Martinez Gutierrez, 44, has stacked his management suite with veterans of Zara owner Inditex, the world's biggest retailer whose model of rapidly changing fashion analysts say is among the best in the industry.

He also unveiled upgrades to technology and distribution to help his new hires get clothes designed, manufactured and on the racks in three to four months from the current seven to eight month time frame.

Now, all he has to do is get customers to buy the clothes.

The former McKinsey consultant and supply-chain whiz has laid the foundations for Esprit's recovery over the next 12-18 months with his nuts and bolts overhaul - he cut 10 percent of Esprit staff in the past year - but the real gauge of success will be in growing sales.

And in today's increasingly crowded market for high-street fashion, that means being able to adapt to the rapidly changing and divergent tastes of price-sensitive shoppers.

"We are mostly focusing now on improving all of our products' design and value for money, rather than on rethinking our sales strategy," Martinez told Reuters.

To succeed, he will need buy-in from every part of the business, ranging from Esprit's design and sourcing departments to its marketing managers.

"Our business figures are extremely far from our goals and expectations," he acknowledged in a letter to shareholders in Esprit's most recent annual report in October.

BRAND REVIVAL

While Esprit's plans may be similar to what worked for Inditex, it faces at least one problem its rival didn't.

Inditex owns most of its stores. Nearly a fifth of Esprit's stores and 60 percent of its sales area is franchised and not directly owned and run by the Hong Kong-listed brand which also has headquarters in Ratingen, Germany.

Feedback on which clothes are selling well takes longer. Franchises tend to be quicker to cut their losses by putting poorly selling items on sale - a potential problem for a company such as Esprit, which has franchise-run stores and self-branded stores in some of the same countries.

"It becomes more complex to manage inventory and pricing in a situation where a certain amount of internal competition has been created," said Jamie Merriman, a senior analyst financial research firm Bernstein Research.

Martinez said that decisions to open or close stores would be based on return on investment and profitability but that Esprit plans to keep its multi-channel distribution model.

Even if Martinez succeeds in dramatically shortening Esprit's production time, it's not clear whether speed alone will be enough to revive the brand.

H&M, Gap Inc and Uniqlo, the flagship brand of Japan's Fast Retailing Co Ltd, are faster than Esprit at getting new products to market, and also cheaper. More expensive brands like family owned Max Mara and Gucci, owned by luxury conglomerate Kering SA, are also developing quicker turnaround times, as are luxury brands such as Prada SpA .

"Competition is very intense," said Aaron Fischer, head of consumer research at brokerage CLSA. "Esprit has high brand awareness but it needs to convert foot traffic into sales - and that requires good products. Right now, their products are quite poor compared with their peer group."

FAST-FASHION DNA

Esprit shares hit a record low of HK$6.95 ($0.90) on September 26, 2011 as the company struggled with loss-making stores and closing down its North American operations. The shares now trade over HK$16 ($2.06), but have remained well below historical highs for more than three years.

Yet only two of Esprit's 10 biggest shareholders have trimmed their stakes in the most recent reporting period, and those cuts were just 0.01 percent and 1.03 percent, respectively, according to Thomson Reuters data. Six of the top 10 investors increased their stakes and newcomer Tiger Global Management LLC bought a 5.09 percent stake.

"The company has been very transparent in communicating our strategy to the market, which includes our shareholders, and so far the overall response has been positive," Martinez said, responding to Reuters' questions via email.

Since joining Esprit in September 2012, Martinez, who spent nearly a decade running Inditex's supply chain, has hired at least five former colleagues as his top lieutenants, news of which propelled the company's shares each time.

His latest hire was at the end of October when Rafael Pastor Espuch joined as chief product officer, sending the shares more than seven percent higher.

One thing that stands out about the new hires is their many years of service with Inditex, which ranges from six years to as many as 18 years.

"All these people certainly have a fast-fashion DNA, but can they change the culture of a company on their own?" said Joaquin Villalba, who was former head of European logistics operations at Inditex and worked with Martinez.

THE MIT CONNECTION

Much of Inditex's success can be attributed to its tightly controlled distribution system that sends tens of thousands of garments a day from distribution centres in Spain to more than 6,100 stores in some 86 countries.

The speed of the system, which uses sophisticated software and robots to process and pack orders, helps it to respond to catwalk trends as fast as within a fortnight.

It's a strategy that the company has fine-tuned over the years in partnership with the Massachusetts Institute of Technology's LGO MBA program in the United States and is a strategy that Martinez worked to refine shortly before he left the company.

"Instinct has been used to make many pertinent decisions, from design to distribution. Design is difficult to measure, but distribution is not; analytics lie behind many distribution processes in the retail world," said Villalba, who founded mStore Operations, a business application for smartphones that supports fast-fashion processes like ordering and restocking.

Rachel Kelley, the author of an MIT thesis on transferring clothes between stores, said Martinez mentored her during her six-month internship at Zara and set her the task of creating a mathematical model to make re-stocking more efficient.

"He had a very clear vision for the project," said Kelley, who expects her new model to earn Inditex an additional $18 million per year in profit. "He knows where he wants Esprit to go and how he wants to redesign the supply chain, and I think that's why he'll achieve it."

Martinez has already moved to get clothes on racks more quickly.

"We have already invested in a state of the art, fully automated distribution centre in Mönchengladbach, Germany," he told Reuters. "Additional investment may likely be required in warehousing space to implement a more ambitious stock replenishment model."

source: www.abs-cbnnews.com