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Inditex’s expansion in emerging markets
Industria de Diseno Textil SA (Inditex), founded in 1963 by Amancio Ortega Gaona, opened its first Zara shop in 1975 in A Coruna, Spain. The company is continuing to grow and has now become a leading player in international/ emerging markets.
In 2012 new stores were opened in 64 markets, including the initial launches in five countries: Armenia, Bosnia-Herzegovina, Ecuador, Georgia and the Former Yugoslav Republic of Macedonia. Sales rose 16%, with Asia’s share of Inditex’s total revenues growing to 20% from 18%.
Inditex’s international success has been driven by growth within the Asia-Pacific region. The company’s retail presence in Asia in recent years means that the region now accounts for 12% of Group sales.
Findings from MarketLine suggest there are strong growth prospects in the Chinese apparel retail industry. Inditex began to operate in the Chinese market in 2004, with the opening of a Zara store in Hong Kong. The company has built a strong consumer base in China and continues to expand its offerings.
In addition to this, during 2010, Inditex made a successful decision to enter the Indian market with its Zara brand. India is the world’s second most populous market and its economy has grown rapidly in recent years.
The successful expansion in emerging markets demonstrates that Inditex has become a renowned apparel retailer around the world. The company has sidestepped the European gloom by expanding in these markets, most notably in the Asia-Pacific region.
This is a strategic move and one which many retailers are moving towards, for example Hennes & Mauritz (H&M) plans to spend around €100mn($130mn) on an initial 50 stores in India during 2013.
However Inditex still drives a major proportion of its revenues from the European market; a weak economic outlook for the Euro area is likely to depress the demand for Inditex’s products, impacting the revenues of the group in the immediate future. The company will therefore have to continue to invest further in emerging markets where there is strong economic growth.
For a more in-depth look, please read our business case study Inditex: Global fashion powerhouse