Barriers to Entry
As the traditional markets have become saturated, Zara’s parent company, Inditex, has set Asia as a top priority for its expansion with stores in countries such as Japan, Korea, and India. In 1998, the first Zara store opened in Tokyo. Since then, more than 150 stores opened in the most popular streets and malls of the biggest cities in these countries. So far, Zara possesses 79 stores in Japan, 35 stores in Korea, and 8 stores in India. Asia represents a very important market for Inditex in the long run. As Asia is becoming the priority destination for Inditex in its growth outside European markets. Inditex’s target for retail space growth in this region is double the average for Zara’s stores in the rest of the world. Coming years will see it open more stores in Asia, with Japan, Korea, and India as its top priorities.
Barriers to entry
For Inditex, Japan, Korea, and India are prime commercial locations in its Asia market. They are also the most competitive markets for international retail sector. It is worth noting that in recent years, a large number of international clothing companies are also expanding Asia market. H&M and GAP are considered to be Zara’s closest comparable competitors. H&M, which also famous of its fast fashion and low price, has 19 stores in Japan, 8 stores in Korea, and is planning open its first store in India.
Furthermore, the local apparel retailers, which with a lower price also increase competitive pressure to Zara’s Asia expansion. Uniqlo (Unique Clothing Warehouse), one of the famous Japanese casual wear designer, manufacturer and retailer, possesses 651 stores in Japan. Its target customers are people from 0 to 50 year-old. Its products purpose is good quality but low price. In Korea, the local fast fashion clothing company such as Basic House, has 150 stores in Kerea and the total revenue in the last year has reached to 1.6 billion dollars. Inditex needs to improve consumer’s perception of the quality of its products because it cannot compete with local companies on price. Its prices in Asia can be even 30% higher than those in other countries.
Strategies to entry
In contract to Spain, where all of Zara’s stores were company-owned and managed, Inditex used joint ventures in Japan, Korea, and India. This business model is characterized by a highly integrated vertical venture. By the new agreements with local companies, Inditex may be able to solve some of the problems related to entering Asia. Inditex stated that both consumption and the interest for fashion in Asia have developed in a very positive way for the company. “The groups growth rate in Asia is twice of that in the rest of world,” Inditex said.
Zara entered the Japanese market in 1997, forming a joint venture with Japan’s BIGI Group to establish Zara Japan. In