Zara to Close Smaller Stores in Brazil, Focus on Online Sales

RIO DE JANEIRO, BRAZIL – Fashion retailer Zara, from Spanish group Inditex, will close seven stores in Brazil. The number represents a little over 10% of the total number of physical stores the company operates in Brazil.

People linked to the company, who asked to remain anonymous, say that the move is not linked to the novel coronavirus pandemic.

According to them, closures began last year and are part of the company’s digitalization strategy, which had been announced seven years ago and is also being carried out in other countries where the company maintains operations.

In June, 2020, Inditex, the world’s largest clothing retailer and owner of the Zara and Massimo Dutti chains, suffered its first quarterly loss as a publicly traded company and has announced a plan of EUR 2.7 billion which includes the closure of 1,200 stores as part of an attempt to boost online sales.

The company reported a net loss of EUR 409 million in the three-month period up to the end of April 2020, compared to a EUR 734 million profit over the same period in 2019.

The Spanish group on Wednesday, January 10th, set online sales targets that will represent 25% of total sales by 2022, against 14% last year.

The closed stores are the smallest in the Brazilian chain and are unable to support the company’s technological structure necessary to link physical channels with online sales.

With this new strategy, some cities will no longer have on-site presence. This is the case of Campo Grande in Mato Grosso do Sul, Joinville in Santa Catarina, and Uberlândia in Minas Gerais.

Stores in São Bernardo do Campo in São Paulo, Vila Velha in Espírito Santo, and São José in Santa Catarina, are also on the list of stores to be closed, but the residents have other options in neighboring cities.

Despite the closures, Zara will still operate 49 stores in Brazil. The company should close over 1.200 points worldwide, as part of its focus on stores that also include digital service.

Earlier this year, another fashion retailer, Forever 21, announced that it will close all of its 11 stores in Multiplan chain of shopping malls in Brazil.

Among them are shopping malls such as Morumbi, Vila Olímpia and Anália Franco (São Paulo), Brasília, Ribeirão Preto (São Paulo), and Canoas (Rio Grande do Sul). The company claimed that it failed to reach an agreement on the negotiation of rental contract

In 2019, the American company filed for bankruptcy protection in the United States, where it is headquartered.

American analysts stated at the time that the brand failed to respond to the increase in online sales, as well as to the impact in the change in consumer behavior caused by the impact on the ‘fast fashion’ networks environment and their concern with the working conditions in the factories that manufacture their products.

Multiplan will not comment on the matter, but sources linked to the company say that the discussion was friendly, although an agreement could not be reached and the company did not leave debts, given that liabilities were exchanged for intangible assets such as sales points.