Zara owner Inditex to join Tmall to reach more Chinese shoppers

MADRID Wed Jun 11, 2014 6:01pm IST

A dress is displayed at a Zara store in Madrid March 18, 2014.  REUTERS/Andrea Comas/Files

A dress is displayed at a Zara store in Madrid March 18, 2014.

Credit: Reuters/Andrea Comas/Files

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MADRID (Reuters) - Zara owner Inditex (ITX.MC), the world's largest fashion retailer, plans to join China's fast-growing Tmall online marketplace to strengthen its position in a country that is already its second biggest by store numbers behind Spain.

Tmall is run by Chinese e-commerce giant Alibaba IPO-ALIB.N, which last year handled more than 1.5 trillion yuan ($240 billion) of transactions for 231 million active users across its three main Chinese online marketplaces - more than Amazon (AMZN.O) and eBay Inc (EBAY.O) combined.

Tmall offers virtual store fronts to merchants who set their own prices and handle their own logistics for nearly everything but payments. Other Western brands to join TMall recently include Britain's Burberry (BRBY.L) and ASOS (ASOS.L).

Inditex has expanded rapidly in China over the last decade to more than 457 stores at the end of January, which analysts estimate account for about 5 percent of its sales.

The Spanish group launched its own online Zara store in China in 2012 to tap a booming e-commerce market and reach consumers in smaller cities and towns without a Zara shop.

A recent analysis by McKinsey Global Institute forecast online retail sales in China will reach $420-$650 billion by 2020 - as much as the United States, Japanese, UK, German and French markets combined.

Inditex's expansion in China has stolen a march on arch-rival Hennes & Mauritz (HMb.ST), which had 205 stores in the country as of Nov. 30 and plans to roll out an online service there this year.

The Spanish firm said on Wednesday that it would launch Zara on Tmall for its autumn-winter 2014 collection, while continuing to sell through its own website in China.

Normally, Inditex prefers to operate its own websites in order to control its brand image although it occasionally sells products through other sites, such as through ASOS for its Pull & Bear brand in the UK.

Chief Executive Pablo Isla told analysts the Tmall model should allow the firm to keep control of its image.

"It is nothing different to online sales through our own webpage," he said. "It is like opening a store in a shopping mall, so ... it's very, very consistent with our image."

Inditex already has an e-commerce presence in 25 markets and will add South Korea and Mexico in September, it also announced on Wednesday as it reported sales rose 11 percent in local currencies between Feb. 1 and June 8.

It does not give separate figures for online sales, but e-commerce is forecast by some analysts to eventually account for a quarter of the fashion market and Inditex is seen as especially well placed to benefit from the trend because of its high-margin garments and centralised logistics.

"We believe e-commerce is ... underappreciated and may cause sales growth to accelerate in the near term relative to our and the market's expectations," said Bernstein analyst Jamie Merriman.

($1 = 6.2277 Chinese Yuan Renminbi)

(Editing by Emma Thomasson and Mark Potter)

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