Why we shouldn't panic about the planned closure of 1 000 Zara stores over the next 2 years

A shopper seen in Zara's home country, Spain. Photo by Xavi Torrent/Getty Images
A shopper seen in Zara's home country, Spain. Photo by Xavi Torrent/Getty Images
  • The Covid-19 pandemic has resulted in multiple store closures over the past couple of months. 
  • Zara is the latest major retail outlet to announce upcoming store closures amid the pandemic.
  • But this does not mark the end for the Spanish retailer, as they are slowly making a transition to e-commerce.

Enjoy this Zara sale - it could be the last one. Just kidding.

The news of Zara-owner Inditex's plans to close more than 1000 stores around the world, has caused much panic on the internet. Not to mention, the thought of threatened livelihoods of Zara employees. However, there's more to the story than meets the headline. Here's what we know for sure so far...

Reuters has reported that Inditex, booked its first quarterly loss as the coronavirus crisis forced it to shut most shops, but its shares rose after it unveiled a 2.7 billion euro plan to accelerate its focus on large stores and online sales. This is after the Spanish company was forced to shut almost 90 percent of its stores from February to April.

Inditex aims to focus on its online business and large stores in prime shopping areas while closing around 1000 of its smaller stores. It expects virtual sales to account for more than a quarter (25 percent) of business by 2022, compared to their current 14 percent. Larger stores will therefore act as distribution hubs for online sales.

Retail rivals H&M and GAP have all reported a drop in sales as global lockdowns have kept stores shut and shoppers at home.

READ MORE: Sell, stow or dump? Clothing stores wrestle with mountains of stock amid coronavirus pandemic 

So what does this mean for you and your Zara moodboard right now? 

Well, it was hardly a year ago when we eagerly downloaded the Zara app when they finally launched online shopping in South Africa, eight years after entering the country's malls in 2011. And we immediately adjusted pretty seamlessly to their new e-commerce offering. So much so that instead of rushing to Sandton City Mall in our masks, we've simply grabbed our phones to add this season's sale items to our carts. Actually checking the cart out mid-month is a story for another day, though. 

The point is, if it does happen that a large number of SA's Zara stores shut down by 2022, you - the customer - will still have the option of shopping their threads online and you'll be fine for the most part. Additionally, The Guardian notes that "closures are expected to be concentrated in Asia and Europe," which inspires a small degree of optimism for us. 

So there's no need to panic buy just yet.

However, Zara is just one of the symptoms of the pandemic facing the retail industry; the impending brick-and-mortar famine. According to The Guardian, brick-and-mortar retailers around the world have been "forced to re-evaluate their business models during the pandemic, amid expectations of lower footfall in stores for a significant amount of time." But the need to reconsider outdated business models had made itself evident in retail long before Covid-19. 

Here, we take a look at some of the brick-and-mortar fatalities we've reported on both before and during the coronavirus pandemic:

Prada leaves SA

Prada, the Italian luxury label owned by the Prada Group, announced its departure from Africa's richest square mile in May, expressing these neatly packed words; "We are writing to inform you that the Prada store at Johannesburg Sandton Mall is now permanently closed." 

They concluded their very brief letter to the Prada community in SA by saying "Don't forget to visit our website an social media channels every now and then for some inspiration too." 

J. Crew bankrupty

J. Crew filed for bankruptcy due to the pandemic. The decision to file for Chapter 11 protection in federal bankruptcy court was reached in early May. It was reported that J. Crew's e-commerce business will continue and at least two brick-and-mortar stores will open once lockdown restrictions have eased. 

Neiman Marcus... also bankrupt

Also in the first week of May, U.S. luxury department chain, Neiman Marcus Group, filed for bankruptcy protection, marking one of the highest-profile corporate collapses yet among retailers forced to temporarily close stores in response to the Covid-19 pandemic, which has shoppers stuck at home. 

The Dallas-based retailer reportedly plans to cede control to creditors in exchange for eliminating $4 billion of debt (they also reportedly owe $6 million to Chanel). Its debt currently totals about $5 billion dollars. 

READ MORE: Retail industry rattled as Neiman Marcus becomes latest chain to file for bankruptcy 

Forever 21's ongoing bankruptcy woes

The end of fashion month in 2019 was culminated by international retail chain Forever 21, filing for Chapter 11 bankruptcy protection. According to Forbes, the company's co-founders Jin Sook and Do Won "Don" Chang were no longer billionaires by July 2019 after over three successful decades of fashion retail.  

SA's revolving door of international retail outlets 

Here today. Gone tomorrow.

The year 2015 saw the coup de grâce of the 30-year-old Platinum Group which had Aca Joe, Urban, Hilton Wiener, Jenni Button, and Vertigo in its stable, after having furnished the wardrobes of middle class black South African consumers for all occasions season after season. In 2017, Stuttafords stores then finally left our malls for good after 159 years of selling coveted (and overpriced) European and American brands to local fashion enthusiasts. In the same year, all standalone Mango, River Island and Nine West stores also packed their paper bags and left SA retail centers hollow. 

And then we were down to a handful of fast fashion options including Zara, H&M, Cotton On, and Topshop; just to name a few. 

That was until Topshop left us too in 2018, but not without a bang of a sale.

Not too long after officially closing its doors in South Africa, Topshop then resolved to close all 11 of their U.S. stores earlier in 2019 as the brand continued to battle. 

A W24 article detailing the reasons behind these closures referenced Business Insider, saying that Topshop's parent company Arcadia Group proposed these closures as part of a restructuring deal amid financial difficulty. It was also stated that Topshop will, however, continue to sell its clothing online through its wholesale partners.

Topshop follows its fellow beleaguered Victoria’s Secret, which shared its plans to close 53 stores in the U.S. – and, according to CNN, was due to more women deserting the brand for lingerie startups and big retailers. Both Topshop and Victoria’s Secret have been previously accused of not keeping up with the times when it comes to fashion. 

And therein lies the retail dilemma - the struggle to keep up with the times not only in terms of fashion, but with regards to business trends and changing consumer habits too.

Additional source: Reuters

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