Inditex has maintained total control of the web sales at its Zara brand since going online four years ago, but in an effort to establish a stronger position in China, the Spanish retail giant will turn over partial control to Chinese e-commerce giant Alibaba.
According to Bloomberg, Zara will open an online store this month in Alibaba-owned Tmall, where more than 100,000 brands—including Gap, Nike and Inditex’s smaller Pull & Bear and Bershka brands—already do business. In China, Tmall beats out Amazon as the biggest e-tailer, and although Inditex has 456 Zara stores in China, zara.cn, which has been around for two years, doesn’t even rank in the top 10,000 most popular websites in China, and Tmall comes in at No. 7, according to analytics firm Alexa.
Jamie Merriman, a Sanford C. Bernstein & Co. analyst, told Bloomberg, “Retailers, to launch e-commerce in China, are deciding to launch through Tmall because of the breadth of its audience,” adding that, “It’s not a question so much about profitability as it is about the potential to expand market share.”
Before the announcement that it would join Tmall, Zara’s sales in China were projected to grow as much as 20 percent according to analysts estimates, and the partnership is expected to boost that growth. Inditex doesn’t break out sales data by country, but according to Societe Generale SA, China accounts for 8 percent of its sales, Bloomberg reported.
Alibaba has been in the news often of late as the company went public last month, and its stock took off in the debut. Alibaba stock closed on Sept. 19, its first day of trading, at $93.89, 38 percent above its $68 initial public offering. The stock was trading at $88.36 as of publication time Monday.
Pablo Isla, Inditex chief executive officer said on a conference call last month that Zara joining Tmall is like opening a store in a shopping mall, as the online sales will be the same as though through its own web page. Alibaba takes a share of profits on Tmall, but retailers are still able to control interactions with consumers. The reason for the move, according to Isla, is because of “how relevant China is for us and how relevant Tmall is in China.”