Why did the brands that replaced Zara and Bershka perform at a loss for the year?
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The brands that replaced Zara and Bershka completed the year at a loss. In the financial statements, losses amount to almost 5.5 billion rubles, writes RBC. Instead of Zara CIS, the New Fashion company now operates in the country. In the former premises of the Spanish group Inditex, it is developing stores Maag, Dub, Ecru and Vilet. The revenue of “New Fashion” in 2023 exceeded 20 billion rubles, which is twice as much as it was in 2022, follows from the report. However, then a significant part of the shops of the departed Spaniards were closed.
About a year ago, the company changed owners and significantly increased expenses, which was reflected in multi-billion dollar losses. However, this situation is temporary, Nadezhda Tsvetkova, head of the retail space rental department at CORE.XP, is convinced: “The main share is the cost of launching brands. Still, in essence, they opened from scratch. Of course, no major renovations were done at the points of sale, but nevertheless, in some places, personnel had to be hired, in others, equipment had to be purchased. Of course, it’s hard for them now. Plus, during the time that Inditex was closed, the loyal audience left, choosing other brands, and now they need to be returned.
It takes time for a company to gain the trust of customers and so on. Considering that this is still not Inditex, not Zara and its brands, they have to do everything from the very beginning.”
The Inditex group represented such brands in Russia as Zara, Massimo Dutti, Pull & Bear, Oysho, Bershka and Stradivarius. They were aimed at different categories of consumers, the products were sold in 500 stores throughout the country. Daher Group from the United Arab Emirates bought the assets from Inditex and announced that it would restore the network. Consumers believed that the usual assortment would return to stores, albeit under a different name, but this turned out not to be the case.
Disappointment with the new player will not allow it to take a high position in the market, says retail real estate expert Anna Savenko: “Zara is fashion for very affordable money. What was on the catwalk yesterday appears in the company’s stores tomorrow. The new Maag brand could not occupy this niche and take the place of the departed Spanish giant. Other brands were also unable to offer analogues of those collections that were very clearly positioned by Inditex for a specific target audience.
The main reason for the failure is that this is a completely different product, which was put together in a hurry, without a clear positioning and concept.
It’s not clear what, it’s not clear to anyone, with very weak marketing support and product line. In addition, you need to understand that our Russian brands were able to provide an alternative offer.”
New Fashion’s financial statements indicate that the company plans to generate profits in the next two years sufficient to cover the shortage of working capital. She intends to achieve this, in particular, by expanding her business, increasing sales and revenue in stores, entering new marketplaces, and also searching for potential wholesale buyers.
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