Zara lowers entry level prices of products to woo customers

Zara India has reduced its entry-level product price by more than 50 per cent to Rs 390 from Rs 799 in order to push sales in a highly competitive retail market. After the sale concluded, the retailer has held on to the price point and even added more merchandise at the price. There are a range of tops and Ts to be had at much lesser prices, and that seems to be drawing in more customers.

The price point seems to have worked for Zara, and even shoppers in high-street locations have access to a wide range at this price. Inditex Trent, the joint venture between Zara brand-owner Inditex and the Tata Group’s retail arm Trent, which runs Zara stores in India, witnessed a 21.4 per cent increase in sales to Rs 1,023 crore in FY17, but the company’s net profit fell 40 per cent to Rs 48 crore.

The pricing battle intensified after Hennes & Mauritz (H&M) entered a little over two and half years ago. Zara has dropped prices by about 70 per cent to Rs 390 to take on its most aggressive competitor, H&M, which is still continuing with its stock clearance sale at a starting price point of Rs 250. Sales of H&M almost doubled for the year ended November 2017 to Rs 956.24 crore. This growth was propelled by rapid expansion of stores from 10 to 27 during the year and strong volume growth.

While other competing brands like Vero Moda and Forever 21 have entry-level price points of between Rs 500 and Rs 700, the battle for volumes and dominance clearly seems to be between Zara and H&M.

Zara is presently the market leader in the segment, but H&M has aggressive expansion plans. H&M has set a target to open 30 new stores in the next 30 months. Zara operates more than 21 stores at present, while H&M has 29 stores operational across the country.