In addition to taking a heavy toll on public health, the ongoing coronavirus pandemic has had a drastic impact on the economy. It has affected the global economy as well as national economies. Lockdowns imposed because of the virus forced people to turn away from physical stores and shops, be it clubs, restaurants, or clothing stores. According to many experts, the economic consequences of the pandemic will be long-lasting. One such consequence is already taking shape, with Zara taking a major decision.
Let’s find out what decision Zara has undertaken.
WHAT IS ZARA DOING?
The parent company of Zara, Inditex, has announced that they will be closing nearly 1,200 Zara stores across the globe. This move comes as a way to recover from losses and shift towards online sales.
Stores in Asia and Europe are expected to be closed under this plan. They are also expected to open 450 new stores, taking their store count from the current 7,412 to between 6,700 and 6,900.
However, the company has said that they will try to avoid mass lay-offs, saying that “headcount will remain stable.” In order to ensure this, they plan to offer their staff jobs in other departments.
Inditex suffered major losses because of the pandemic. They experienced a 44% decline in sales, selling products worth €3.3 billion. Moreover, they booked a net loss of €409 million in the first financial quarter of the year.
This does not mean that the company experienced slumps on all fronts. Online shopping softened the blow of the sharp decrease in sales. Compared to previous years, online sales increased by 50% in the first quarter, and 95% in April.
Inditex’s new plan aims to increase the share of online sales in their total sales. In 2019, that figure stood at 14%. The new plan aims to increase it to more than 25% by 2022.