Zara Follows Shoppers Into the Bedroom
If consumers can be persuaded to buy new sweaters, jackets, and pants every month, can’t they be persuaded to do the same with bedroom linens and bath towels? Spanish retailer Inditex (ITX:SM)—which operates more than 2050 Zara stores in 88 countries, and is the world’s largest retailer—is extending a fast fashion sensibility to home goods. Almost 12 years after launching Zara Home, the company is pushing to have the design stores everywhere the clothing store operates.
“They are creating a market,” says Cruz del Barrio, head of home and garden research at Euromonitor. “They sell you a lifestyle. It’s very aspirational.” The strategy is gaining momentum as Zara Home’s competitors try to catch up.
Zara Home opened with four stores in Spain in 2003 and now has 420 locations worldwide, including new outposts in Hungary and South Korea. According to Inditex, 26 Zara Home stores opened in the nine months ending Oct. 31—a 6.7 percent increase from a year earlier. Sales at Zara Home have about doubled since 2009, growing at a faster pace than all of Inditex’s brands—which include Zara, Massimo Dutti clothing stores, and a fashion accessories and jewelry chain.
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Inditex, founded in the first half of the 1970s as a textile manufacturer, is building on that experience. (The name is a mash-up of the Spanish words for “textile” and “industries.”) Zara Home specializes in fabric products for every room, from the bedroom to the kitchen. Duvet covers are displayed alongside tea towels and place mats. The home accessories emporiums, located in city centers and on main shopping streets, cater to urban dwellers and workers who can pop in, browse the merchandise, and buy something on a lunch break.
Rival H&M (HMB:SS) has followed Zara Home’s lead. It opened a home design chain in 2009. Swedish retailer Ikea, known more for its furniture and for warehouse-size spaces on the outskirts of cities, opened a store this year in downtown Hamburg. Ikea expects more than half its customers to travel there by public transport or bike. It has announced plans for a similar outlet in Paris. “It’s about convincing you that if you have a green towel and a blue towel that now you need a red towel,” del Barrio says of the growth of home goods. “You create needs for consumers that they don’t actually have.”
Zara Home offers about 10,000 products, including white-and-beige sheet sets (about $16) and wool rugs (about $390). Ikea, by comparison, sells from a catalog of 9,500 items per year, which includes furniture.
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With sales of €451 million ($564 million) last year, Zara Home has a way to go to eclipse the size of its sister brands at Inditex, let alone Ikea. The Swedish company has the largest portion—4.8 percent—of the home furnishings market, forecast to be worth $695 billion in 2018, up from $553.7 billion in 2013, according to Euromonitor. That includes textiles and furniture. Zara Home has less than 0.5 percent, but it operates more stores worldwide.
Zara’s brand recognition offers the company an advantage in a highly segmented market, according to Anne Critchlow, an analyst with Société Générale (GLE:FP) in London. The home furnishing market is “fragmented across online, department stores, even in supermarkets, hypermarkets—all types of different retailers sell this kind of merchandise,” she says. “Fragmentation always gives you a chance.”
Expanding beyond clothes has strengthened the business by tapping Zara’s brand recognition, according to Cedric Lecasble, an analyst in Paris for Raymond James Financial (RJF). “There’s the possibility to build a segment with limited expenditure in terms of promotion and advertising, because the brand is already strong in the given country, so it’s a natural kind of move,” he says.
