Inditex to invest €1,000mM in its eCommerce while closing 1,000 stores: the eCommerce Era has arrived

Post-coronavirus, the e-commerce era has finally arrived

Let's not fool ourselves, until 2020 the world was offline, online was the exception and not the rule, even though we had been growing at 20% per year since 2012, the pace was not enough for eCommerce to catch up with physical commerce. We were slow because of a lack of investment because many people still thought that selling online was cheap and no, it is not cheap because if it was cheap to develop an eCommerce Amazon would not be the company that invests the most in R&D in the world with $23mM in 2019. In the words of its founder, Jeff Bezos, the three most important things for a physical store are: location, location and location, while for an eCommerce store the three most important things are: technology, technology and technology.Why is Amazon using so much technology? Well, to improve customer loyalty because with the first purchase almost all eCommerces lose and it is in the recurrence where money is earned.

The cost of customer acquisition has been the Achilles heel of eCommerce to date.

Acquiring a new customer in e-commerce costs on average between 50€ and 100€ and it is almost impossible to earn that kind of money with the first purchase, so eCOmmerce lives and grows thanks to recurrence and to the fact that those of us who buy more and more buy more, but in the post-coronavirus Everything has changed, in the US Food bought 30% of the population and during the forties it increased by 31% to 61%, what does this mean? Well, user acquisition costs have dropped from 50€ to 0€, and what is even better: that a group of the population with greater age and greater purchasing power has joined eCommerce. A bargain.

Inditex is our only world champion

I still remember the visits to Arteixo and Inditex headquarters in La Castellana in 2013 where we were told that zara.com was not yet a store but a showcase, and it was true. If Inditex is the world leader in fashion, Apple is the world leader in electronics, and the apple.com website in 2007 was not an eCommerce site but an aspirational website that tried to show their products better and faster than they used to show them at computer fairs such as SIMO. The webs ended with the trade fairs because on the Internet you had the samples faster, cheaper and with more detail than in person, and the fairs had to reorient themselves towards content and contacts. I know this because coordinated one third of SIMO's surface area when that fair was about to be cancelled for the second year in a row.

Then the group's online sales began to grow and were approaching 10% but even more important was the online/offline convergence that was consolidated in 2019. Inditex had been working for years to bring its eCommerce, mobile apps and social networks closer to its network of stores, to the point of opening stores where you could only see the clothes but not take them home from the hanger. Pablo Isla acknowledged before the shareholders' meeting that last year's exceptional numbers were due to the synergy between the digital and the physical.

Playing big games

The eCommerce already accounts for more than 10% of the group's sales but also reinforces the physical presence, Inditex is not afraid of Amazon or Alibaba and is going to play hard because it is also doing well. The wind is blowing in its favor because the terrible crisis has caught it with cash and lung, because in the first quarter its online sales grew by 50% when there were only two weeks of confinement in that period, and because it has been investing in its own technological infrastructure for five years and it is already working well.

The same day that they announce the first losses in their history in the first quarter of 2020 and recognize that they will close more than a thousand stores, they also tell us that they will invest a billion euros in their eCommerce. So yes, I am sure that they will put up a fight and so, why not, we can dream of Arteixo becoming, after Amazon's Seattle and Alibaba's Hangzhou, a world eCommerce hub. They have the makings, it remains that the institutions do not hinder the way, that the market is favorable to them and, why not say it, that they have a little bit of luck.


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