Zara closes half of its stores in China:Adapts premium pricing strategy to compete with Chinese fashion brands like ‘Shein’ ‘Temu’

When Chinese brands like ‘Shein’ and ‘Temu’ created a stir in the fashion world with their ‘ultra-cheap’ pricing model, it was believed that Zara would have to lower its prices to survive. But the Spanish giant Inditex, the mother company of Zara, on the contrary, adopted a ‘premium strategy’ as two-thirds of the total sales of the brand come from Zara alone. As a result, in 2025, the company’s annual sales reached a record high of ₹67,000 crore, which is 6% more than the previous year. Zara’s operating profit is five times more than that of its rival HM. How does the pricing stratagy work? According to Jeff Lowery of the Rothschild Bank, selling fast-fashion with a ‘luxury look’ is now paying off. Inditex focused on style instead of price. On its 50th anniversary, the company ran a ‘luxury campaign’ with renowned photographer Steven Meisel and top models, which changed the brand’s image. Meisel is known for working with luxury brands. The hairstylists and makeup artists for this shoot were also of the same high caliber. These advertisements showed every top-paid model of the past 30 years dancing to Donna Summer’s song ‘I Feel Love’. This glamour symbolises a successful strategy for Inditex. Today, Zara’s advertisements on Instagram look like those of an expensive luxury house. Know about Zara’s economic model Zara’s founder, Amancio Ortega, built the brand on an agile logistics network that introduces new stock every week. This reduces the risk of dead stock and gives the brand the power to maintain high prices. William Woods of Bernstein says that Zara targets buyers aged 30-40 who are more affluent than HM’s customers. Competition from Chinese ‘even-faster-fashion’ retailers like Shein and Temu has forced many rivals, including HM, to cut prices. Inditex chief Oscar Garcia Maceiras, who is launching new items every week with an agile business model, attributes this success to the company’s half-a-decade-old business model. Founder Amancio Ortega allowed merchandise to be quickly changed based on customer preferences. Zara and its associated brands aim to introduce new items every week, and sometimes twice a week. This reduces the risk that the brand will make clothes that no one wants and then have to sell them at heavy discounts. It also allows Zara to set higher prices, as its clothes quickly adopt popular styles. Zara has become more ‘premium’ since Marta Ortega became president in 2021. The brand recently partnered with legendary designers like John Galliano and Stefano Pilati. Styling singer ‘Bad Bunny’ at the Super Bowl is also part of this strategy. Personal Shoppers, Luxury Boutique Idea Brought Big Change
Inditex chief Oscar Garcia Maceiras says, ‘Customers are now looking for something more (an experience) beyond just buying clothes.’ Zara has halved its locations in China, but has made the remaining stores larger and more luxurious. As a result, according to Deutsche Bank, sales per square meter increased by 46% between 2022-25. The brand is now moving away from its ‘fast fashion’ image towards ‘affordable luxury’, where customers get a high-end boutique feel. Now, stores have separate boutique areas for handbags and shoes, and ‘personal shoppers’ are available to assist customers. This ‘luxury touch’ from Zara is now writing a new chapter of profit.