ZARA Parent Company'S New Mechanism: Making Money

In March 18th,

The parent company Inditex group announced its 2014 earnings report.

In 2014, net sales in Inditex increased by 8.3% to 18 billion 120 million euros (121 billion 730 million yuan), while net profit increased by 5.2% to 2 billion 500 million euros (about 16 billion 440 million yuan).

In order to encourage employees to make persistent efforts in 2015, Inditex decided to start a two-year operation starting next year.

Inditex will share profits in the form of cash dividends and 70 thousand employees scattered in 54 markets, but the employees will be required to work in the company for more than two years.

The whole incentive plan is divided into two parts: in 2016, Inditex will be presented as a bonus from 10% of the 2015 year-on-year growth in the group's combined profits, and the second part will be distributed in 2017 according to the same distribution method.

"We want to make sure that all Inditex employees contribute to the development of the company."

Inditex President Pablo Isla said in announcing the plan.

As the largest brand of Inditex, Zara has experienced a difficult process of sales growth from 2% in 2013 to 7% in 2014.

2014 in the first half of the year, net sales of Zara fell 7.3% in the first quarter, the biggest decline in 5 years, due to the increase in sales costs due to exchange rate changes and large expansion of stores.

Pressure from market and finance forced Zara to change its strategy.

It had to shift its focus from brand expansion to profit growth.

Inditex is no longer eager to introduce as many brands as possible, but instead improves the efficiency of existing flagship stores.

At the same time, Zara has opened online stores in Mexico, Korea, Romania and China.

The adjustment of strategy led Zara to reverse the drop in profit in the second half of 2014.

And this year, Zara.

The plan will continue to advance in Hongkong, Macao and Taiwan, and will open 420-480 new stores in the European and American markets.

However, H&M, the biggest competitor of Zara, is not idle.

Sales increased by 14% in 2014, exceeding 7% of Zara, and announced in February this year that the company will promote long-term investment plans, covering e-commerce, new concept development and new product category innovation.

H&M will also open 400 new stores, mainly targeting the US and Chinese markets.

It sounds like an endless competitive drama.

H&M may soon announce a similar draft of employee motivation.