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With consumers in Spain suffering sky-high unemployment rates, record low consumer confidence levels, and enormous public spending cuts – stretching already fragile domestic budgets – consumers have to be more cost-conscious than they’ve ever been in the past. Ironically, this has run parallel to the arrival of modern retailing concepts, such as e-commerce and Asian fast-fashion, which has challenged the existing status quo, and has given consumers in Spain the ability to better shop and compare.
The internet, enabling e-commerce, was first key in allowing consumers the opportunity to better compare prices, giving them the chance to buy top brands at cheaper prices and to have access to lesser known ones. The impressive success of Privalia, Asos, La Redoute, and many others, showed that the traditional clothing and footwear retailer was now being challenged by a new class of competitor. In response, Inditex, and other mid-priced fast-fashion giants, quickly opened their own online store, despite their ubiquitous presence on the Spanish high-streets.
However, the ongoing severity of the financial crisis has further reshaped the distribution landscape, allowing the introduction of Asian fast-fashion retailers. Over the last decade, Madrid and other big cities began witnessing the arrival of new Asian clothing chains that offer super-low prices but with clothing of a similar quality to Zara and H&M. Moreover, they offer these clothes in a modern, neat, fashionable and upscale-looking environment. Such establishments include Mulaya, Okeysi and Modelisa, which are now competing directly with retailers such as Zara and are expanding very quickly.
While Mulaya was first established in Madrid in 2003, it’s only been over the past two years that the chain has really taken off. It now has stores in Madrid (20 outlets), Barcelona, Valencia and Ciudad Real. The stores are typically managed and run by Chinese staff, offering fast-fashion at an average of 30% cheaper than high street brands like Zara or H&M. Mulaya owner, Lisa Pou, described the company as a “Chinese company born in Spain for Spanish consumers”. The company is benefiting not only from a consumer need for economy products, but also from the current low property prices, enabling the brand to open in key commercial hot spots and shopping districts. The brand is also offering online sales through its website Mulaya.com, which offers free delivery for €50+ purchases throughout the country.
Another Asian fast-fashion success story is Okeysi, which was established in Madrid in 2008, and founded by Xiaohua Chen. During the crisis, the brand expanded in Madrid’s commercial districts like Fuencarral Street and is also present in some shopping malls. Okeysi, known in Spain as “the new Zara”, follows a very similar commercial strategy to Mulaya. The company currently operates 10 outlets in Madrid and one in Valencia, and offers fashionable, low-cost clothing items, targeting the younger demographic. The price strategy is very much in line with giants like Bershka, Lefties and Suiteblanco. The brand is currently developing its online business, which is expected to be operational by year end 2014.
One interesting aspect about this fast-fashion trend is that Chinese retail outlets have typically had a negative image in Spain. Historically, Chinese-run businesses tended to focus on economy products in very basic locations, offering low-quality items. They also received negative publicity in the media in relation to working conditions at factories back in China. However, brands like Mulaya, Okeysi and Modelisa have overcome these concerns by offering a consumer-friendly environment and shopping experience, paying closer attention to shop-floor design, music, decoration and visual merchandising, for example.
So if high street presence and e-commerce are no guarantee for success, how should established brands like Zara, H&M and Primark respond to this threat? It seems that as long as the economic situation remains as it is, value-driven products will drive domestic consumption. In particular, this increasing offer of quality items at favourable prices means that value for money will be the most defining purchasing factor. For a long time, Spanish consumers have been complaining about the perceived declining quality of certain high-street brands, despite the increase in prices. Fast-fashion stores like Mulaya, Okeysi and Modelisa have finally levelled the playing field.