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Why Zara Home South Africa’s launch was doomed from the start

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Why Zara Home South Africa’s launch was doomed from the start

The Zara Home franchise in South Africa has shut its doors, but the South African market and consumers are not to blame for this failure.

No South African needs to be told that the South African economy makes it difficult for businesses to thrive – or even that there is a huge barrier to entry for international brands looking to make the leap from overseas.

But what we, and we assume many other South Africans, are tired of hearing at this point, is how international brands failed within the country because of demand issues.

Zara Home South Africa’s closure

In case you missed it, the International fashion brand Zara expanded its in-store offerings for South African consumers in 2016. Zara opened a few Zara Home stores in a select few malls across the country (really, across Johannesburg).

However, the retail giant has now seemingly abandoned this venture, and has shut the doors on Zara Home stores (and the Zara Home online store which was still in the pipeline).

And though various sources have been quick to chalk this failure up to another ‘failing South African economy demand issue’ – there is actually much more nuance to this issue than that.

And in the end, an inconsistent pricing strategy and a failure to appeal to local consumers had much more to do with the sudden disappearance of the Zara Home brand than a lack of demand from South African shoppers.

Zara Home world wide

While Zara Home did not quite get off the ground in South Africa, the brand’s homeware concept has actually been performing well internationally.

In fact, in markets where the Zara home concept is considered “affordable” – akin to PEP HOME and Mr. Price Home locally, it has become one of Inditex’s most successful ventures, as outlined in the 2023 Annual Report:

Category Description
Number of Zara Home stores 410
Net sales 26 billion EUR (include both the Zara and Zara Home brands)
Profit before taxes 5 billion EUR (includes both the Zara and Zara Home brands)

There is not a demand issue in the South African homeware market

To put it in the most straight-forward terms possible – there is not a lack of demand for homeware goods in South Africa.

In fact, at this stage, the industry is booming. Other brands operating in the country, such as Pick ‘n Pay and Poetry, have even jumped on the bandwagon and launched their own homeware sections in the last year or so.

And Pepkor reported that they saw a 21.9% growth in sales for PEP HOME in 2023. The Mr. Price Home, Yuppiechef, and Sheet Street brands contributed over 20% of the Mr. Price Group’s retail sales and other income in 2023.

Zara’s inconsistent pricing strategy

When news started spreading that the few Zara Home stores that had opened in South Africa in the last few years would be closing, the rumours were met with a resounding “they were overpriced, anyway”.

In 2015, Morgan Stanley (in partnership with AlphaWise) found that Zara’s prices in places like South Korea and the United States – some of the brand’s biggest markets – were almost double (196% and 192%, respectively) what they were in the brand’s home country, Spain.

So, while opinions on pricing can usually be overlooked in the grand scheme of things – the Zara brand has landed in hot water for its controversial geographic pricing strategies in the past.

The price-value disparity

We could go on and on about the disparity and inherent unfairness of international brands simply converting their original Euro or Dollar prices to Rand when they arrive in South Africa – with no regard for the local economy or the various economic struggles of consumers living in a developing country – but the bigger issue at hand is how this decision leads to unrealistic expectations.

While Zara may be charging consumers in America double what they charge consumers in Spain – the reality is that Zara (and by extension, Zara Home) is still considered a relatively affordable brand overseas.

Here in South Africa, however, Zara’s higher price-point (compared to local retailers) often creates this assumption that the brand offers higher quality goods and exceptional service.

And this leads to even greater disappointment when it is revealed that the items purchased from a store like Zara Home are not that different from the ones purchased from @Home, H&M Home, Woolworths or even Mr. Price Home – and, that the service you can expect to receive in-store also is not likely to blow you away.

Overall, it is not so much the high prices that killed Zara Home (before it really even took off), but rather, a value disparity that left South African consumers facing some real buyer’s remorse.