Zara looks to Alibaba to ramp up online sales

MADR ID • Since opening its first website four years ago, Inditex SA has maintained full control of online sales for its flagship brand Zara. To gain a stronger foothold in China, the Spanish retailer plans to partially cede both oversight of the chain’s Web sales and a share of its profit.

This month, Zara will open an online store on Tmall, a Chinese website owned by Alibaba Group Holding Ltd. where companies such as Nike Inc., Burberry Group PLC and The Gap Inc. sell their wares. Tmall, which outranks Amazon.com Inc. as China’s biggest e-store, with more than 100,000 brands represented, takes 0.5% to 5% of sales made on the site.

Zara is one of the strongest Western retailers in China, where Inditex has 456 stores. But its two-year-old Zara.cn, which will continue to exist, isn’t even among the 10,000 most popular Web destinations in China, while Tmall is No. 7, according to data tracker Alexa.

“Retailers, to launch e-commerce in China, are deciding to launch through Tmall because of the breadth of its audience,” said Jamie Merriman, an analyst at Sanford C. Bernstein & Co. “It’s not a question so much about profitability as it is about the potential to expand market share.”

Alibaba raised US$25-billion this month in New York in the world’s largest initial public offering, and it’s now worth more than Amazon. com. The IPO prospectus raised at least one red flag for retailers considering sales on its websites: The U.S. govern ment has called Tmall’s sister-sites, Taobao.com and Alibaba. com, “notorious markets” for counterfeit goods.

Tmall has sought to allay concern about counterfeiting by requiring retailers to put down cash deposits as a guarantee that their products are legitimate. That anti-knock-off stance has increased the site’s appeal to companies such as Inditex, according to Christodoulos Chaviaras, an analyst at Barclays PLC in London.

Counterfeiting is “a welldocumented problem in China, we have seen it in the past, and Tmall comes as a solution there,” Mr. Chaviaras said.

Though Alibaba takes a share of profits on Tmall, it lets retailers maintain control of their interaction with clients. That was a key part of its attraction to Inditex, according to Pablo Isla, the retailer’s chief executive.

“It’s no different from online sales through our own Web page, so it’s like opening a store in a shopping mall,” Mr. Isla said on a Sept. 17 conference call. Inditex will also join the website because of “how relevant China is for us and how relevant Tmall is in China.”