Inditex’s quality-led model delivers far higher profits than Shein’s growth.
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INDITEX, the owner of popular clothing brands Zara, Pull&Bear, and Stradivarius, has quintupled the profitability of Chinese retailer Shein. While Shein maintains strong growth and a net margin on sales of 3.3 per cent, Inditex reached 16.4 per cent in the first nine months of the fiscal year, according to business news source elEconomista. The data reaffirms Inditex’s high profitability model against ultra-fast fashion brands like Shein.
Inditex dwarfs Shein’s margins despite ultra-fast fashion spike
Shein has experienced strong growth during the fiscal year, with projected sales of $60 billion (€51.2 billion) and a net profit of $2 billion (€1.7 billion). If these projections prove to be correct by the end of the year, Shein would have nearly doubled its results from the previous fiscal year. However, Inditex’s profits dwarfed it, reaching a net profit of €4.622 billion, accelerating its growth in the third quarter in particular.
These differences could be explained by the vastly different marketing strategies. While Shein focuses on extremely low-cost products and ultra-fast fashion, Inditex focuses on higher-value clothing items and keeps cheap items to a minimum. Both the Spanish and Swedish chains of Inditex in particular have strayed away from low-cost products, which also foregoes competition with Chinese low-cost retailers, and moved towards more sustainable and higher-quality clothing.
Notwithstanding, Shein has reached the third position in global online fashion sales, with a 1.53 per cent market share globally. Inditex trails behind it with 1.24 per cent, in the fourth global position.
Ultra-fast fashion takes over Europe, causing concern among large retailers
The growth and exponentially increasing popularity of ultra-fast fashion and incredibly cheap online retailers like Shein, Temu, and Aliexpress, have caused concern among larger European retailers and in particular, Anged, the trade association representing companies like El Corte Inglés, Carrefour, Alcampo, Ikea, and Fnac, claiming that the ultra-low prices, lack of control and tax loopholes make it difficult for traditional companies to compete. Anged has called the situation an “unequal playing field and clear unfair competition.”
The number of shipments worth less than €150 coming into the EU have more than tripled in the last two years, with Shein and Temu in particular being the main instigator due to their “pervasive online advertising, low prices and ultra-fast shipping.” In the EU, an incredible 4.6 billion parcels were imported in 2024, with 91 per cent of these coming from China.
However, just last month, the EU announced they would be doing away with the tariff exemption on small and cheap parcels, and online Chinese retailers are set to take a massive hit from the change.
As for Inditex, its figures show a strong reinforcement of its financial and strategic prowess, emphasising models based on sustainability and quality rather than ultra-fast fashion, ultra-cheap production, and ultra-low prices.
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