Zara US Defendants Deceptive Pricing Or Group Action

Global

The leading Inditex SA (ITX.MC) Indo Textile Group has a huge difference in pricing the world's different markets, so that it can eat in the United States deeply rooted in the rights protection sense.

Devin Rose, an American customer of fast fashion brand Zara, sued Zara USA Inc. on the Federal District Court of Losangeles last Friday for fraudulent pricing practices.

In terms of Devin Rose, the brand does not reflect the actual exchange rate in the pricing of products (Euro to us dollar), which leads us consumers to pay far more than the real value for their products.

In May of this year, Devin Rose bought three jackets at a Zara store in California, with the tag price of 9.95 euros.

When he arrives at the counter, each item is made.

The selling price has changed to $17.90, and the unit price at that time should be $11.26, which means that the selling price has increased by nearly 60%.

He immediately questioned the price, but said that the answers to price and exchange rates varied.

Devin Rose also believes that Zara USA Inc. uses foreign currencies to show low prices to attract consumers to settle accounts, while not disclosing the secret price increase to consumers, so that consumers can pay an average of 5-50 dollars more than the lowest price shown in euros, which is a violation of state and federal laws.

The prosecution demanded compensation from Zara USA Inc. and is seeking a class action lawsuit, which is also said to be a lawsuit of more than $5 million.

Zara USA Inc. denied the "unfounded" allegations through a spokesperson and said it would fully defend the legal process.

The company also said that it always adheres to its commitment to pparency, honesty and morality, and will continue to focus on providing excellent customer service to customers and fashion products with high quality and value for money.

In fact, the pricing differences between Zara and Inditex SA Indo Textile Group and even the retailers in different industries in different markets of the world are normal. The author also finds in the Zara stores in China from time to time the price tags which are priced in euros and are relatively low in price. I believe this is only the negligence of the relevant employees and has not been priced in Renminbi in time.

However, the prosecutors of the case believed that the Zara acted deliberately, even though the brand was re priced in the US dollar to cover the euro price on the tag, the dollar price was still much higher than the original price of the euro converted into US dollars, which had nothing to do with the real exchange rate.

As for the price of Zara in different regions, Tang Xiaotang, a retail industry analyst, said that the global parity is not normal. "Tariffs, excise taxes, local labor costs, logistics and even sales products all decide the price of a single product or the average selling price is different".

Tang Xiaotang also said that in the field of fashion, countries such as Asia and South America are generally higher in prices for some products than in European countries, mainly due to the effects of heavy taxes and exchange rates.

In the middle of 2015, Morgan Stanley NYSE:MS (NYSE:MS) Morgan Stanley and Research Institute AlphaWise released a research report on global pricing for Zara.

The report combines the pricing of 7000 products in Zara 14's main online stores, ranking the price of Zara in these markets, and the benchmark is the mobile phone in the Spanish local market.

The report shows that Zara is the most expensive seller in Korea, which is 95% higher than the Spanish market price, or nearly doubled.

Surprisingly, the US price is also very high, which is 192% of Spain's.

China's Zara products are also 78% more expensive than Spain's. The three main markets in Russia, Japan and India also sell 76%, 62% and 53% respectively compared with Spain.

Spain's European market, though relatively cheap, still has a premium of over 20% relative to Spain's pricing.

Zara is the largest single market in Germany, which is 124% of the market price in Spain. The situation in Italy is the same as that in Germany, even the most closely priced France is 22% more expensive than the domestic market.

Consumers who care about the huge difference in price are very few after all, and Zara pricing is originally "affordable" level, totally unimpeded Inditex SA Indo Textile Group is advancing in the global market.

According to the no fashion Chinese network (micro signal: nofashioncn) data, the world's largest apparel retailer has maintained rapid growth in the last quarter, and sales and profits have exceeded market expectations.

In the first three months to the end of April, the group's net sales increased by 11.5% to 4 billion 879 million euros compared to the same period last year. After the exchange rate effect, the group's sales increased by 17%. In the first half of the two quarter of May 1st, -6, the fixed exchange rate group sales also increased by 15%.

However, the performance of earnings was weaker, and the growth rate slowed sharply compared with the first quarter of fiscal year 2015 and the whole year.

Net profit increased by 6.3% to 554 million euros per annualized year, even though it was 547 million euros better than the market expected, but the growth rate reached 28% and 15% in the same period last year and 2015 fiscal year respectively.

Profit margins also showed a setback. The core profit margin of EBITDA fell from 20.5% in the same period last year to 19.6%, and gross profit margin also dropped by 130 basis points to 58.1%.

Barclays PLC PLC (BARC.L) Barclay said in the research report that Spain's Inditex SA India Textile Group headquarters and most of the logistics infrastructure located in Spain over the past two years wage inflation, the current increase of 5%, the bank estimated that in the next three years, the group gross margin will be significantly affected by this factor.

As of April 30th, Inditex SA Indo Textile Group has 7085 stores in 90 countries.

The group said earlier that it would reduce the rate of expansion of stores and instead focus on expanding the size and acceleration of stores.

With the development, the growth target of the physical sales area will be reduced to 6%-8% from the previous 8%-10%.

Group Chairman and chief executive officer, Pablo Isla, revealed in the early March that the customer price of e-commerce channels was higher than that of physical stores, which helped to increase market share and promote revenue growth with less input cost.