Inditex, a Spanish corporation, recently made the largest retail deal in Manhattan at 666 Fifth Avenue. They spent $324 million, about $8,361 per square foot. This space will be made into a 39,000 square foot flagship store for the Zara retail chain, adding to the 7 other Manhattan store locations already in business. The decision to buy rather than to lease was based on the rates of Fifth Avenue property and the increases that would equal a 15 year lease on the area. Thus it saved the company money by buying the property. On Wednesday, the company is launching its online sales website in the U.S. The company only has 49 stores nationwide, so why spend so much on a huge flagship in a city that already has 7 stores? This is the nation’s fashion capital and the company wants retailers to know they mean business. This is just another example of how globalization is working its way into every aspect of the world’s economy. It’s expected that the company is going to end up making most of its revenue from online sales. Last year Inditex roughly made $353 million from its U.S. locations, a small chunk compared to the 12.5 billion Euros in global sales. This purchase is an important step to those in the fashion and retail industry because it’s a foreign company taking over a large amount of domestic retail sales. They are competing directly with American companies like Gap on price and style of clothes. The manufacturing and production all happens outside of the U.S. and as more and more international companies move into large retail positions in this country, it will inevitably keep affecting the domestic economy. The company’s fast turnaround of conception to production and delivery as an advantage when it comes to showing more profit than its H&M and Gap competitors. The control over inventory makes it possible for Zara to ship twice a week to stores and easily deliver packages to online shoppers.
(http://online.wsj.com/article/SB10001424053111903895904576546651628934210.html?KEYWORDS=Inditex)
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