Billion euro fiesta heading to Britain

THE Spanish are invading England…. not with ships and artillery, but with shoes and designer handbags.

With unemployment at a dismal 20 per cent and the country not expected to come out of recession until at least next year, Spain’s businesses are having to look further afield to stay afloat.

And it is the British high street that global retail giants such as Zara and Mango are targeting.

The policy has already borne fruit with Zara’s parent company, Inditex, seeing a five per cent boost to their 2009 net profits, up to February 1 this year. The results have smashed forecasts renewing optimism for the Spanish retailer.

But even smaller firms are getting in on the act with Barcelona’s Café y Te chain heading for British shores for the first time this year.

With a weak pound, cheap high-street rents and a robust retail market, the UK has now emerged as an economic paradise for Spanish retailers.

In 2008, the UK was the fifth most important destination for Spanish fashion exports with 794 million euros worth being sent to the UK.

Even when the world recession hit hard last year, imports only dropped to 674 million euros to the UK.

Despite this 8.4 per cent fall, UK operations still increased by 4.2 per cent – a clear indicator of the retail giants’ plans to continue expanding.

In short, despite sales slowing in the UK, Spanish firms still wanted their brands to grow.

And a policy of never advertising has not hampered its growth, but instead created an exclusive appeal for the clothes produced – half of which are still believed to be made in Spain.

Although the economy has certainly acted as a catalyst for the move to the north, the UK also offers the opportunity for global brand recognition.

International domination is clearly an aim for huge fashion chains Zara and Mango. While Zara spans the globe in 73 nations from Saudi Arabia to Chile, Mango is incredibly even bigger, with outlets in 93 countries. It even has plans to open a store in Iraq.

Furthermore, retailer Inditex Group is now one of the world’s largest fashion groups, with a total of 65 outlets in the UK, the first opening in 1998.

The Coruna-based business was founded by tycoon owner and Spain’s richest man Amancio Ortega, in 1974.

Ortega – who refuses to wear a tie and shuns public appearances – also founded Zara the following year.

The Spaniard is now astutely using Zara’s success and notoriety to promote other Inditex Group chains, including Massimo Dutti, Pull and Bear and Bershka.

All are planning to open more stores this year in the UK, as well as Zara Home.

Replicating its eccentric founder, Zara is known for its individuality and maverick business strategy.

One instance is their pledge to pay a special shareholders’ dividend of ten cents on November 2 this year after higher than expected profits for 2009.

And a policy of never advertising has not hampered its growth, but instead created an exclusive appeal for the clothes produced – half of which are still believed to be made in Spain.

Louis Vuitton has even called Zara “the most devastating brand in the world” for the way that it has eaten into the high-end fashion market.

With 10,000 new designs every year, the fashion giant has a prodigious output of new styles.
It is rumoured to be able to put a new line of clothes in store within two weeks, slashing the industry average of six months.

Meanwhile, fashion chain Mango, from Catalonia, having observed the success of Zara in the UK, is catching up fast.

With 46 outlets already, chairman Isak Andic explains: “We are enjoying a period of growth in the UK and there are significant opportunities for the company.”

Around half of Mango’s UK outlets have been opened as ‘corners’ in big department stores. Influential chains such as the House of Fraser and Selfridges now boast Mango clothing sections within the store.

The policy has awarded Mango prime placement and allowed their clothes and accessories to be seen inside the most popular locations.

In contrast to Zara, Mango does use advertising to get out its message, having recently hired starlet Scarlett Johansson to front its recent campaigns, in the process giving Spain’s mega-star Penelope Cruz (who Johansson co-starred with in Vicky Cristina Barcelona) the boot.

The popular American is expected to increase the appeal of Mango’s clothes in the UK.

Meanwhile, Rosa Tous, head of her eponymous jewellery company, makes her approach clearer. It is “essential” for a fashion firm to have a presence in London, she states.

The Kylie Minogue-fronted chain has hired the Aussie pop-star to cultivate an image as a style leader. Tous are planning three new stores in London this year to expand their British portfolio.

Brand expert Lucie Sherwood, from Freud Communications, agrees. “Any respectable fashion brand needs a presence in the style capital of Europe,” she says.

“Building a brand is a big part of business today and Spanish firms are clearly recognising that Britain can help them do that.”

Selling jewellery and accessories, Tous have a flagship store on Regent Street following a similar pattern to youth clothing store Desigual.

Desigual have more than 200 stores all over the UK including London’s Westfield shopping centre. The recent expansion by both Tous and Desigual represents the next phase of Spanish firms entering the UK high street after giants Zara and Mango.

Both firms have international aspirations but view London and Britain as essential to any plans for their future.

Furthermore, shoe store Camper and children’s clothes shop Neck & Neck are also opening stores in the UK.

However, it is not just Spanish fashion breaking into Britain.

Coffee house Café y Te are moving to Britain for the first time, but face stiff competition from the likes of Starbucks, Café Nero and Coffee Republic.

It will remain to be seen how the English will feel about Spaniards trying to sell them tea!

But business will always go where the money is and Britain is well poised to take advantage of Spain’s dwindling profits.

With more than one billion euros spent in just two weeks last Christmas, Britain’s retail market remains robust and is recovering strongly.

Moreover, a weak pound serves as extra encouragement and, coupled with relatively cheap high street rents, Spanish firms are determined to take advantage of the competitive rates.

The situation for Spanish firms in the UK this year is looking good and is predicted to gross around one billion euros a year in 2010.

UK is crucial to both economies and its impact on British culture and style is increasing rapidly.