MADRID - Zara owner Inditex, the world’s biggest listed fast fashion company by sales, is expanding its low-priced Gen Z-focused brand Lefties to counter Chinese-founded rival Shein.

The rapid growth of Shein, an online marketplace with no physical stores, is putting pressure on retailers like Inditex and Sweden’s H&M to find ways to respond to its budget prices.

Zara has become less competitive on price since Inditex started hiking prices at its core brand to protect profit margins from inflation and as part of a shift towards more upmarket customers.

But the Spanish company is also quietly growing its budget ranges.

The expansion of Lefties, which sells €17.99 (S$26) jeans, dresses for as little as €7.99, and €5.99 handbags, is a key part of that strategy.

Lefties, which started life as an outlet for Zara leftovers, now has stores in 17 countries, including Egypt, Mexico, Romania, Saudi Arabia, Turkey and the United Arab Emirates (UAE).

Its growth shows that Inditex wants a foothold in the value end of the market, even as it has successfully boosted profits at Zara, which is much bigger than Lefties in terms of sales and store numbers.

In Spain, where Lefties has 25 stores according to its website, it has grown from around 3.5 million customers in 2019 to 5 million customers in 2023, putting it just behind Shein with 5.2 million, based on estimates from market research firm Kantar.

Lefties’ presence in several emerging markets suggests it is a way for Inditex to serve shoppers who may be less willing to splash out at Zara, said Ms Swetha Ramachandran, a portfolio manager at Artemis Fund Managers in London whose fund invests in Inditex.

Shein’s impact on the fast fashion market, and how Inditex can best compete against it, are themes that keep coming up in meetings with Inditex management, Ms Ramachandran added.

Unlisted Shein is the world’s biggest fast fashion retailer with an estimated 18 per cent market share, according to Coresight Research.

On Instagram and TikTok, Lefties employs similar strategies to Shein, featuring micro-influencers in most of its posts – in contrast with the high fashion aesthetic of Zara’s social media marketing.

Lefties is still bundled under Zara in Inditex’s financial reports, meaning its results are not public.

In Spain, rival Primark does not offer home delivery, while Shein takes between 10 and 12 days to deliver orders, making Lefties a stronger proposition, said Ms Patricia Cifuentes, senior analyst at Bestinver Securities, adding that Inditex is biding its time by keeping the brand’s performance private.

“It typically takes time for a retailer to reach the critical mass and, therefore, the right profitability. Moreover, there is an advantage in keeping the results hidden from the competitors for the time being,” she said.

Shein’s shopper numbers in Spain rose to 5.2 million in 2023 from 421,000 five years ago, but the Chinese group is still well behind Zara and Primark, according to Kantar estimates on the market.

Asked about Lefties, Shein said it does not comment on other companies. The retailer said it will open “several” pop-up stores across Europe in 2024, after doing pop-ups in cities including Berlin, London, Paris, and Rome in 2023.

In Portugal, Lefties attracted even more shoppers than Zara in 2023, according to Kantar estimates that have not been previously published. In 2023, Lefties opened its first stores in Romania and Turkey, and added stores in the UAE, where it operates through franchise partners.

That is even as Zara and the other Inditex brands, including Bershka and Pull&Bear, are shrinking their global store count.

Overall, Inditex had 585 fewer stores by Oct 31, 2023, than a year previously. REUTERS