Zara Vs. Amazon: the great online fashion battle for a billion and a half dollars

In the weak winter sun, the steel and glass greenhouse domes, the Spheres, that flank the entrance to Amazon headquarters, rise from the sidewalk with the promise of a glimpse into the future and also a good time . It's nine in the morning and battalions of 'Amazonites', laptop and coffee in hand, break into the Day One building (at Amazon it's always the first day, to remind its employees that rest is for the weak). Once inside, they assemble and segment billions of trillions of bytes of consumer data that stream from their gigantic servers and end up on our mobile phones, computers, and Alexas, prompting us to buy, buy, and then buy more. “The people who bought this also bought…”. It is optimistic, contagious.

However, if you walk a few blocks, you arrive at Pine Street, the main artery of Seattle, where the atmosphere is very different. The Westlake is such a quiet mall that when you walk into a store you feel like you are interrupting the privacy of the owner. At Nordstrom Rack there is a 60% discount on designer products that were not sold at their flagship store, just two blocks away. The only store that maintains its prices is the Spanish Zara.

It may not seem like it, but this corner of Seattle is the epicenter of fashion's biggest battle: an epic global fight to win the fast fashion market, which has more to do with the consumption variables than with the magic of fashion and design.

In one corner of the ring we have Jeff Bezos, the head of Amazon. Thanks to his ingenious algorithms, he knows who we are, where we live and what we buy. After years of focusing on underwear, T-shirts and sportswear, he turns his eyes to the luxury market, offering name-brand clothing and shoes, as well as watches and jewelry, on his newborn website redesigned as Amazon Fashion (note the capital F , Bezos is serious).

In the other corner is Pablo Isla, CEO of Zara, the world's largest clothing retailer, first inventing, then perfecting, "cheap'n' chic fast fashion," the quick sale of cheap and stylish fashion. . Inditex, its parent company, generates annual revenues of 25,000 million euros. No other company in the trade – not H&M, not Uniqlo, not J Crew, not Gap, not anyone – is big, nimble or profitable enough to take on these two titans. It's going to be a fierce fight.

Oddly enough, big data, the new Eldorado of marketing, is collected in an extraordinary way in stores, something Amazon lacks. This is how Luis Lara, a professor at the ISEM Fashion School and for five years the international director of Inditex, explains it: “Zara collects data from multiple sources: Instagram, social networks, the web..., apart from its own stores. They know when a garment arrives at the store, if it is tried or not, if it is sold, what colors or sizes work...; sales speeds or order quality. Based on all this information, they can much better fine-tune their predictions of what is going to work and what is not going to work and the offer by country, region or store. In addition, and to reinforce that big data, they have the small data that they have been working on for many years and what they call 'qualitative information', or, what is the same, comments that customers make to employees and that they transmit to the center”.

Perhaps this is why Bezos has thrown himself into the arena of contention in a very un-Amazonian way: by building physical stores. Last year an Amazon pop-up store appeared in London selling traditional brands such as Calvin Klein, Tommy Hilfiger, Puma and Levi's alongside collections from its newly created brands: Truth & Fable (for special occasions), Find (exclusive fashion), Iris & Lilly (lingerie and swimwear), Meraki (basic clothing) and Aurique (sports).

Shoppers could buy products in the store and take them away – remember? – or scan the codes on the labels to have the products delivered to their home. More stores, pop-up and permanent, are planned. And Amazon has also opened its own studio in Hoxton, where it digitizes 500,000 photos a year to display on its websites in the UK, France, Italy, Germany and Spain.

Bezos spends more on research and development than any other director in the world, spending last year $23bn – more than four times the BBC's total budget – to pioneer new services, both digital and analogue. The Echo Look is an Alexa combined with a camera. We can take a selfie in an outfit and, via Amazon's Style Check, get a second opinion on our look based on 'current trends and what's flattering on you' courtesy of algorithms and advice from fashion experts. It has also developed an app that will allow Amazon Fashion to track our selfies and online calendars – if we give it permission – and suggest the appropriate clothing (sold on Amazon) for a particular event, be it a business meeting or a wedding. With Prime Wardrobe we can order clothes, shoes and accessories, try them on at home, and return what we don't want within seven days. Only then are we billed for what we have left.

Zara is strong where Amazon has only just begun. It has 2,127 stores around the world and is making them more and more attractive. Isla has introduced augmented reality. There is a pilot project in which customers, through the Zara app, can choose a model from the shop window and a short film showing how it is worn appears on their mobile phones. The model can be purchased from the device screen. In the new high-tech locker rooms, information screens on the mirrors offer "multiple options for combining clothing and accessories."

Zara was slow to start selling online –it didn't start working until 2010– and it knows it has to improve its commitment. Inditex has recently opened 18 online stores, which means that next year Zara products will be available through its website almost anywhere in the world, making it the largest clothing store on the planet. “We want to make our collections available to everyone,” explains Isla. E-commerce currently accounts for 10% of sales, 40% more than the previous year, and that figure should double in the next three to four years.

The power of the viral can generate great income based on hits. A very clear example was the Oroley jacket, designed by computer following only the dictates of what people were looking for on the Internet in 2018: “It is a case of viral marketing”, explains Luis Lara, “because information about its design and quality attributes spread like wildfire in various areas of the US [influencers, specialized fashion and general press, etc.] and from there to the rest of the world. That made 'everyone' talk about this garment and the demand grew rapidly. The Chinese supplier had enough flexibility to launch colors and variants, and meet global demand."

How will the battle of the brands play out? In the US, Amazon has the advantage. Sales figures by sector are not published, but analysts say that it is number one in clothing and footwear, with 35% of the market. Europe is another story. Here, Amazon only has 8% of the market.

The problem for Bezos is that Amazon is not associated with fashion in Europe, a lesson learned painfully when he tried to persuade the likes of Gucci and Prada to join him and they gave him the door. "Being popular is not the same as being chic," an executive blurted out. Adding insult to injury, the mid-market consumers Bezos was targeting were already being served by their favorite brands and platforms like Asos, Missguided and Zalando.

Zara has the advantage that most of its garments are made close to its headquarters in Galicia, in northwestern Spain, while Amazon outsources the manufacturing of its collections. This means that Zara reacts faster to market trends and, thanks to its extensive network of stores, it can keep up with the latest trends than Amazon. “Fashion is all about mood and emotions, things that are hard to measure with algorithms,” says John Hooks, a British-born executive and adviser to the world's biggest fashion brands.

Luca Solca, a fashion and luxury analyst, acknowledges Zara's strength, but argues that Amazon's greater size and scale could, over time, give it the upper hand: “Amazon can develop a Zara-like model in a big way, to be invincible thanks to the combination of databases, artificial intelligence and its provisioning capacity”.

Zara, he adds, faces structural challenges that Amazon does not. Isla has to keep customers interested in cheap chic clothes when the trend in many markets is towards responsible consumption. For Gen Z, those born around the year 2000, it's ridiculous that fashion changes so fast and they resist buying something new. Many millennials shop based on resale level, using websites like Vestiaire Collective, eBay, or Wallapop.

Many consumers over the age of 40 are following Marie Kondo and getting rid of the contents of their cupboards. Bezos' customers only care about low prices, variety of products and speed of delivery. Elaine Kwon, a former supplier manager for Amazon Fashion who now runs Chanlogic, a consultancy for e-commerce businesses in fashion brands, believes that in this duel of giants the forces are even. "The industry mocked Zara for trying to create quality fashion pieces while maintaining affordable prices, but Amazon has the technology and distribution battle on its side."

Who will get bigger, and is better positioned? That is the billion and a half dollar question.