Spain's armada of fashion retailers has taken the world's high streets by storm with Inditex becoming the largest such enterprise and smaller rivals such as Mango rushing to gain domination. Not to be outdone, Madrid-based Cortefiel Group has drafted its own ambitious expansion with plans to roll out 440 franchised stores in the next five years to operate over 2,000 shops. Speaking to just-style, franchise director Alex Cara outlines the strategy and explains how Cortefiel plans to stay competitive in coming years.

Cortefiel Group, taken private by buyout holding MEP in July 2005, encompasses the Cortefiel eponymous chain, unisex casual chain Springfield, lingerie label Women's Secret, upmarket label Pedro Del Hierro and suits chain Milano.

It operates 1,570 stores in 45 countries, mostly under the Springfield, Women's Secret and Cortefiel nameplates, of which 460 are franchised.

Cara says the group is on track to install 440 franchised stores around the world by 2013, many of them in Asia-Pacific and Latin America where the chain sees "untapped" potential in markets such as China, Argentina and Brazil.

In that vein, the group hopes to enter China, Kazakhstan, Algeria, Tunisia, Indonesia and Slovakia respectively within the next 12 months in efforts to open 100 franchises this year, Cara reveals.  It will also muscle into Ecuador, Venezuela Mexico, Russia and the Middle East.

"We are moving full throttle with our expansion," Cara notes from Madrid, adding that Cortefiel Group will run 800 franchised outlets - from roughly 360 now - by the end of 2012.

"We are still negotiating with potential partners but hope to be in these markets by the end of our fiscal year" of February 2010.

Expansion drive
Cortefiel's flagship Springfield and Women's Secret labels will continue to drive the expansion.

Stores will be rolled out in the five continents but with a special focus on Asia-Pacific, South America and the Middle East.

Springfield was recently converted from a men's only to a mixed label operating separate men and women chains as well as mixed-gendered stores under the "Springfield" banner.

According to Cara, the future outlets will be opened as a mixture of standalone stores and department-store corners depending on the country's retail market, consumer profile and franchise partner.

"Every market is different," he adds. "Indonesia has an established department-store network so we are more likely to open corners there but in Kazakhstan, Tunisia and Azerbaijan we will probably open standalones."

Under the chain's franchise model, partners buy Cortefiel's product and own the stores.

"We get an entry fee and margin on the sales, but our partners make a higher mark-up than with our competition," Cara says.

Focus on Asia/South America
In Asia-Pacific, the focus will be China, Vietnam and Thailand, Cara said, adding that Cortefiel hopes to open 200 Chinese stores in five years. The chain will also muscle in India through with Springfield leading the way.

Next will be South America where Cara said Spain-Latam cultural/language links provide an ideal backdrop for expansion. Apart from Ecuador and Venezuela, Cortefiel group hopes to enter Brazil and Argentina in three years.

"South America is very interesting for us," Cara noted. "We have been operating there very successfully, particularly in Mexico, and there is a lot of leverage to be had from being a Spanish company."

Regarding the Middle East, Cortefiel will grow heavily in Qatar and Saudi Arabia, while in Europe the onus will be on Russia where "there's still huge room for growth beyond our 50 franchised stores" when the recession abates, Cara said.

Cortefiel has a much more cautious strategy for its self-owned outlets.

Cara said non-franchised business will be stepped up post recession, particularly in Europe where the firm owns most stores including 800 in Spain and some 200 in key Western European markets including Portugal, Germany and France and Belgium.

"We will move to secure continued growth [post recession] where we lead but for now franchising will be the driving force. It's a good business with limited risk and investment from our side."

Tackling Zara, Mango 
As Cara spoke to just-style, ubiquitous archrivals such as Inditex and Mango are moving ahead with their own aggressive expansions.

Inditex, which owns Europe's largest fashion retailer Zara and other top labels such as Paul & Bear and Bershka, opened 560 stores last year to run 4,278 and is targeting up to 450 new stores during 2009.

Barcelona-based women's chain Mango is targeting 150 stores this year to boost its global count to 1,379.

With such formidable competitors biting at its feet, how does Cortefiel plan to compete?

Cara says product differentiation and quality are key to the retailer's competitive strategy, which he says has earned it the trust of investors and franchise partners.

"One thing that has been echoed throughout is that we offer something different than our rivals as well a better quality/price ratio," Cara points out.

"We are also happy to work with large franchise partners that deal with our competition. By offering mall developers a greater variety of anchor tenants, partners can negotiation better rent deals so we see this as a healthy thing." 

He says Cortefiel's brands avoid cannibalisation by targeting a very specific consumer profile.

Asked about how Women's Secret competes with closest Inditex rival Oysho, Cara says its chain targets slightly older women (25 plus versus 16-18 for Oysho) and has a broader collection of "higher quality" lingerie, swimwear and children's underwear. 

"We are leaders in Spain with the biggest market share in lingerie," Cara boasts.

Speaking about Springfield Women versus Mango, Cara says the former targets younger women and offers a broader range of casual wear with a "fashion twist" whereas Mango is more focused on evening, party and formal.

With Springfield Men, the chain's target is 18-plus compared to 14-plus for Inditex's Paul & Bear, says Cara. Springfield also has a larger casual range and stronger accessories business than Zara Men.

"Our accessories business is very broad and we have a very strong denim brand," Cara says, adding that Springfield recently launched a new and slightly more premium "urban and contemporary" casual label called Urban Project modelled by singer Justin Timberlake.

That strategy has been piggy backed by a new store format for Springfield which Cara says is performing very well and will serve as a blue print for future outlets.

Not fast-fashion
And Cara is first to stress that Cortefiel is not a "fast-fashion" retailer like Zara or H&M.

"We are about offering quality fashion at affordable prices," he says, at least when it comes to Springfield and Women's Secret. "We could work with factories with better margins and rates but we don't want to sacrifice quality." 

The quality spectrum rises with the Cortefiel chain, the group's first and a staple of Spanish high streets, which sells more classic and upmarket clothes. Pedro Del Hierro is the group's more luxurious brand while Milano mostly focuses on affordable suits.

Cara says Cortefiel has increased investment in tools and processes to streamline its distribution operations to accommodate its swelling franchise network.

It recently opened a new logistics centre in Aranjuez, Spain and a sourcing office in New Delhi to manage Indian suppliers more closely. The firm uses third-party manufacturers around the world and only has one self-owned factory in Morocco.

"We have invested a lot in people and resources to improve our logistics and operations because at the end of the day, if we can't move product in the right time and quantities we won't have a business."

By Ivan Castano-Freeman.