By Sonya Dowsett
MADRID (Reuters) - Zara-owner Inditex 's (MC:ITX) little-known budget brand Lefties started online sales in Spain and Portugal on Thursday, giving the label a digital advantage over discount fashion chain Primark in its second-biggest market.
Lefties sells low-priced clothing for women, men and children and is present in six countries - Spain, Portugal, Russia, Mexico, Qatar, and Saudi Arabia - with over 100 stores.
First set up in 1999 as a way to clear Zara clothing from previous seasons, Lefties now has its own designers and ranges. However, it has little visibility compared to Inditex's main brands like Zara, Massimo Dutti and Bershka and it does not appear on the list of brands on the Spanish company's website.
A Lefties store on Madrid's central shopping drag Gran Vía sells short printed dresses for 12.99 euros ($15.33) and cotton candy-striped shirts for 8.99 euros - a similar price point to clothing on sale at the flagship Primark store next door.
Primark, owned by Associated British Foods (L:ABF), is active on social media but has no online offer. Associated British Foods finance chief John Bason said in June Primark would not rethink its lack of online offer.
Online sales have soared during the COVID-19 pandemic due to shuttered stores and shopper reluctance to return to busy streets and malls.
But the cost of servicing those orders eats into margins even before factoring in returns, especially on low-cost items.
Societe Generale (OTC:SCGLY) calculates that online would not be profitable for Primark if it were to offer free online delivery and returns and estimates a margin drop of 5 percentage points if it were to offer online through click and collect only.
"Inditex has the infrastructure and IT capabilities from across its other brands to make online work for a budget brand. Primark would have to set it up from scratch," said Societe Generale analyst Anne Critchlow.
Inditex did not say whether it planned to expand online sales to other countries where Lefties has a presence. A company spokesman declined to comment further.
The Lefties site, which does not deliver outside Spain or Portugal, offered a standard delivery fee of 3.99 euros. At sister site Zara, deliveries are 3.95 euros or free for purchases over 30 euros in Spain.
