Zara was described by Louis Vuitton's Fashion Director as "Possibly the most innovative and devastating retailer in the world." But should the world’s largest fashion retailer be nervy by the entry of rival, H&M on Indian shores?
Competition is a norm of the industry, where the best show wins! Fast fashion is a relatively more competitive realm. H&M has started to investigate the possibilities of opening H&M stores in India by setting up a wholly-owned subsidiary. They have been looking at India for some time and are in the process of preparing an application for an H&M subsidiary in India. Zara made an India entry in 2010 with the opening of its first store in May.
The two leading fashion retailers have been competing to grab larger market shares across the globe. In the rat race to supremacy, both the labels have embedded their philosophies into business models intricately, which is leading their path to success.
Brands: At a glance
Zara opened its doors for the first time in 1975 in A Coruña in Spain. Its journey spreads across 85 markets with a network of more than 1,700 stores located at appropriate locations. Its global presence clearly shows that national borders are no impediment to a shared fashion culture. Inditex's (Zara's perent company) net sales climbed up by 17 per cent to 11,362 million Euros in December 2012.
H & M, which opened its first store in Sweden in 1947, is available today in more than 40 markets. Fashion and quality at the best price is H&M’s basic business concept. Their collections are created by 140 in-house designers together with buyers and pattern makers. The brand buys products from around 700 independent suppliers mainly in Asia and Europe. In 2012, the turnover including VAT was pegged at Euro 17 billion. In January 2013, H&M Group total sales including VAT in local currencies increased by five percent compared to the same month the previous year.
Biz & expansion strategies
H&M remains positive towards future expansion and new business opportunities. The growth target is to increase the number of stores by 10–15 percent per year with continued high profitability and at the same time increase sales in comparable units. The strong pace of expansion is continuing in 2013 with a planned 325 new stores net. This means that they will effectively be opening a new store every day this year! This growth, which is entirely self-financed, will proceed with an emphasis on quality, sustainability and continued high profitability.
Zara’s specialty lies in its ability to constantly update merchandise with replenishments landing in stores twice in a week. Zara’s new store image was launched at the Fifth Avenue in New York in the first half of 2012, which has afterwards been introduced in other cities.
Both Zara and H&M, in some markets is collaborating with franchise partners. However both prefer to run stores managed by them solely or they are majority stakeholders.
Internationally, H&M is said to possibly beat Zara with its access to celebrities and more promotion. Zara spends a mere .3 per cent on advertising. Their focus lies in finding the right store than engaging in marketing initiatives. Zara’s interaction with its customers is focused in the store, through its localisation, its architecture and interior design, the image of their shop windows, the product itself and its display in the store and with customer service of quality. Zara offers the clothes its customers want to wear. H7m is also riding high on Sustainability and is bringing the element to the forefront not only through its stores but also through its sustainable clothing. H&M is working actively to make all stores sustainable in the long term.
In India, Zara will definitely enjoy its first mover advantage. But for the well traveled Indian, H&M will also be a great value proposition. Zara’s margins will witness a hit, the degree of which can only be judged once H&M does enter the market. The question also remains if Zara will tweak its strategies to continue its legacy with the Indian customer or will it carry forward the operations the same way. Will it ramp up operations or take it slow? We wait for the story to unfold.