Zara and H&M shore up defences as internet threatens

H&M, Zara and Uniqlo are three international clothing retailers with over 1,000 stores each worldwide. The competitive companies target similar markets but employ different strategies in their business models to manage the distribution of product lines.

Zara is the youngest of the trio, having begun in Spain in 1975. The company is owned by textile giant Inditex. Zara’s ownership of its supply-chain steps allows for more rapid product turnover; Zara can design a product and have it sold in stores a month later.

Zara has outsmarted rival fashion retailer H&M in the road to expansion outside Europe. Logistics investments, new technology… Faced with fierce online competition from the likes of Amazon, affordable fashion giants Zara and H&M are shoring up their defences, trying to use their stores to boost internet sales.

Separated by thin partitions, 15 little photo studios used exclusively to update the website line up in a corner of Zara’s huge headquarters near Corunna in Spain’s northwest.

Under a constant barrage of camera flashes, models strike pose after pose to get seven photos showing the piece of clothing under all angles. In total, 1,500 photos are put on line twice a week to match the speed at which articles of clothing are replaced in-store.

“Online sales are becoming an element that is contributing significantly to the company’s growth,” said Pablo Isla, CEO of the Inditex group which owns Zara among other brands like Massimo Dutti, said this week at the annual results’ presentation.

In 2017, these represented 10 percent of sales, a figure unveiled this week after years of secrecy over a crucial sector that Inditex only entered in 2010, on the late side.

Sergio Avila Luengo, an analyst at IG Markets, said gaining “more visibility online” was the main challenge for Inditex if it wants to remain “competitive on the long term”.

He said the retail giant started having trouble clearing its stocks for the first time in 2017 due to competition from Amazon, which sells everything from books to clothes.

For its part Sweden’s H&M, Inditex’s arch-rival, has recognised that a drop in profits in 2017 was due in large part to online competition. The clothing market “is in big transformation,” CEO Karl-Johan Persson said in February.

“We know about the big online platforms, I’m thinking Amazon and (China’s) Alibaba, affecting our industry,” he said, adding smaller niche online players were also “a force to be reckoned with”.

It holds 11 percent of the global clothing market, and this is expected to rise to 19 percent in 2020, according to data compiled by Bloomberg. German online clothing and shoes platform Zalando and Britain’s Asos, meanwhile, saw their European sales leap 25 percent and 34 percent respectively between 2012 and 2015, according to the Ecommerce Foundation.