Zara owner has edge in online battle with H&M

Zara owner has edge in online battle with H&M

MADRID - The families behind Zara-owner Inditex and H&M will need to fend off fast-moving competitors if they are to replicate online the winning formulae that made them the world's top two fashion retailers.

Each has borrowed ideas from the other, but their business models are quite distinct, which could put Inditex in a stronger position to tackle digital-only upstarts like Germany's Zalando or Britain's Asos.

H&M has moved into Inditex's "fast fashion" space by offering a bigger turnover of styles, a strategy summed up by a slogan in an H&M store in Berlin: "New stuff comes into the store every day.

Why don't you too?" Inditex, for its part, has launched a budget chain to try to compete with the lower prices of H&M and other fast-growing discounters like Primark and Forever21.

But by and large, each has stuck to its original approach, giving them unique advantages and disadvantages online.

Zara's slick distribution network is a big bonus though some analysts feel its cutting edge fashions may make managing stock more tricky.

H&M took to the Internet earlier but its low prices and decentralised distribution network are barriers to growth.

"The higher the typical selling price of the product, the better for online growth and margins, because a higher selling price can help the retailer to bear the cost of subsidised delivery," said Societe Generale analyst Anne Critchlow.

Primark, where average prices are at least a third lower than H&M, opted out of e-commerce after a brief trial with ASOS in 2013, saying it is hard to justify selling a £3 t-shirt online when it cost the same to ship it.

In H&M's biggest market Germany, the Swedish chain charges 4.90 euros for delivery in 3-5 days, compared with 3.95 euros at Zara, which offers free delivery for orders over 50 euros.

Neither can trump Zalando, which lures shoppers by offering free delivery within two days and free returns within 100 days.

 

"People keep pushing free delivery, same-day delivery, incredible levels of customer service, but someone has to pay for that," said Bryan Roberts at consultants Kantar Retail.

"And if shoppers aren't going to pay for it, it's going to have to be shareholders."

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