Zara and H&M shore up defences as Internet threatens
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 per cent 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. “It is happening fast and it is challenging everyone.
“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”.
In the United States, Amazon was in 2016 the top online clothes vendor. It holds 11 per cent of the global clothing market, and this is expected to rise to 19 per cent 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 per cent and 34 per cent respectively between 2012 and 2015, according to the Ecommerce Foundation.
Faced with this threat, H&M devoted 45 per cent of its investment to Internet in 2017, or close to $736 million, for a new photo studio and personalised apps for its clients. Inditex is also investing, but would not unveil how much.