- H&M and Zara are two of the top names in fast fashion.
- Zara’s parent company, Inditex, reported a 7% increase in profits in 2017. H&M, on the other hand, has struggled in recent months, with operating profit dropping 62% in the first quarter of 2018.
- Despite the striking difference in how each company is performing, we found that H&M had better deals to offer shoppers and greater variety in the products sold.
Zara and H&M are in fierce competition with one another to be the best in fast fashion.
But things aren’t looking good for H&M. In the first quarter of 2018, operating profit at H&M decreased 62%, following another massive sales drop in the fourth quarter of 2017. Business Insider’s Mary Hanbury reported that analysts believe H&M has a brand issue — it’s not the cheapest store, and its clothes are not the best quality nor the most fashionable.
It’s also facing the fact that it simply has too much clothing in stock. H&M currently has over $4 billion worth of unsold clothing, and it’s rolling out some big technological changes to better streamline its supply chain.
Zara, on the other hand, has been successful in part because it has found a way to avoid the inventory issue. Brand strategist Martin Roll wrote in March that Zara limits how much of each product is made, controlling inventory and creating artificial scarcity that drives up sales, in addition to offering more fashionable clothing. At the end of the 2017 fiscal year, profits at Inditex were up 7%.
H&M was first stop.
The entire first floor sold women’s clothing. Some of the styles at the front of the store were nice …
… but others missed the mark, like this t-shirt that just read “Saturday” on the front. The selection was very hit or miss — some of the clothes were fashionable, and others were far from it. The quality also hugely varied, with some clothes feeling like they were about to fall apart and others seeming to be of higher quality.
There were $10 jeans placed by the front of the store as well. H&M was certainly cheap, selling a lot of basics like jeans, t-shirts, and sweaters at low prices.
On top of the sometimes unbelievably low prices, there were sale racks all over the store.
The inventory problems really started to show here. The sale racks were completely cluttered and messy, and the products that were on sale felt totally random. There were jeans, dresses, tank tops, sweaters, scarves, and shorts. The aisles were narrow, and there was just too much going on at once.
The rest of the store was much neater than the sale racks, but it didn’t seem to be organized in a clear way. There were nice blouses, sweatshirts, jeans, and pantsuits all displayed in the same spot.
Clothes for every season and occasion were next to each other.
It definitely embodied the idea of a “treasure hunt” experience, but if you were looking for something specific, it would be tricky to find it.
H&M also sold hats …
… shoes …
… and beauty products. Near the register, there were also face masks, perfume, scrunchies, socks, and other random small products.
Upstairs was a large kids’ department. It had a boys’ section and a girls’ section, and each side was further organized by age. It was definitely easier to navigate than the women’s section downstairs.
The men’s section was also upstairs, and there was a pretty long line at the register. It didn’t have as much as the women’s department did, but what it did have was better organized.
Though the store was a mess, and the quality of the products varied the store had a lot of great deals to offer if you were willing to look for them, and there was something for everyone style-wise.
Zara next. It was directly across from the top level of H&M.
It felt much less cluttered than H&M. You didn’t need to snake through every aisle to find something. It was a smaller store, but it had more space to walk around in.
It was also more minimalistic than H&M. Everything was more spread out, and the clothing racks were much less cluttered, making it easier to actually see everything without having to dig through piles of clothes.
The styles were very hit or miss at Zara, too. It was generally higher quality than H&M, but the prices reflected that — it was more expensive, too.
Basic blue jeans that were $10 at H&M were $45 at Zara. However, basic t-shirts were similarly priced at the two stores.
Zara had fewer basics than H&M. Instead, there were more t-shirts that felt like they were trying to imitate streetwear and high fashion.
Like H&M, Zara had a kids’ section …
… and a men’s section.
H&M was more cluttered, and its inventory problems were obvious in the store. However, from a shopper’s perspective, the store had a lot of great deals and a ton of variety in the styles it carried. Zara was slightly more expensive, and it didn’t offer everything H&M did in terms of basics, beauty products, and accessories. Even though Zara was less cluttered and is performing well sales-wise that H&M had more to offer overall.
H&M AND ZARA: 2 BUSINESS MODELS THAT HAVE LED TO GLOBAL SUCCESS
H&M and Zara are two of the world’s most famous retailers. They have landed spots in the top 20 of Interbrand’s best global companies. How did clothing retailers join the likes of Apple, Google and IBM? Their business models and utilization of digital marketing catapulted them into success but with contrasting strategies.
With Zara’s strategy more items are sold because of the continuously changing items and manufacturing less. This allows to frequently have new items on the floor increasing overall sales to a smaller market. H&M’s strategy saves on designers with only releasing two collections. Customers are more likely to find items in store more reliably.
Depending on the business you have, you can consider stocking the Zara or H&M way depending on your audience!
Identify Your Target Market
Zara and H&M know what they make and who to make it for. Both companies’ target markets are 50-60% women, the rest are made up of menswear and children. H&M targets 15-30 year old females in school or early in their careers, they break it down further by a segmented strategy. They focus their prices and designs on people who fit this criteria. Zara targets 18-40 year old females who want to be runway ready at a moderate price, young professionals essentially. Knowing their target market helps them find what pieces to create and and prices are appropriate.
Establishing a target market narrows down the decisions making process and gives your customer what they are looking for.
Both H&M and Zara have utilized social media since the 2000’s. Instagram, Twitter and Facebook were quickly gaining users so Zara and H&M had to jump on board. Both companies have millions of followers and streamlined campaigns throughout all platforms that flow.
Zara has had success in collaborating with influencers such as bloggers and YouTubers while H&M uses a more traditional approach by working with designers and celebrities. Try out different ways to market your company. Work with big names in your field or have them host a podcast.