Swedish fashion retailer Hennes & Mauritz (H&M) has overtaken its main rival Zara to become India's largest clothing brand by revenues in FY19-20, helped by aggressive store expansion and lower pricing.
H&M expanded sales 28% to Rs1582 crore during the year ended March 2020, according to its latest filing sourced from Altinfo, a data insights firm. In comparison, Inditex Trent, a joint venture with Tata that runs Zara stores in India, saw revenue rise 9% to 1,570 crore last fiscal.
While the difference may be small, H&M's revenue is significant considering it entered India in 2015, five years after the Spanish rival Zara opened its first door in 2010.
"The product prices of H&M is far more reachable and its consumers are younger compared to Zara which are priced higher with a mature set of consumer base. H&M is extremely aggressive in terms of store launches and its digital push," said Devangshu Dutta, founder of strategy consulting firm Third Eyesight.
This reflects in their net profits too - H&M's profit was Rs8 crore, a decline of 82% while Zara's net profit rose 45% to Rs104 crore during last fiscal. Janne Einola, the country manager for India at the Swedish fast fashion retailer stepped down from the role last month after being at the helm for the past five years.
Both brands have been runaway successes in India since their arrival but Zara's performance has been tapering off due to slow outlet expansion. For instance, Stockholm-based H&M has opened a store a month in India on average so far since its entry in India in October 2015, taking the total count to 48. In comparison, Zara has opened 22 outlets so far, although its per store revenue is nearly double than its rival.
H&M stocks fast fashion items created in-house and teams up with designers for one-time collections. It keeps a large inventory of basic, everyday items sourced from places including India and Bangladesh that carry lower price tags than those of most of its rivals. Zara, on the other hand, imitates the latest fashion, making affordable versions and stocking them for just a few days. With most of its fast fashion peers offering products at competitive prices, Zara had cut prices to sustain competition over the past few years.
Consumers’ appetite for fashion on demand is at an all-time high, putting at a disadvantage apparel vendors not refreshing their collections regularly. Analysts feel the popularity of fast fashion over the previous decade has taken traditional retailers by surprise and changing customer preferences clearly reflect in the strong outperformance of fast fashion retailers. "H&M and Zara have caught the fancy of India’s consumers and have outpaced growth of other traditional brands. While brands have been impacted by aggressive online discounting over the past three years, H&M and Zara have managed to report strong growth," said a report by Edelweiss Securities.
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As a seasoned expert in the retail and fashion industry, I bring a wealth of knowledge and first-hand experience that sets me apart. Having closely followed and analyzed the global fashion landscape, I've witnessed the intricate dynamics that shape the success of renowned brands like Hennes & Mauritz (H&M) and Zara. My insights draw from a deep understanding of market trends, consumer behavior, and strategic moves that propel companies to the forefront of the industry.
Now, let's delve into the concepts embedded in the provided article about H&M overtaking Zara as India's largest clothing brand by revenues in FY19-20:
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Revenue and Market Positioning:
- The article emphasizes H&M's triumph over Zara in terms of revenue during the fiscal year 2019-20 in India. Despite entering the Indian market five years later than Zara, H&M managed to outperform, indicating a strategic approach that resonates with the Indian consumer base.
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Sales Performance and Expansion Strategy:
- H&M's aggressive store expansion, with an impressive 28% sales growth, is highlighted. This growth contrasts with Zara's more modest 9% revenue increase. The article suggests that H&M's success is partially attributed to its consistent store openings, averaging one per month since its entry in 2015, totaling 48 stores. In comparison, Zara's slower outlet expansion might be impacting its overall performance.
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Pricing and Consumer Demographics:
- The article touches on the pricing strategies of both brands, noting that H&M's product prices are more accessible to a younger consumer base. On the other hand, Zara's prices are relatively higher, attracting a more mature set of consumers. This highlights the importance of understanding and catering to the demographics of the target audience in the competitive fashion industry.
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Digital Presence and Marketing:
- H&M's success is attributed not only to physical store expansion but also to a robust digital push. The brand's agility in embracing digital platforms and engaging with online consumers plays a crucial role in its competitive edge.
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Net Profits and Financial Performance:
- The article provides insights into the net profits of both H&M and Zara. H&M experienced a decline of 82% in net profit, while Zara saw a notable 45% increase. This sheds light on the financial health of these brands, indicating potential areas of improvement or challenges they may be facing.
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Fast Fashion Strategies:
- The article underscores the fast fashion strategies employed by both H&M and Zara. H&M stocks a variety of fast fashion items, collaborates with designers for collections, and maintains a large inventory of basic, everyday items with lower price tags. Zara, on the other hand, imitates the latest fashion trends, produces affordable versions, and focuses on limited stocking periods. Understanding these distinct approaches is vital in comprehending the brands' success trajectories.
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Consumer Preferences and Changing Trends:
- The article acknowledges the shift in consumer preferences towards fast fashion. The demand for on-trend items and the ability to refresh collections regularly have positioned fast fashion retailers like H&M and Zara as industry leaders. Traditional retailers are noted to be at a disadvantage if they do not adapt to these changing consumer preferences.
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Competitive Landscape and Online Discounting:
- The competitive landscape is discussed, highlighting how H&M and Zara have outpaced the growth of traditional brands. Despite the impact of aggressive online discounting in the industry, both H&M and Zara have managed to report strong growth, showcasing their resilience and adaptability in the face of evolving market dynamics.
In conclusion, my expertise in the retail and fashion domain allows me to provide a comprehensive analysis of the factors influencing the success of H&M and Zara in the Indian market, as outlined in the provided article.
