H&M Prudently Manages Four Reasons For Steady Expansion, Slower Than Zara

Although H&M and Zara are the leaders of fast fashion brands, they still have different business layout. In August 2013, H&M announced that it would enter the world's largest online apparel market and access the sales channel of its official website. After a long wait, American fans can finally buy H&M products online. Since entering the US online shopping market in September 2011, Zara parent company Inditex's share price has risen by 69%, almost two times that of H&M. Zara started selling clothing online in 2010. By 2013, it had launched Internet sales in 23 markets worldwide, while H&M had only 8 markets.

In fact, H&M entered the network sale time is not late, as early as 1998 began. It was only in northern Europe (Sweden, Denmark, Finland, Norway), but Zara entered the net sale in 2010. Moreover, Zara's understanding of the Internet is lagging behind in the fast fashion brands, but it's just coming from behind.

H&M landed in the world's largest online apparel sales market in 2013 - the United States. Zara began to enter the market in 2011. In fact, as early as the spring and autumn of 2012, H&M plans to start selling the Internet in the United States, but it has been postponed. As for the reasons behind Zara, I think it is mainly in several aspects:

　　 1. operation strategy

In fact, compared to Zara, H&M is prudently managed and steadily expanded. H&M adopts the strategy of organizational growth in expansion, which has a high initial cost and needs higher gross margin and sales volume to protect. At first, H&M was only expanding in Europe with similar geographical, economic and cultural similarities. Now H&M has not entered the South American market of Zara (Brazil in the market). And the United States is known as the "graves" of European retail industry, and H&M is more prudent.

2. the US market achievement

H&M did not start selling the Internet in the US, but it may also be due to the fact that the store sales performance in the US is still in the past. The American people did not prefer Zara because H&M did not buy online. H&M has nearly 300 stores in the United States, and 39 new stores last year. Last year, H&M sales in the US market reached 1 billion 900 million dollars, accounting for 9% of total revenue, while Zara's data was about 1 billion 850 million (in-storenetsales).

　 3. supply chain system

Zara is famous for its famous 15 day myth of the extreme supply chain. Zara has 22 factories in Spain, about 50% of its products are completed by itself, but all sutures are completed by subcontractors. The remaining 50% were completed by 500 external collaboration partners, with about 70% of all products in Europe and others in Asia. Zara all products are sent through the logistics center. Usually, the order will be shipped away 8 hours after receipt of the order.

There is a fixed departure timetable for transport vehicles in logistics centers. European chain stores can receive goods within 24 hours, while the US in 48 hours, and Japan in 48 to 72 hours. H&M is well known for its dual supply chain. One is to control the rapid reaction supply chain of European production. About half of the frontier fashion products are made in European countries (mainly Turkey) which are close to the European market. Such goods require a shorter delivery cycle (the shortest 3-4 weeks), so as to make timely adjustments based on sales feedback; two is the efficient supply chain that controls Asian production, while the other half of the basic products has less fashion risk, and the delivery cycle can be extended relatively (the longest 6 months). In order to ensure low quality and quality, it is arranged in low-cost Asian countries (mainly China, Bangladesh and other countries).

Relatively speaking, H&M's supply chain system is less responsive than Zara (which leads to a relative lower price of H&M than Zara).

　 4. worries about the US Internet market

As Zara initially entered the US internet sale, it was also threatened by online's business threats such as AF and Gap. This is also what H&M said in its official statement about the size and complexity of the AOL market.