The Contest Between Fast Fashion And Big Brands Zara Exceeds Gap, H&M

INDITEX was founded in 1975. Its predecessor is Zara's small shop. Now it is the third largest clothing company in the world. Compared to the fast fashion brand Gap and H&M, who is better?

Exceeding Gap

In contrast, the performance of Gap Group continued to be poor. Besides the performance of Banana Republic, Gap and youth dress brand Old Navy failed to get out of the adjustment period.

It is also reported that Gap is preparing to revoke the European design department in London. In fact, the European series performs very well, and the well-known secret is that the consultant of Gap Europe design department is a very influential designer, such as Phoebe Philo and Marie-Anne Sauve of Balenciaga.

The momentum of expansion is stronger than H&M

Is the competition between the global fashion retail chain giant Sweden H&M and Spain Inditex competing or fighting? In terms of the colorful fashion, they are more than the art of contending, but on the basis of winning or losing, they differ in their different business operation thinking, and see that they emphasize the strategic battle of differentiation strategy and tactics.

Inditex, which owns 8 fashion brands such as Zara and Bershka, ushered in 2700th chain stores in Huaihailu Road, Shanghai, although Sweden's H&M sales were ahead of Inditex, but it also had to sigh: "born in the future"! Inditex, a rival from Spain, was founded in 1963, while H&M (Hennes & Mauritz) was established in 1947, while the new talent Inditex history is short, but the shop speed is two times that of H&M.

This time, Inditex's beachhead in China proved some of the views of analysts: the expansion of Inditex is stronger than H&M.

Speed versus profitability against H&M

H&M's stock has always been regarded as the benchmark of clothing retailing industry, but investors are pouring more enthusiasm into Inditex.

In 2005, among the 25 analysts who evaluated Inditex, 2/3 recommended investors to buy their stocks, compared with about half of the analysts recommended H&M shares.

This kind of practice is just because Inditex has shown better growth in recent years.

Although Inditex's market capitalization of about US $20 billion 400 million still does not rival H&M's market value of about US $28 billion 600 million, the expansion of Inditex has attracted many analysts and investors.

Since its inception, H&M has been popular in the world for its fashionable, high-quality and inexpensive fashion, and is considered to be the representative of "McFashion".

But H&M is more and more affected by Inditex.

On the scale expansion, although H&M has nearly 1200 stores, Inditex already has 2700 stores. Inditex has maintained a growth rate of about 20% since 1996, while H&M has been hovering around 10% in recent years.

Investors are looking for the right thing.

This momentum of rapid expansion.

However, speed is not the only criterion for game evaluation in the business world.

In the face of the challenge of Inditex's speed winning, H&M has repeatedly stressed that we should not only increase the speed but also increase the quality. We need to open more new stores and increase the sales volume of existing stores.

In fact, H&M has always been known for its prudence in the industry. It has devoted more time and energy to paying more attention to the more important content in the business world - profitability.

The fact is that in the French market that the two sides contend for, the number of shops opened by H&M in 2005 was 72, far less than 123 of Inditex, but sales of H&M 5.64 billion were still in the lead.

The rapid growth of Inditex has attracted investors' attention. The future potential and trend of its stocks will lead investors to reconsider their stock value, but some analysts also point out that Inditex may not be more than H&M in the next 8 years, because its rapid expansion has sacrificed a portion of its profits.

Scale, speed and profitability are the three elements of a game in the business world.

How to balance? Inditex and H&M give us two choices: Inditex wins the battle with speed, and scales up the momentum war; H&M is speed and profit keep pace with each other and steadily expand.

The two options have no advantages or disadvantages in themselves. No matter speed, scale priority or profit priority, the most important thing is to find a balance.

Assimilation and differentiation of expansion

Inditex and H&M both take Europe as the main market.

About half of its revenue comes from Spain, while H&M's sales come from 1/3.

Perhaps it is this different key market strategy that makes them appear to be on the road of expansion.

With the support of the real estate boom, Spain's economic growth has surpassed the European average for 10 consecutive years, which has benefited Inditex.

Germany's growth rate in 2005 was less than 1%.

H&M wants to let more consumers pay for their clothes under the pressure of economic contraction.

Fashion and fashion industry is an industry that is vulnerable to the level of market economy.

Neither Inditex nor H&M has put "eggs" in a market basket.

H&M and Inditex have opened stores in almost all countries in Europe, and have begun to infiltrate each other's strategic places.

In fact, the new expansion plans of H&M and Inditex are somewhat similar, aiming at the mature markets and big cities in the world, and at the same time, blow the fashion trend to more emerging developing countries.

H&M should continue to expand the German market while infiltrating into the United States, Spain, the United Kingdom, France and Canada, while Inditex also takes Italy, France, Britain, Germany and even Portugal and Greece as new focal points for expansion.

Moreover, when Inditex brought Zara to China and vigorously opened up the Asia Pacific market, H&M sounded the clarion call for entering the Middle East market.

H&M will open stores in Kuwait and Dubai.

However, compared to Inditex, H&M has a more diversified expansion plan.

As a matter of fact, H&M has begun to enter the online and mail order market outside the shop's sales channels.

Moreover, H&M is putting more and more resources into the North American market.

Since its entry into the North American market in 2000, H&M has been developing rapidly, though it has gone through a detour.

In the long run, the North American market is even expected to become the largest market for H&M.

In contrast, Inditex, which has always been ahead of the expansion speed and scale, is much smaller in the US.

So far, H&M has nearly 80 stores in the United States and fewer than 20 shops in Inditex.

For H&M and Inditex, the next few years will still be a time to seize the market.

Although there are cross markets between them, the direct competition from face to face is not strong enough. In the future, though there are some signs of differentiation, they can see that their market is getting closer and closer.

Predictably, competition between H&M and Inditex will be more intense rather than mitigated.

Balance between fashion and parity

As a cheap fashion

The core competitiveness of H&M and Inditex comes from fashionable design, novel style and fair price.

But how can we keep up with fashion and keep a lower price? H&M and Inditex have their own tricks.

In fashion competition, Inditex has created an industry legend for us.

A shirt from Zara will take only two weeks from the design room of colon to the store in Paris or Tokyo.

How can Zara do this? Inditex's guarantee is fast response to fashion and rapid design, production and distribution.

Unlike the fashion industry's early judgement of fashion trends, Inditex always determines the design and production of fashion based on the needs of the market and its customers.

At Inditex's headquarters in Spain, hundreds of designers are busy all night, watching the market trend and sales at any time to adjust the existing design and production.

Like Inditex, H&M also pursues the "freshness" of fashion: timely analysis of product sales, in order to quickly adjust the design and production, and at the same time, shorten the time from the design to the shelf, and establish a diversified and balanced fashion triangle: the bottom of the triangle is the largest customer demand commodity; the middle end represents the clothing that is in fashion during the season; and the merchandise at the top reflects the latest fashion trend.

By adjusting the proportion of different levels of fashion triangle, H&M can easily expand sales and reflect fashion.

Low price is the second important point for Inditex and H&M to stand on the market.

How to reduce costs to maintain parity strategy? H&M embarked on a common cost control approach in the era of Globalization: "first world fashion in the third world factory", pferring production links to low-cost countries such as India, China and Turkey.

H&M does not own its own factory, and 60% of its goods are produced in Asia, and the remaining 40% come from Europe.

Although Inditex has been purchased in China and other countries, half of its products are produced in its own (or holding) factories, and 80% of them are made in Europe.

In fact, although production costs are 15% to 20% higher than that of competitors, Inditex does not agree with H&M outsourcing practices.

In Inditex's view, owning their own factories can respond to market changes more quickly and control the production process in seconds, so as to create more styles and lower inventories, forming a virtuous cycle system of "design production distribution sales", which is actually more conducive to overall cost control.

H&M, which lacks internal production capacity, is more effective in controlling production costs. However, its response to fashion in the production process must lag behind, and it is also more vulnerable to external cost fluctuations.

How to balance the contradiction between fashion and parity? Driven by market demand and consumer demand, rapid market responsiveness, low inventory and low cost are all factors contributing to the success of Inditex and H&M.

However, Inditex's vertical integration of "design production distribution sales" intensive management method with faster response speed has given us more enlightenment.

Management style is different from Tibet.

Inditex and H&M are also different in terms of management style. Prudent H&M is good at using stars to enhance brands, but Inditex, which is known for its rapid growth, is low-key and pragmatic.

Many people can not remember H&M's superstar Kate Moss, Chanel design Supreme Karl Largerfeld and other star level characters.

Yes, H&M is making use of the power of these stars to improve their popularity.

Every time the new clothes are released, H&M will try their best to sell themselves, and the show of the famous models will almost forget the fact that H&M is just a cheap clothing brand.

In 2005, the cooperation between H&M and Karl Largerfeld was only a short week, but it was enough to create a boom in the fashion industry.

As long as the texture of the buttons is allowed, H&M will almost show the word "Karl Lagerfeld For H&M".

Moreover, shortly after Karl Largerfeld announced that it had stopped cooperation, H&M invited the famous Stella McCartney to design its autumn suit, and invited the Italy model Mariacarla Boscono to replace the Kate Moss with drug shadow to endorse the Stella series of Stella.

Although the Inditex is too fast to expand, it is a bit of a publicity. But the founder of Inditex, Oman Amancio Ortega, is the only Spanish billionaire who is second only to LVMH Bernard Arnold in the fashion world. He is a low-key and displeased person. He rarely shows up in front of the media, or even likes to wear a tie. "Inditex"

In fact, almost all Inditex operators are not fashions.

In production, Inditex, who spared no cost, displayed "stingy" in advertising.

In addition to two times a year's store advertising, Zara has almost no other promotional activities.

Compared with the industry's usual 3% to 4% advertising budget ratio, Zara's advertising budget, which accounts for only 0.3% of annual sales, is really surprising.

Inditex almost all of the marketing funds are invested in the expansion of factory equipment. It is located in the warehouse of Spain's cone, which is equivalent to 90 football fields.

Moreover, the designers invited by Inditex are rarely "star class". Most of them are from the top design institutes, but few are known.

In fashion and fashion, Inditex is always unique.

So when H&M invited many star designers and models to fashion, Inditex quietly created fashion.

Perhaps, for consumers, parity is enough.

But how many people can resist the fashion trend brought by H&M with Karl Lagerfeld or Stella McCartney? H&M, which always seems to follow the rules, is actually creating a fashion hi-end popular experiment.