Battle of the brands: Zara looks to outdo H&M online
With Swedish fashion brand Hennes & Mauritz (H&M) leading the offline battle, Spain’s Zara is looking to launch its online store ahead of rival H&M to gain an upper hand in India's competitive e-commerce market.
Zara’s parent firm Inditex’s group chairman and CEO, Pablo Isla at the Annual General Meeting in Spain told the stakeholders that Zara will launch its online store in India this October as part of the ongoing international expansion.
Earlier rival H&M in it six-month report had stated that it plans to go online in India by 2018 to cash in on the booming e-commerce market in the country.
Zara has been facing stiff competition in the offline space from H&M in India which posted impressive sales of Rs 435 crore (approx $67 million) in six months from December 2016 to May 2017.
Inditex Trent, a joint venture (JV) of Zara-owner Inditex and Trent, posted a jump of 21 per cent in sales to Rs 1,023 crore (approx $156 million) in 2016-17 (FY17) compared to Rs 842.5 crore (approx $131 million) in FY16. However, its profit after tax fell to Rs 48 crore in FY17, from Rs 80 crore in the year-ago period, according to Trent’s latest annual report.
Zara’s profit took a hit as the company decided to slash prices last year by 10% to 15% to gain a larger market share, which it managed to do as it saw a jump in sales by 21 percent in the last financial year.
Zara which entered India seven years back operates 20 stores at present while H&M which entered the country two years back has 16 stores. H&M has plans to add around 50 stores by 2020 with an investment of Rs 700 crore (approx $108 million).
Zara is reluctant to explore newer markets in India and continues to focus on metros even as H&M is ready to experiment and risk by opening stores in smaller towns and cities.
H&M’s Country manager Janne Einola said their lower pricing structure allows them to venture into these markets. He further added that the tier II and III cities have ‘tremendous potential’ for growth.
H&M prices are comparatively lower than other leading fashion brands like Zara, Gap, etc
With H&M winning the offline battle, it looks like a strategic move by Zara to launch its online store in India ahead of its rival which will give the firm an upper hand in the e-commerce space which is dominated by the fashion segment.
Tata Group’s retail arm Trent Ltd had formed a joint venture (JV) with Inditex Group in 2009 for bringing the Zara brand to India. Inditex holds 51% stake in the JV, while Trent Ltd has 49%.
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