Mon, Mar 19, 2018 - Page 14 News List

Zara and H&M shore up defenses as online competition threatens profits

AFP, CORUNNA, Spain

Faced with fierce online competition from the likes of Amazon.com Inc, affordable fashion giants Zara and Hennes & Mauritz AB (H&M) are shoring up their defenses, trying to use their stores to boost Internet sales.

Separated by thin partitions, 15 little photography studios are used exclusively to update the Web site line-up in a corner of Zara’s huge headquarters near Corunna in Spain’s northwest.

Under a constant barrage of camera flashes, models strike pose after pose to get seven photos showing the piece of clothing under all angles.

In total, 1,500 photos are put online twice a week to match the speed at which articles of clothing are replaced in-store.

“Online sales are becoming an element that is contributing significantly to the company’s growth,” Pablo Isla, chief executive officer of the Inditex group, which owns Zara and other brands such as Massimo Dutti, said this week at the annual results’ presentation.

Last year, these represented 10 percent of sales, a figure unveiled last week after years of secrecy over a crucial sector that Inditex only entered in 2010, on the late side.

Gaining “more visibility online” was the main challenge for Inditex if it wants to remain “competitive in the long term,” IG Markets analyst Sergio Avila Luengo said.

He said the retail giant started having trouble clearing its stocks for the first time last year due to competition from Amazon.

For its part, Sweden’s H&M has recognized that a drop in profits last year was due in large part to online competition.

The clothing market “is in big transformation,” chief executive officer Karl-Johan Persson said last month. “It is happening fast and it is challenging everyone.

“We know about the big online platforms, I’m thinking Amazon and [China’s] Alibaba (阿里巴巴), affecting our industry,” he said, adding that smaller niche online players were “a force to be reckoned with.”

In the US, Amazon was the top online clothes vendor in 2016.

It holds 11 percent of the global clothing market, and this is expected to rise to 19 percent in 2020, data compiled by Bloomberg showed.

Faced with this threat, H&M devoted 45 percent of its investment to Internet sales last year, or about 600 million euros (US$737.79 million), for a new photography studio and personalized apps for its clients.

Inditex is also investing, but would not unveil how much.

Inditex has opened 19 warehouses in the world dedicated to online sales. H&M is soon to follow suit.

Both are also taking advantage of their thousands of stores, including for client delivery.

Both groups are implementing systems to avoid missing out on a sale if for instance the size is not available for a customer, by pointing the customer to the item online.

Their strategy was to combine both sales methods, said Gildas Minvielle, head of the economic observatory at the French Fashion Institute. “Distributors that develop their stores and their online sales perform quite well.”

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