Once major disruptors in fashion retail, companies like H&M and Zara have been uncharacteristically slow to catch up with e-commerce, while a new wave of online fashion players have arisen and its leaving them in its wake.
Fast fashion retailers like Zara and H&M disrupted the fashion industry with its lightening-fast speed of production, trend-led merchandise and a sizeable physical footprint, but these days a new wave of digital disruption is impending from e-commerce companies like ASOS, Amazon and Boohoo – and it’s leaving fastfashion in its wake.
It’s fair to say these fast-fashion retailers have been uncharacteristically slow to catch up as far as its digital presence goes. “Fast pace is vital,” H&M’s chief executive, Karl-Johan Persson, said in June, as he gestured plans to boost the company’s e-commerce growth in the face of mounting online competition.
Only weeks ago, H&M’s Australian business announced it will launch its online store locally to back its bricks and mortar presence here, after finding better than expected success in Australia, reporting that its 22 local stores here have been some of the best performers out of its global fleet. Analysts have criticised that H&M isn’t being fast enough in its e-commerce efforts.
It’s surprising though – H&M’s and Zara’s slow uptake and focus on digital commerce, given that its target audience, that is, millennials, are the most digitally savvy of all consumers. H&M doesn’t reveal what share of sales come from online, while Zara is equally private in citing its integrated store and online model sales figures.
As online players ate into its bottom line, Zara finally catapulted into e-commerce in 2010, 10 years after ASOS launched its brand, which sells lookalike merchandise seen on celebrities, at budget prices, targeted at 18 to 35 year-olds. Zara’s initial hesitance in selling online stemmed from fears the cost of delivery and returns would weigh heavily on profits and canabilise existing stores.
For Zara, however, delivery costs can be offset due to its older 18 to 35 year-old customer base, who are willing to pay more for items. The same can’t be said for H&M though, whose average shopper is more budget-conscious sitting in the 18 to 25 year-old age group. To keep costs down, H&M sources 80 percent of its merchandise from Asia, but this comes at a price of longer lead times. This also increases its challenge to compete against pureplays like ASOS, who have a higher level of new merchandise on its website, with the ability to alter prices as demand varies.
UK based ASOS has been successful in establishing its niche brand amongst 20-something consumers, offering a mix of private label merchandise and branded items, coupled with low prices and quick delivery from local distribution centers. ASOS says that over half of its sales from its 15 million customers come from mobile devices. The retailer has invested heavily in app functions like visual search, a tool that enables shoppers to search its 85,000 plus products by uploading a photo on its mobile app. The online retailer predicts sales growth of 30 to 35 percent in 2017.
Over the next year, ASOS says it’s planning to add another 200 staff to its 900-strong tech team. It’s currently hiring engineers, scientists and more, to trial artificial intelligence, chatbots and augmented reality, that will help fulfill its vision of nailing the customer experience online. Seems light years ahead when you’re thinking about H&M and Zara, doesn’t it?
So, how can these retailers catch up?
H&M is rethinking its approach to how stores will better support its omnichannel model, which it says it will integrate for a “seamless, smooth and inspiring shopping experience,” according to Persson. H&M is rolling out app features like “scan and buy” allowing customers to scan products in-store that are not available in their size, and have it delivered to their home. The Swedish retailer is also using what it calls “advanced analytics” where algorithms improve its in-store range as well as logistics operations.
Zara, on the other hand, says it has a “global, fully integrated store and online model.” Zara will focus less on rolling out new stores, but instead redirect to rolling out new flagship stores, which will incorporate its “radio frequency identification system” which assists staff and shoppers find products in-store, nearby or online – thereby, enhancing in-store availability and boosting online sales as well. Progress yes, but still may be a long way off from catching up with its retail peers.