H&M and Zara: The differences between the two successful brands
H&M and Zara appear to compete in the same space in the market, but a dig into our retail data platform shows the clear difference in pricing, replenishment, discounting and commun...
The clash of the retail giants continue. As of 2019, H&M’s brand value is approximately $15.9bn, a 16% drop from $19bn in 2018. Zara is currently sitting at a brand value of $18.4bn.
Both retailers have a global vision and are market leaders in affordable fast fashion, but the shopping experience and product is greatly different. We’ve turned to EDITED’s retail data platform to understand what sets them apart. Read on as we share the key findings relating to price, product, and timing.
H&M and Zara have very different strategies when it comes to the weighting of their offering. The bulk of H&M’s assortment is womenswear, which is actively communicated in its advertising while menswear takes a backseat. While Zara’s womenswear assortment gets plenty of promotional coverage, its assortment breakdown is very balanced across segments. These weightings suggest that Zara and H&M are competing for and pitching at different consumer types. While H&M’s predominant consumer is shopping for womenswear, the Zara customer could be more mature and shop across the breadth of the retailer’s offering for his or her partner and children.
Strategically, Zara splits its focus across all three channels. A sign of confidence and clarity? Or perhaps an overly broad vision?
H&M has a bigger online offering, with currently over 4,000 more womenswear options than Zara. The pricing strategy at the two retailers varies dramatically. H&M’s women’s apparel pricing spans from $2.99 for a short camisole top to $349 for a cashmere-blend coat. Meanwhile, Zara’s pricing ranges from $5.90 for a cropped top to $219 for a belted coat. Although the cashmere coat pushes up H&M’s current exit price, its average price still comes in below Zara at $27.61 compared to $40.46. What’s telling is the price point which each invests in most. At H&M nearly half of the women’s offering sits in the $1-$20 bracket, whereas Zara’s most optioned price point is $20-$40, also representing 49% of their products.
The different pricing structures are visible when comparing two of the most competitive categories: womenswear tops and dresses. H&M’s most optioned price bracket in tops is $0-$20, whereas Zara’s is $20-40. With two distinct pricing categories for tops in the market, customer purchases will depend on product type, quality and detailing. Analyzing the structuring around dress price points reveal both H&M and Zara give products priced $20-40 the most weighting at 55.2% and 37.1% respectively. H&M then favors lower price points and eases off on the $40-$60 and $60-$80 brackets, which Zara give equal weighting. The $60-80 price point has been a sweet spot for Zara this year with the viral success of the infamous spotted dress priced at $69.90.
H&M’s bullish discounting
Discounting strategy is one of the most defining differences between the two retailers. H&M currently have 21% of its entire online offering on discount, with 39% discounted between 50-60%. Zara, in contrast have 6% of its online offering discounted – a much subtler approach, and only 9% of the offering discounted by 50% or more.
Womenswear is the most replenished segment
Replenishment is another area of marked difference between the two retailers. Over the years, Zara has evolved its strategy in line with its competitors by ramping up its replenishment rate with continued investment in its top-performing styles. 26.4% of Zara’s current range has seen replenishment compared to 17.6% at H&M. At both, womenswear is the most replenished segment.
Analyzing new product arrivals compared to other retailers shows a high and frequent level of new product drops at Zara. Ensuring a low rate of discounting combined with consistent newness equals a rapid product sell out. We can prove this with EDITED data, which reveals the speed at which Zara womenswear experiences sell out is an average of 63 days, outpacing H&M at 119, Forever 21 at 168 and Topshop at 85. Evidently, Zara doesn’t slow its processes with mass restocking. Instead, it focuses on replenishing the hero items (such as the spotted dress which has been restocked three times online in the US and is still selling). Taking this approach requires the design and buying teams to work very harmoniously, as there are many risks associated. For Zara, however, this is a winning formula.
The way each retailer communicates its brand is very different. H&M is known for collaborations with designers such as Giambattista Valli, Alexander Wang, Moschino, and more, while Zara works with fashion insiders to endorse its products.
Despite brands and retailers worldwide increasingly incorporating Instagram influencers within their marketing communications to gain exposure to a broader audience and create a community. H&M and Zara were late to this party. It wasn’t until this year, both brands tapped into influencer marketing to promote its product. Zara launched a collaborative Instagram account, @livingzara. Each week, a new influencer takes over to create content featuring items available to shop directly from Instagram. H&M got onboard by hiring 22 influencer ambassadors, the #HMLEAGUE, to create content wearing the brands clothing.
Comparing email newsletters, Zara strikes an equal balance between its women’s, men’s and kid’s collections while H&M focus predominantly on advertising womenswear.
And much like the discount percentages revealed above, Zara takes a softer approach to sales periods. Its minimal and understated branding is consistent in communications, whether promoting a new launch or a percentage off – discounts are never communicated with splashy red campaigns. H&M, however, isn’t shy of pushing aggressive sales with the bold red banners associated with slashed prices.
To a sustainable future
While both brands have built a fortune on affordable fast fashion, they are now pledging to reduce their carbon footprint with sustainable initiatives. At H&M all cotton available will be 100% organic by next year. And Zara announced that all of its clothes will be made from 100% sustainable fabrics by 2025. Although these initiatives have been met with skepticism and “greenwashing” claims, both retailers are the market leaders and their actions will influence other fast fashion brands to examine their environmental impact.
Zara continues to take a fashion-forward route, creating catwalk-inspired products for the whole family. It has a high product turnover and low discounting which is reflected in its brand communications. H&M is more bullish with discounting but maintain sophisticated replenishment strategies. Its brand positioning in the market aligns with the Gen Z consumer who is driven by designer collaboration hype and low price. Happily, retaining these differences will let both retailers continue on their ambitious paths.
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