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Raghavendra Kamath, Business Standard\n<\/i><\/p>\n
Raghavendra Kamath, Business Standard
\n<\/i><\/p>\n
Mumbai, 24 March 2016<\/i><\/p>\n
![\"Sales](\"..\/images\/h-and-m-delhi.jpg\")
Inside\nSelect City Walk, New Delhi, where almost every brand that wants a\npiece of the great Indian consumption story has pitched its tent, a\ngrand fight is in the making. <\/p>
According to industry\ninsiders, here Zara’s 17,000 square feet store pulls in about Rs 10\ncrore a month, or around Rs 6,000 per square feet. H&M’s 25,000\nsquare feet store makes Rs 12.5 crore a month, or about Rs 5,000 per\nsquare feet. <\/p>
Since neither label breaks down its\ncountry-wise numbers, these numbers, although not completely\nrepresentative, are the closest reflection of their struggles in the\ncountry. Both\nZara and H&M cater to the premium category, but a Delhi-based mall\nhead said, “H&M will grow faster than other global brands given\nthat it is more affordable, has no partners, and a balanced portfolio.”\nH&M refused to comment on whether it would outgrow others, but\nsaid, “We believe we have competitive prices, by having our own design\nand buying department.” Inditex Trent, Zara’s parent company refused to\ncomment, but it has launched a budget chain to compete with the likes\nof H&M and other fast-growing discounters like Primark and\nForever21.
According to industry veterans, H&M has been faster\noff its feet. “Scoring point for H&M is that it is priced right for\nIndia while Zara is relatively expensive. Zara wanted to reduce prices\nbut did not do so eventually,” said Dipak Agarwal, former CEO of DLF\nBrands which retails brands such as Forever 21 and Mothercare.
However\nthe big challenge, for both, many believe would be stepping beyond the\nmetros in their next phase of growth. And here H&M holds an edge\nunless Zara is willing to take a fresh look at its prices. Zara’s entry\nrange (women’s wear) retails at over Rs 2,500, but H&M starts at\naround Rs 1,500. “H&M will definitely impact Zara’s sales in the\nmedium term,” Agarwal said.
Price, partnerships, styles
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Zara is also the first apparel brand to cross the\n$100-million mark in India where it has spent six years and built 16\nstores. But its sales growth has slowed; according to the Trent annual\nreport for FY15, it is down from 43 per cent in FY14 to 23 per cent in\nFY15.
H&M, on the other hand, is new to game. It has just\ntwo stores in India but its stores are turning in far better numbers\naccording to sources in the malls it is present in. But as a source in\nInditex Trent said, “It is easy to grow from Rs 25 crore to Rs 50 crore\nbut to grow from Rs 50 crore to Rs 150 crore is really difficult.”\nBesides, given that 75 to 80 per cent of the market is unorganised and\nbrands are growing by just tapping the switch from unorganised to\norganised, he believes there is enough space for new and old brands to\ngrow.
H&M has a wider range of styles and targets a larger\ncustomer base too — it caters to women, men and kids unlike Zara which\nfocuses largely on women although it does have a men’s line. Globally,\naccording to a Reuters report, H&M has moved into Zara’s fast\nfashion space by offering everyday styles.
Devangshu\nDutta, CEO, Third Eyesight, says both have distinct operational\nstrategies. H&M partners with designers to create special lines\nunder joint branding, whereas Zara maintains its own branding. “Zara\nhas a far greater number of products in its annual range, and invests\nfar more on product development. H&M spends a significant amount on\nadvertising, which Zara mostly shies away from,” he says.
The road ahead
<\/span>Both\nbrands are at different stages of their India journey, but are\nlooking at non-metros. H&M’s next store will be in Bengaluru,\nfollowed by one in Noida, Mohali and Mumbai in 2016. It is looking at\nother cities as well and so is Zara.
However, the question is\nwhether the premium brands will tweak their pricing strategies for\nsmall towns. According to the head of a Delhi mall, non-metros can\nabsorb H&M as it is more affordable. “After you move out of South\nMumbai or South Delhi, there will be more shoppers for H&M than\nZara. That’s why after 17 to 18 stores, Zara is finding it difficult to\nexpand,” he said.
However, in Mumbai, a senior executive with\none of the leading malls said that all global brands struggle after\nfour to five stores in metros, be it Zara or H&M. “It is not easy\nto expand in tier II and III cities for any international brand,” he\nsaid. Dutta however believes that\nboth are marquee brands that, more than hurting each other, will help\nall brands by driving customers to malls.<\/span> Even if they do, the fight for converting footfalls to transactions is going to be an arduous one.<\/p>