Zara was founded in 1975 by Amancio Ortego. Zara is the world’s largest apparel retailer. The company was initially named “Zorba” after the movie “Zorba the Greek”, but was changed to “Zara”. In 1988, company started its international expansion, and in 2010 Zara launched its first online store.
Company started its outsourcing or international expansion in 1988 through Porto and Portugal. In 1990, it entered in USA and Belgium. Company started its expansion in Asia in 2010 through India and launched its first online boutique as well. Online stores are available in almost every region now.
Zara’s supplies its products based on consumer demands. Products reach the stores within 15 days. The distribution center in Spain processes all the clothing. The clothing products are delivered within 2 days. Zara produces over 450 million items per year. Company has good relationship with customers. They know the demand of customers which helps them in stocktaking by 80%. Zara’s stock management is very good, that shortens delivery time and enhances customers need.
The transportation and distribution of products is undertaken entirely by external contractors. Company works with the suppliers and manufacturers across 53 different countries to outsource their products. Headquarters are present in Spain, Portugal, Turkey and Morocco. Clothes with a longer shelf life are outsourced to low-cost suppliers, mainly in Asia.
They Key factor in their outsourcing is that the suppliers and manufacturers are present in 53 different countries. So raw material comes to the nearest possible manufacturer and then after manufacturing the products are distributed in all over the world easily. These countries send the final products to the nearest countries. Online stores are present in every region now. Zara due to its vertical integration has more rapid product turnover. Zara can design a product and have it sold in stores within a month.
Hennes and Mauritz was founded in 1947 by Erling Persson. It is second largest global clothing retailer company, just behind Spanish Inditex (Zara). Like Zara, H;M also have significant online presence with online shopping available in 33 different countries.
Company started its international expansion in 1964 in Norway. The company has roughly 900 independent suppliers. H;M is the 2nd largest buyer in Bangladesh. H;M supplies to Europe and Asia from Bangladesh. H;M has outsourced most of the components of their production, to more experienced suppliers such as Liz Fashion Industry Limited, which can reduce costs with lower labor costs, lower costs of input, lower cost of energy and easier access to customers because of legal and trade barriers. H;M has higher number of online offerings than its competitors.
The key factor in their outsourcing is that their focus is on women clothing. They have 900 suppliers, due to which they have large number of varieties in their clothing. Their lead time is more than Zara but better than rest of all competitors. They have 900 suppliers so there is no shortage of raw material. From Bangladesh they outsource their products in Asia.
Difference between Zara and H;M
Zara, owing to the twice weekly deliveries of replenishment stock as well as new items, customers constantly return to stores to browse new items. Zara has an average of 17 visits per customer per year, which is higher than its competitors. Zara is a vertically integrated company. The company sets its own price range while on the other hand H;M’s price varies from brand to brand. H&M doesn’t own any factory, instead partners with 900 suppliers worldwide. H;M is a horizontally integrated retailer. Zara’s lead time is 10-15 days while H&M’s lead time is 20 days. According to a report in 2014, brand value of H;M is more than Zara. H;M focuses on women wear, while Zara covers all three categories. H;M has bigger online offering with 2000 more options than Zara. Average price point at H;M is $21.4 and at Zara is $48. H;M has faced 62% decrease in profit in early 2018, because of overstocking and in late 2017 as well, and has about $4 billion worth of unsold cloths. On the other hand, Zara’s profit has increased by 7% in the same period.