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Who Is The Enemy Of ZARA Or UNIQLO H&M?

2019/7/3 13:41:00 1

ZARAH&M

No matter how satisfied H&M is with the scale of business in China, we have to face the fact that if we can not design, distribute and sell more accurately, the scale will only be counterproductive in the future.

Magnus Olsson can't remember which city he came to China's first store.

As the general manager of H&M Greater China, in the 4 years since he took office, he changed the number of fast fashion clothing brands from northern Europe to 115 in China from 383 to 383, which is more than two times that of its main competitor, ZARA, which entered the Chinese market in the early 1 years.

H&M has gone through a high price growth in the past 10 years.

"Although H&M is still the largest market in Germany, I am not surprised that it will soon be China." Karl-Johan Persson told the first financial weekly. He is the grandson of the founder of H&M and the global CEO of the group. Karl-Johan Persson stays in Stockholm and London for the most part. The two cities are the design center of H&M and its brand COS. 4 years ago, after he took office, Magnus Olsson transferred from Britain to the Chinese market and started the H&M's motor in China.

Karl-Johan Persson is the third generation of the H&M family and the CEO of the group.

Since the first store in mainland China opened in Huaihailu Road, Shanghai in April 2007, the time for H&M to enter the Chinese market will be 10 years. In November of this year, Karl-Johan Persson visited Shanghai. On the open schedule, he will deal with such issues as visiting stores, Rediscussing whether to enter Tmall and the membership system next year.

In the 3 fiscal season before the arrival of Karl-Johan Persson, the financial figures submitted by the Chinese market were not good enough: in the first quarter of 2016, the sales of the H&M group's Chinese market increased by only 7% over the same period last year. This figure was more than 20% before 2015, and the peak period had reached 50%. In the second quarter, the total sales volume of H&M in China even dropped by 1%, which was the first time that it entered China for 10 years, and the result is also based on the continuous opening of new stores.

At the same time, the data that Karl-Johan Persson sees from H&M global is not very good. In the first three quarters of 2016, although sales remained single digit growth, net profit declined.

The explanation given by Karl-JohanPersson is the warm winter effect. "Last year Europe was very hot from August to December, so at the end of the first quarter of this year, we said that the decline in profit was due to the weather. Weather can really affect business in a short time. " Karl-Johan Persson said.

For Europe and Asia, a large area of warm winter has made H&M thousands of winter clothes designed for the winter, and the US Business Week commentary is: "H&M can only say that the supply chain is not fast enough." The core market is also in the warm winter Europe of ZARA, which still maintained the same period net profit growth.

"People often compare us to ZARA, but in fact, we can deliver goods in 3 to 4 weeks, or even faster. We can do it if we like, depending on the production line. " Karl-Johan Persson said. He himself is not willing to label H&M as fast fashion. Whenever he needs to use this word, he doesn't put it in a sentence with H&M.

But anyhow, fast, it is the fast fashion brand represented by H&M, which is the most important brand characteristic that is difficult to go around. Over the past 10 years, they have been sweeping the global apparel market at low price, fashion and weekly updates. From Europe to North America to China, from cheap Metersbonwe, Baleno, ONLY to more expensive Esprit, Vigny bear... Almost all of the clothing brands originally lying in department stores were devastating, bankrupt, sold or forced to transform.

Now, 10 years later, H&M, which has experienced rapid growth, has also come to a gateway. Whether the third generation of leaders of the family is willing to admit that H&M's best time in China may have passed, and the warm winter sales at the end of 2015 are not good enough to reflect the problems H&M is facing now.

Fast fashion meets warm winter why can't it get up soon?

As time goes back to the end of 2015, all clothing brands are worried about the weather. H&M may be one of the most anxious companies.

According to the plan, in October of this year, well made winter clothing was distributed to H&M's global stores. Whether retail stores are open in Europe, Hongkong or Shenyang, at the same time, 80% of all H&M stores in the world share the same goods, and only 20% of the products are ready for local differential needs. Differentiated demand includes design preferences and climate factors. When Europe and Shenyang enter winter, Hongkong may still be summer.

This means that for Hongkong, almost 20% of the goods are marketable at any time of the season. Catching up with warm winter, most of the winter clothes in Europe or North China market are not marketable.

But it is almost impossible to solve the marketable problem from the source of the supply chain, because "the whole design was completed a year ago, and the production was finished half a year ago". A fashion industry in the fast fashion industry has told the first financial weekly.

It is often imagined that fast fashion brands can complete the design and production of goods in half a month or a month, but the actual operation process is: after the design of the brand or the sample provided, the proofing takes one or two months. And all fabrics must start with yarns. Basic fabric preparation takes a month, and doubling time is needed for washed fabrics.

Garment production is next. After looking for multiple plant quotations, the factory will match the three elements of production quality, price and production cycle. Because the volume is large, the production process lasts for the longest time. In order to save costs, H&M chose not land transportation or sea transportation. A shipment of goods from Asia to Europe usually drifted for 20 days at sea. Customs clearance and check took more than 10 days. The goods would take one month to enter the local warehouse. Plus front end design, the whole process usually takes about a year.

The reason why we see "new products" in fast fashion stores every week is that the buyers will control the delivery rhythm after the production is completed, which is a common practice in the whole industry. If there are 1000 styles in autumn and winter, it will probably be shipped in batches of 200 models in May, 300 in June and 500 in July, so as to create weekly appearance of new products.

Self built factories also can not shorten the delivery time, because no factory can produce all the products. Leather, dress, down coat, T-shirt... Different clothes require different factories. It is also a dress. Winter clothes and summer dresses are different from factories. And every fast fashion company has thousands of product types every year. ZARA's legendary private factories are also small in number, and their production accounts for a small proportion.

"For more fashionable products, our production cycle will be faster. But most of the time, the production cycle is relatively balanced. Karl-Johan Persson said.

In other words, the so-called "fast fashion" is not fast production, but fast operation. When you retail, transfer goods from warehouse to store, from south to north, or from east to west. Yuki, floor manager of H&M store in Nanjing West Road.

Since its establishment, H&M has been focusing on the supply chain strategy. It has always built factories, but self retailing stores and self built logistics systems. Buyers will look at the sales data of local stores every day, and when they need new goods or need to replenish goods for individual stores, they will issue instructions to the warehouse. In the early hours of next morning, H&M's truck team would shuttle to the stores and put them on the shelves before the business hours. In comparison, UNIQLO and Muji do not have their own logistics. They focus their business models on unique design.

H&M did not disclose how it used the logistics system to solve the problem of poor merchantability in the first half of this year. "I can only say that such things happen every day. It's a regular thing for us." H&M Irmgard, general manager of China's production office, said Fischer.

But this transfer obviously failed to solve the problem. The year-on-year growth rate of sales dropped to a single digit in the first quarter, and in the second quarter it became a negative number even further.

  It's all fast fashion. What's the difference between H&M and ZARA?

When the goods are transferred, what can the terminal stores do to improve sales? ZARA also spent a very busy period of the same warm winter.

Because the customer does not enter the door, the shop manager of a ZARA store in Chengdu is busy with display every day. "No matter how on the models, on the walls, on the hangers or on the table, they are all matched." The ZARA store manager told the first financial weekly. In ZARA, the store manager needs to personally be responsible for the display, and the manager of the Department and above must also understand the display. Every season products come out and imitate which brands and which elements are popular. There will be systematic training materials. They must show them after digestion and understanding.

According to her experience, when customers buy clothes at the store, they buy them mostly. She could not tell the truth, but found that the sales strategy really worked. During the warm winter, she and the Department Manager spend more time on display. At weekends, they even change their models once every two or three hours. A week later, she will sit with the Department Manager to discuss the sales results of which match is the best, and then improve the sales effect in the new collocation. These efforts kept her in store.

But H&M's operation system does not require the manager to worry about display. In H&M, store display is an independent functional branch. Each shop has a full-time visual division, responsible for window display, model to shelf matching, and its work is only reported to the head of the exhibition. When new goods arrive, they put their clothes on the right shelves. Other clerks just put the goods they want to replenish in the old shelves.

As for how to match, this Chen Li and other shop divisions will receive guidance information regularly from regional and global display directors. This information does not specify how to match each garment, but which clothes must be worn on the model.

In other words, H&M's shop display does not need to be responsible for sales, so the display will not change with the needs of the sales site, unless the clothes on the models are broken, and they will be replaced. Otherwise, they will maintain a rhythm of two weeks.

At the same time, the strategy of calculating initial shipment is also one of the obstacles that H&M can not cope with. A clothing, ZARA small shop initial shipment may have only a set of sizes of goods, sold out. This not only reduces inventory risk but also imperceptibly drives customers to place orders quickly. H&M of course will also consider consumer psychology, but it also wants to provide customers with enough size choices. So, it often assigns thirty or forty pieces of clothing to the same store. When warm winter sales are sluggish, they become inventories and make stores look chaotic.

"ZARA is better at collecting and using customer data to make decisions. H&M just looks like fast fashion, but it's actually a traditional clothing company." Bernadette Kissane, an apparel and footwear analyst at Ou Rui consulting, commented.

ZARA has reduced the adverse impact of warm winter to a minimum because of a more flexible store response mechanism. However, if the business crisis is totally attributable to the fact that H&M is not fast enough or the operation is not flexible enough, H&M's management of the entire supply chain is always strict and prudent, but it also leads to more problems.

"Fast fashion clothes are worn out two times, and they are very deformed." Li Xinrui said. She is a project manager of a state-owned enterprise in Shanghai. 7 years ago, when she graduated from University, the channels for buying clothes began to shift from Taobao and department stores to fast fashion. H&M used to be one of the brands she frequented. "The lights of the stores are very bright, the clothes are many styles, the price is not high, a simple T-shirt can be bought for tens of dollars, and jeans are often only 199 yuan."

The first financial weekly also obtained a similar result on a questionnaire survey of company's impression of H&M brand. Of the 1424 questionnaires we collected, 51.5% of respondents thought that H&M was "designed in general and the quality was general", and that H&M was 24.9% cheaper.

Low price is indeed the brand factor that H&M tries to guarantee. In order to achieve low price, H&M does not purchase any design from any supplier, but all of them use their own designers. In each region, H&M has retail offices and production offices, which are responsible for finding suitable foundries and managing them locally. Asia with low labor cost is the largest production base of H&M, and 75% to 85% garments are produced here, including not only basic funds, but also more complex Trend series of fabrics and processes. According to H&M, it will consider the needs of the local retail market and make a good mix in the production process.

This may not be anything special. Almost all fast fashion companies do this. However, H&M will be more economical on this basis.

"The same clothes, H&M is willing to give the purchase price is about 20% lower than ZARA." Above garment industry personage says to "first finance and economics weekly". He had done OEM for ZARA, C&A and other fast fashion brands. He also visited H&M to discuss cooperation. Finally, he abandoned it because of the low purchase price of the other party. He told the first financial weekly that the supply chain of H&M is transferring to Southeast Asia, and the purchasing office has moved from Shanghai to Hongkong.

If the fabric grade is improved, the processing technology will be improved. For example, the production of white clothes, the ordinary cotton yellowing, the workshop is not clean enough, but if you want to use special clean cotton to make clothes, the workshop is clean, workers' hands can not dirty, the clothes can not be touched when the operation is done, the requirements for the workshop environment and workers are high, the overall procurement cost will be raised by at least 20%. The apparel industry said.

After the completion of production, and also for cost reduction considerations, H&M's logistics process did not allow goods to head to a round of links, it directly let the factory after the production of goods shipped to the sales area of large warehouse. In order to ensure the distribution of goods to the maximum extent close to the timing of sale, ZARA will require all the world's foundries to pack all the goods, or land or sea to its headquarters in Spain, and then distribute them to retail markets by air.

The cost control of each link will ultimately be reflected in product pricing. The H&M's highest priced Trend series is the same as ZARA, and the Everyday and Basic series account for about 30% less.

The enemy of H&M is himself.

Li Xinrui, who initially attracted the first tier cities at low prices, also helped H&M enter more two or three tier cities and suburbs of first tier cities than ZARA. Here, low prices are the key to opening the market, and even higher priced ZARA is not ready to open shops in these places. H&M is constantly playing the role of hot, fast fashion consumers.

But over the past 10 years, the market has changed a lot.

"Consumers are becoming richer and smarter. They will reduce the number of purchases, but choose more expensive and quality clothing products than they used to buy a lot of bargains." OC&C, a management consultancy, said in a survey on clothing retailing in 2016.

Li Xinrui is one of them. At the age of more than 30, she has been promoted for two times, and there are more occasions to deal with clients. "Very few people can find suitable clothes in H&M." She said.

The data provided by Davies, the first real estate consultant, can also be corroborated by the fact that at the peak time, H&M's single store revenue in Shanghai can reach about 10 million yuan a month, and has now fallen by half.

Fabric problem is only one reason why Li Xinrui no longer chooses H&M. Another thing that keeps Li Xinrui away from H&M is design.

Like IKEA, which is also from Sweden, H&M is planning product lines according to "designing for everyone". Whether men's or women's wear, they are divided into Everyday daily series, Trend trend trend series, business series, Youth Street series and sports series, and children's wear.

The meaning of Everyday series is "everyday wear", and the pursuit of design style is "safety". In every store, this series is the highlight. They occupy the gold display location of each store just entering the door, and the number of products and display area are the largest. Taking women's clothing as an example, about half of the area belongs to Everyday.

To find the most popular fashion elements of velvet and pleated skirts this year, you have to look for the Trend series. It is the most daring design in all H&M series. The series is a bit like ZARA, but in the most complete Nanjing West Road store in Shanghai, its product is only 1/10 of this store. If the size of a store is too small, or if H&M judges that there is no suitable consumer group around the business circle, the series will be removed. For H&M, this means flexibility. But this flexibility is not enough to deal with consumers who are more and more design like Li Xinrui. For example, few people can feel the so-called "personality" and "multiple styles" of H&M.

Since 2004, H&M has been looking for famous designers to design clothing in the world, and in the product as far as possible to reflect the external designer's own design style, create a kind of inexpensive purchase of designer works consumption. Karl Lagerfeld and Versace have joined hands with H&M. The brand of this year's cooperation is Japanese designer brand Kenzo.

Karl-Johan claims that H&M does not make money in order to make money, but to give consumers something special to surprise them. "Emphasize that we want to surprise consumers every day." He said.

But the company did not actively promote the series in the Chinese market. After the release of the H&M and Kenzo joint series in 2016, the designer walked away with a model wearing a joint name in New York. Karl-Johan Persson's brand effect may only stay in fashion sensitive circles.

In H&M2016, the Japanese designer KENZO was the partner of the designer series.

This bold design failed to extend to H&M's regular products. After seeing the joint name issued by H&M this year, Bernadette Kissane gave a comment on "one day designer".

For the design problem, Karl-Johan Persson's father once thought that the buyer system could solve the problem. This mechanism requires the designer to design the product, and decide which kind of design to decide, which orders to place, what materials to choose, and which products to give to the company. All buyers has the final say. The latter is a group of people who travel through fashion circles, showrooms and markets all the year round. Compared with designers who plot designs, buyers are considered to know better how to find an optimal balance between fashion and market demand. That's what ZARA did.

But for a long time, the role of buyer does not exist in H&M, and what design can enter the order and production process is the chief designer has the final say. In 2002, H&M decided to "promote" some of the designers whose design achievements were good in the market. After that, the designers began to learn to "buy" as a buyer, go out of the Swedish fashion spot, decide which designs to enter the production process, collect orders from the buyers of the regional market, and listen to the feedback from the local market to design, but they still have their own design preferences.

"If the design is not right, it's easy to change the buyer, so it's not easy to change the designer." The clothing industry said he thought designer brand should be the soul of designer, but commercial companies should not. Gap, whose business is also in trouble, is turning to this. After changing many design directors before and after they failed to recover their performance, at the end of last month, Gap CEO ArtPeck said, "retailers should pay more attention to data and at least regard data and design equally."

Karl-Johan Persson also admitted that H&M needed to invest more in design, but he mentioned that it was not a real buyer, but a return to the designer. "If we throw a garment directly to the supplier to imitate the production, it will be fast. We have some products to do that, but we want to have a balance, to do our own design, this process is slow, but in the long run." He said.

Like his father and grandfather, Karl-Johan Persson has a designer complex. COS is founded in 2007 and has a brand independent of H&M designer team. The target audience is interested in fashion, and wants to have a personalized personality and better quality consumers. This means that his goal of "designing for everyone" on H&M brand is not effective enough.

Karl-JohanPersson does not want companies to become more consumers. In H&M, he asked every employee to work in a store for two days a year - executives are no exception - to observe and listen to consumers. One of his trips to Shanghai is to visit H&M Nanjing West Road flagship store.

Before he arrived, the 3 storey store had just finished redecorating. Instead of the LED directly mounted on the roof, the color and brightness of the light did not change, and it was still the white light simulating sunlight. The walls of the stairs were changed from hand painted planks to mirrors to brighten the roofs. In Sweden with short sunshine hours, this way of decorating is popular. But in China, "supermarkets are not like boutiques." Li Xinrui said.

Because of language barrier, Karl-Johan Persson did not experience salesmen during this trip to China. In the past 10 years, Li Xinrui's views on H&M business have rarely been transmitted to the ears of the global CEO. He knows more about this market only through the final sales figures.

However, he did not intend to radically change the company. "Our business models are feasible in big cities, medium-sized cities and small cities, and not many companies can do that." Karl-Johan Persson said.

H&M's recent plan is to become more localized, such as adjusting products to better suit the needs of the Asian market. It's not just the size, but whether it can do more in the fashion trend, similar to the new spring series that was launched in the Chinese market during the Spring Festival in 2015.

Meanwhile, Karl-Johan Persson said that H&M is studying more digitalized topics, including how to arrange sales season more flexibly, how to distribute goods in better ways, and provide consumers with more targeted services. Last, he refers to the customer loyalty program that will be landed in China next year, that is, the membership system. It is expected to help H&M "know what kind of goods the customer has bought" and "targeted promotions and rewards". As for the actual role of H&M in improving the business model, it is hard to say that in 2014, the risk of losing online sales was chosen to build self shop instead of Tmall. In fact, the shopping experience provided by its website is not ideal. 51.7% of the consumers in our survey think shopping experience is general, and 25.1% of consumers never experience it.

In the Chinese market, the H&M's clearer goal is to continue to open stores. Every year, the plan of opening 15% new stores has not changed due to the decline of single store revenue.

In the age of Karl-Johan Persson's father in charge of the company, the founder of H&M, Karl-JohanPersson's grandfather, also questioned whether the company's expansion policy had gone too far. He asked the father of Karl-Johan Persson: "Why are you in such a hurry?" the father of Karl-Johan Persson replied, "when you are hot, you can't stop to cool the heat."

Obviously, Karl-Johan Persson and Magnus Olsson agree to strike while the iron is hot. No matter how satisfied they are with the scale of H&M's business in the Chinese market, they have to face the fact that if they can not be designed, distributed and sold more accurately, the scale will only be counterproductive in the future.

Because in the face of changing markets, mature consumers and better competitors, the experience of creating high growth over the past 10 years is hardly suitable for the next 10 years. The biggest enemy of H&M is H&M himself.

  

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