Monday 20 January 2020

Hi-tech Inditex out to widen lead over struggling rivals

Models wearing clothes from Zara’s 2017 fashion line
Models wearing clothes from Zara’s 2017 fashion line

Tech-savvy retailer Inditex, whose online sales have put it ahead of its European clothing rivals, is trying to widen the gap further.

The owner of the Zara chain plans to expand its online offering to new markets and upgrade its inventory management technology. The moves are aimed at securing the Spanish company's fast-fashion lead over rivals like Sweden's Hennes &Mauritz (H&M) after the fastest earnings growth in almost two years.

"Inditex is one of very few non-food retailers that find themselves well-adapted for the online world," wrote Anne Critchlow, an analyst at Societe Generale.

Inditex so far has defied the gloom afflicting other European apparel retailers contending with sluggish domestic economies, the rise of e-commerce and a shift in consumer spending away from clothing. H&M has warned of price cuts to clear inventory, while UK apparel chains like Next and New Look have struggled to align their offerings with changing consumer tastes.

Inditex has adopted one of the retail industry's most advanced inventory-tracking systems across all Zara stores, it said yesterday. Inditex's Massimo Dutti office-wear chain has also started using so-called radio-frequency identification tags, which automatically track the location of individual garments and help prevent theft. The retailer plans to introduce the technology in other formats in coming months, and all of its stores will use the system within three years, CEO Pablo Isla said on a conference call.

Internet sales are also enhancing margins while weighing on those of H&M, Societe Generale's Critchlow said. Zara's prices are higher than the Swedish retailer's, which makes it easier to offset free delivery, while a centralised inventory system and efficient supply chain speed up its response to fashion trends.

H&M has also said it's investing in RFID, though it has given few details as to how that's progressing. (Bloomberg)

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