Case Studies – Zara V.S. H&M

According to the International Trade Statistics 2010 published by the World Trade Organization, in 2009, the international export in clothing could account for $316 billion dollars, approximately 2.6 percent of the world’s merchandise trade.
Without doubt, the fashion business is being affected by the Globalization. The retailing as well as the sourcing activities are greatly globalized nowadays. When formulating the sourcing strategies, due to the complexities of global situation, the brands often encounter challenges about how and where to source the products.
Besides, in recent years, the emergence of fast fashion has changed the global apparel industry, shortening the attention span of clothing consumers. Traditionally, retailers were used to deliver four fashion collections a year; but now, they are under growing pressure to deliver ten collections a year.
Zara and H&M both are leading companies in retail clothing industry. Although both of them are fast fashion brands, they adopt different sourcing approaches. In fast fashion principle, new products will be offered to the market within two to four weeks. Therefore, the sourcing of products in the supply chain management plays an important role to facilitate the global delivery of products.
Zara sources fabric and other raw materials from external suppliers globally through the purchasing offices in Barcelona and Hong Kong. On the other hand, the brand has kept more than 70% of its production in Europe, earning the reputation of being one of the exceptions to globalization of production. This exception grants Zara a public recognition of high-quality fashion garments. Most of the factories are owned by Zara so it has an entire control over its own logistic centre. This vertical integration greatly enhances the rapidity and flexibility of product delivery of Zara. For H&M, the main difference in sourcing strategy from Zara is that H&M outsource all of their production globally to nearly 700 suppliers.
Actually, both of the sourcing strategies have their own pros and cons, depending on the ultimate sourcing goal of the supply chain. H&M is because of the strategy to outsourced much more flexible than Inditex. There is also much more knowledge where they can profit from when working with 700 suppliers, a knowledge that Inditex will miss.