Happiness for Amancio Ortega: Zara's Rival Closes Many Stores in Spain

The fast fashion industry is experiencing turbulent times. However, few things can challenge the giant Zara and Amancio Ortega. Although sometimes it seems like the competition is going to overtake them, in the end, they manage to withstand any storm. 

The same can't be said for H&M, the latest major brand to experience the consequences of a changing market. The Swedish company, which for years was one of Inditex's main competitors, has announced the closure of 28 stores in Spain. As well as the dismissal of 492 workers.

This restructuring reflects the profound impact of digital transformation, the rise of sustainable fashion, and new consumer habits. For years, H&M contested the leadership of fast fashion with giants like Zara. However, the current landscape is very different.

Amancio Ortega Sees His Competition Closing

In the third quarter of 2024, the company recorded a 30% drop in profits, with losses of 258 million euros. The pressure to reduce costs and adapt to a new commercial era has led the company to make decisions. Recent closures in locations like Elche, Orihuela, and Torrevieja are just a sample of the contraction process the brand is undergoing in Spain.

The factors explaining this crisis are multiple. On one hand, e-commerce has gained ground relentlessly, partly driven by the pandemic. Brands like Inditex have managed to adapt better to this reality, with strategies focused on larger and more digitalized stores.

Meanwhile, H&M has reacted more slowly. On the other hand, rising costs, inflation, and fierce competition from brands like Shein and Temu have further eroded its position. Additionally, the rise of the second-hand market has caused a profound change in consumer behavior.

Platforms like Vinted or Wallapop have captured a new generation seeking more affordable and sustainable fashion. All of this is taking customers away from the large traditional chains. But H&M's case is not isolated.

A New Way to Consume Fashion

Since 2020, more than 18,000 fashion stores have closed in Spain, representing a 30% drop in the number of retail outlets since 2019. Although spending on fashion grew in 2023, this trend has not been enough to stop the disappearance of physical stores. In response to this situation, major brands have accelerated their digitalization.

Inditex has opted for closing small stores to focus on flagship stores and enhance its online channel. H&M, meanwhile, has incorporated new technologies in its stores and launched more sustainable collections, although its future remains uncertain. The market changes, and with it, giants fall.