Swedish retailer H&M is facing greater exposure to the cost of implementing health and safety measures than its high street counterparts, according to analysts.
The fashion chain sources more from Asian markets than Spanish rival Inditex, owner of Zara, Pull & Bear and Massimo Dutti, which buys in more product from its home market where production and labour costs have remained more stable.
Espirito Santo analyst Caroline Gulliver said: “At the margin we expect sourcing costs to increase as a result - though so could productivity. H&M has a bigger exposure to sourcing in Asian markets than Inditex and there has been a higher cost pressure in these markets than in Western ones.”
Gulliver added that Bangladesh is not the only country seeking to improve the conditions of its workers and building safety, and that H&M has a responsibility to fund initiatives in these markets too. It is not clear what the overall cost to H&M will be.
“There is a general trend towards improving conditions in these markets but it is hard to tell how much of this is PR and how much will be really spent on improving things. None of these countries will want to lost their competitiveness,” she said.
Primark, Dutch retailer C&A and Tesco have also signed up a new fire and building safety code in Bangladesh, following the collapse of the Rana Plaza building, which has killed 1,100 people. The code will see retailers funding and implementing a joint fire and building safety programme that will include inspections and training at supplier factories.
Tesco has announced that it is investing £1m to support improving safety and condition, through increased staff and manager training and interest-free loads for supplier partners to help with infrastructure improvements.