H&M GETS HOTTER: FASHION AT ITS FASTEST

Hennes and Mauritz (H&M) is a Swedish multinational clothing-retail company known for its fast-fashion clothing company. It operates in 62 countries with over 4,000 stores and as of 2015 employed around 132,000 employees. The first store was opened on the high street of Vasteras, Sweden in 1947. It has 3,997 stores at the end of March 2016. It is ranked the second largest global clothing retailer, just behind Spain-based Inditex (parent company of Zara), and leads over the third largest global clothing retailer, United States based Gap Inc.

Stefan Persson, chairman of Swedish retailer Hennes and Mauritz (H&M) vividly remembers his company’s first attempt at international expansion. It was 1976; the year H&M opened its London store in Oxford Circus. “I stood outside trying to lure customers by handing out Abba albums’ he recalls with a wry laugh. Persson, the 29, son of the company’s founder, waited for the crowds. I still have most of those albums,’ he says. But Stefan is not crying that unsold vinyl. In a slowing global economy with lacklustre consumer spending and retailers across Europe struggling to make a profit, H&M’s pre-tax profit hit £1.9 billion in 2014.

Marketing at H&M

If you stop by its Fifth Avenue location in New York or check out the membership at the corner of Hamngatan in Stockholm, it’s easy to see what’s powering H&M’s success. The prices are as low as the fashion is trendy, turning each location into a temple of ‘cheap chic’. At the Manhattan flagship store mirrored disco balls hang from the ceiling, and banks of television broadcast videos of body-pierced, belly baring pop princesses of the moment. On a cool afternoon in October, teenage girls in flared jeans and two-toned hair mill around the ground floor, hoisting piles of velour hoodies, Indian-print blouses and patch work denim skirts – each £16 or under. The average price of an H&M item is £10. This is not GAP’S brand of classic casuals or the more grown-up Euro chic of Zara. It’s exuberant, it’s over-the-top and it’s working. ‘Everything is really nice – and cheap,’ says Sabrina Farhi, 22, as she clutches a suede trench coat she has been eyeing for weeks.

 

The H&M approach also appeals to Erin Yuill, a 20year old part-timer employee from New Jersey, who explains, ‘things go out of style fast. Sometimes, I will wear a dress or top a few times and that’s it. But I’m still in school and I don’t have a lot of money. For me this is heaven.

H&M is also shrewdly tailoring its strategy to the US market. In Europe, H&M is more like a department store – selling a range of merchandise from edgy street fashion to casual basics for the whole family. Its US stores are geared to younger, more fashion-conscious females. H&M’s menswear line, a stronger seller in Europe hasn’t proved popular with the less-fashion conscious American male. So a number of US outlets have either cut back the selection or eliminated the line. And while the pricing is cheap, the branding isn’t. H&M spends a hefty 4% of revenues on marketing.

Behind this stylish image is a company so buttoned-down and frugal that you can’t imagine its executive tuning into a soft-rock station, let alone getting inside a teenager’s head. Stefan Persson, whose late father founded the company, looks and talks more like a financier than a merchant prince. H&M is run on a shoestring’ says Nathan Cockrell, a retail analyst at Credit Suisse First Boston in London. They buy as cheaply as possible and keep overheads low.

H&M is pursuing a strategy that has undone a number of its rivals. Benetton tried to become the world’s fashion retailer but retreated after a disastrous experience in the USA in the 1980s. Gap, once the hottest chain in the States, has lately been struggling on its relatively slow reaction time to changing fashion trends and its failure to attract young shoppers and has never taken off abroad. Body Shop and Sephora had similar misadventures.

Nevertheless, Persson and his crew are undaunted. When I joined the company in 1972, H&M was all about price, he says. Then we added quality fashion to the equation but everyone said you could never combine fashion quality and price successfully. But we were passionate that we could. Persson is just as passionate that he can apply the H&M formula internationally.

 

 

What’s that formula exactly? Treat fashion as if it were perishable product: keep it fresh and keep it moving. That means spotting the trends even before the trendies do, turning the ideas into affordable clothes and making the clothes fly off the shelves.

Although H& M sells a range of clothing for women, men and children, its cheap-chic formula goes down particularly well with the 15 to 30 set. Lusting after what Dolce and Gabbana corduroy trench coat but unwilling to spend £600 plus? At £32, H&M’s version is too good to miss. It’s more Lycra than luxe and won’t last forever. But if you are trying to keep current, one season is sufficient. At least half my wardrobe comes from H&M says Emma Mackie, a 19-year-old student from London. It’s really good value for money.

H&M high-fashion, low-price concept distinguishes it from Gap Inc., with its all-basics-at-all price points and chains such as Club Monaco and Bebe whose fashions are of the moment but expensive. It offers alternatives for consumers who may be bored with chinos and cargo pants but not able to or willing to trade up for more fashion. H&M seized on the fact that what’s in fashion today will not be tomorrow. Shoppers at the flagship store agreed particularly the young ones that the retailer caters to.

In 2004, H&M commissioned Karl Lagerfeld, Chanel’s designer to create the limited-edition Lagerfeld range, which included a £70 sequined jacket and cocktail dresses for under £55. The range, which was offered in the USA and 20 European countries sold out within two hours in some stores. This was followed by the Stella McCartney collection. McCartney, the British designer whose clothes normally retail for hundreds and sometimes thousands of Pounds, designed 40 pieces for H&M, including camisoles, skinny jeans and tailored waistcoats. The average price was £40 per item around 15 times cheaper than her own prices The limited edition was a resounding success, with customers queuing from as early as 6.30am to get first pick of the clothes.

Since then, many other top names have lined up to work with H&M, including Robert Cavalli, Kylie Minogue and Madonna. Since 2009, Matthew Williamson, who has designed dresses for Sienna Miller, Keira Knightley and Penelope Cruz, has been reworking his most popular designs – kaftan dresses, beaded cardigans and print frocks – for the retailing giant. His designs sold out within hours of hitting the stores.

Design at H&M

H&M’s design process is as dynamic as its clothes. The 95-strong design group is encouraged to draw inspiration not from fashion shows but from real life. We travel a lot says designer Ann Sophie Johansson, whose trip to Marrakesh inspired host of creations worthy of bazaars. You need to get out, look at people, new places. See colours. Smell smells. When at home, Johansson admits to following people off the subway in Stockholm to ask where they picked up a particular top or unusual scarf.

The team includes designers from Sweden, the Netherlands, Britain, South Africa and the USA. The average age of designers is 30. Johansson is part of the design group for 15 to 25 years old and one style they designed for the autumn was Bohemian: long, crinkled cotton skirts with matching blouses and sequinned sweaters for a bit of night-time glamour. The goal is to keep young shoppers coming into H&M stores on a regular basis even if they are spending less than £16 a time. If they get hooked, they will stay loyal later on when they become more affluent.

Not all designs are brand new: many are based on proven sellers such as washed denim and casual skirts, with a slight twist to freshen them up. The trick is striking the right balance between cutting-edge designs and commercially viable clothes. To deliver 500 new designs for the stores for a typical season, designers may do twice as many finished sketches. H&M also has merchandise managers in each country, who talk with customers about the clothes and accessories on offer. When they travel, buyers and designers spend time with store managers to find out why certain items in each country have or have not worked. In Stockholm, they stay close to the customers by working regularly in H&M’s stores.

 

 

 

 

INDIVIDUAL ASSIGNMENT

• You are employed as a Marketing Executive by H&M and have been asked by the Marketing Manager to prepare a report that addresses the following questions. The Report should be submitted and uploaded on the MyCourses site by the 21^st October 2016 at 12 am midnight.

 

Q1. To what extent is H&M market oriented? What evidence is there in the case to support your view? (30 marks)

Q2. What are the marketing benefits to H&M of commissioning Karl Lagerfeld, Stella McCartney and Matthew Williamson to design limited-edition clothing ranges? (30 marks)

Q3. What are the likely marketing challenges that H&M will face in the future? Propose recommendations for overcoming the identified challenges (40 marks)

 

ASSESSMENT CRITERIA

• Demonstrate clear understanding of the relevant theoretical concepts and principles
• Convincing, clear and concise analysis of and in using relevant concepts and principles in the context of the information provided
• Ability to synthesize and to form creative responses
• Evaluation of issues
• Effectiveness of problem solving
• Ability to present the required information in an acceptable format

• To support an argument, draw in evidence as well as assertion. Make extensive use of external information sources to support your answers where necessary.
• Refer to the literature. The more references you draw on the better.
• Think about structure.

WARNING!!!

Do not be tempted to plagiarism which is considered an academic dishonesty. Plagiarism includes copying direct from books, journals, websites etc. without acknowledgement and copying from other students’ work.   (See student Hand Book for details)