Recovery of H&M Sales
Post Pandemic
Strategic and Innovation Management
Submitted to – Dr. Divya Vyas
Submitted by – Dhruvi Kota, Dhwani Doshi, Harshmeet
Rao, Shambhavi Kapoor, Priyanshi Jagtap
Semester - 3
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Recovery of H & M post pandemic, Study notes of Brand Management
H & M Hennes & Mauritz AB or H&M Group (abbreviated H&M) is a multinational clothing company based in Sweden that focuses on fast-fashion clothing for men, women, teenagers, and children. As of 23 June 2022, H&M Group operates in 75 geographical markets with 4,801 stores under the various company brands, with 107,375[b] full-time equivalent positions
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Recovery of H&M Sales
Post Pandemic
Strategic and Innovation Management
Submitted to – Dr. Divya Vyas Submitted by – Dhruvi Kota, Dhwani Doshi, Harshmeet Rao, Shambhavi Kapoor, Priyanshi Jagtap Semester - 3
Table of Contents
- Abstract
- Introduction
- SWOT Analysis of H&M
- Problem Statement
- Literature Review................................................................................................................................
- Strategic Decisions..............................................................................................................................
- 6.1 Expansion through Concentration
- 6.1.2 Technological Advancements 6.1.1 Digital Sprints Error! Bookmark not defined.
- 6.1.3 Visual Search
- 6.1.4 RFID (Radio Frequency Identification)
- 6.1.5 In-Store Mode
- 6.1.6 Customer Loyalty Programme
- 6.1.7 Express Delivery
- 6.1.8 Garment Rental
- 6.1.9 Scan & Buy
- 6.1.10 Garment Collecting
- 6.1.11 Reusable, plastic-free packaging..........................................................................................
- 6.2. Strategic Alliance
- 6.3 Production Adaption Strategy
- 6.3.1 Sustainability........................................................................................................................
- 6.3.2 Supporting Customer Adoption
- Outcome
- 7.1 Post Covid Consumer Experience...............................................................................................
- 7.2 Sales Analysis
- Conclusion
- References
3. SWOT Analysis of H&M
Strength
1. Strong Global Reach: In recent years, H&M has moved into new continents like Asia and Africa.
The company’s worldwide solid presence allows them to reduce business risks. H&M is well- represented in more than 70 countries, with over 5000 shops across six continents, and the firm anticipates annual growth of 10% to 15%.
2. Successful Strategy: H&M follows a fast fashion model, which provides designer tables with the
most up-to-date fashion trends. This technique enables items to be delivered quickly from the designer’s table to the store, in contrast to the traditional approach of seasonal manufacturing, which requires a four- to six-month wait before a new collection is released. However, the corporation must convey the goods rapidly from the manufacturing site to the retail outlet.
3. Systematic Supply Chain: H&M makes effective use of supply chain management, ensuring that
customers get their items on time. One of the benefits of working with several suppliers is that there’s a far lower likelihood of running out of stock. H&M keeps all of its locations well-stocked with current merchandise, and any supply concerns that arise are immediately rectified.
4. Powerful Online Presence: H&M has an effective E-Commerce strategy that adequately serves
the online market. Companies that effectively use the internet can gain a significant competitive edge. It uses third-party platforms and its main website to reach more online customers and increase E-Commerce sales. Weakness
1. Dependence on Third Party Suppliers: H&M outsources product manufacture to over 800
separate vendors, resulting in a reduced production control level. Vendor overdependence can impair the company’s order obligations, and any negative customer experience can harm the brand’s reputation. While this approach has helped the company succeed, it also can be risky because the suppliers can take all the credits.
2. Ingenuine Designs: The problem with H&M’s designs is its reliance on large designer companies
to create fashion trends. H&M creates inexpensive apparel, relies on many independent suppliers, and follows the trends set by luxury companies. This is a significant flaw since fashionistas are driven to new designs rather than current fashion trends. They don’t have any unique designs that are identifiable as H&M.
3. Controversy on their Ethical Values: Many fashion critics argue that the brand copies the work of
other designers and enterprises. In 2018, the brand sparked controversy when it sold a hoodie with a black kid model wearing it with the phrase “Coolest Monkey in the Jungle.” Customers worldwide were outraged, and they decided to boycott its products for encouraging racism. Opportunities
1. Future in E-Commerce: The online marketplace had been steadily expanding, but as the pandemic
spread, more people became aware of the advantages of online shopping. H&M has a solid web presence, but there is always the potential for development, especially given that the internet industry is developing quicker than ever before. To service a bigger market, they must also grow
their E-commerce platform. E-commerce has the potential to be the future of the garment business, and H&M must maximize its usage of the platform.
2. Growing Market: Because H&M sells items at a low cost, the Asian and African markets would be
ideal for the brand. There is a rising market of middle-income households in emerging nations that like fashion and flair and can afford it. There are various developing areas with high sales potential, and the corporation would be good to explore these opportunities. Threats
1. Worldwide Pandemic: The continuous flow of raw materials and completed goods is critical to
multinational corporations like H&M’s success. In the case of another worldwide pandemic in the future, lockdowns and quarantine might disrupt the supply chain, reducing H&M’s sales and profitability. Because H&M is shutting physical locations and shifting its retail operation to internet platforms, its previous growth model cannot be employed as an immediate approach.
2. Huge Competition: H&M must find tactics to keep ahead of the fast fashion market competition,
which has been highly cutthroat in recent years. Uniqlo, Zara, Gap, and Macy’s are some of the most competitive brands. H&M’s competitors attempt to gain market share and lower demand for their items.
the category is an uptick in cycling as an alternative mode of transport. The casualization trend that was already in motion before the pandemic and that accelerated throughout 2020 is likely to emerge as a dominant force across many fashion categories in 2021. Looking forward, as demand remains subdued in 2021, fashion companies should aim to mirror shifts in consumer behaviour across their product offering and double down on growth hotspots. Product marketing campaigns should focus on in-demand categories such as athleisure and loungewear and be given a spotlight in prime locations like online landing pages. (Fashion, 2021) Figure 1 - Graph on H&M’s 2020 Weekly Sales (Source- https://www.statista.com/statistics/1133661/h-and-m sales-growth- coronavirus-crisis/)
Consumer Shifts
Consumer behaviour has undoubtedly shifted over the past year, as people sheltered from the virus in their homes, travel was restricted and stores were closed around the world. However, as digital consumption continues its dominance and growth in 2021, companies must develop more engaging and social experiences to encourage consumers to connect (H&M, H&M Group Annual and Sustainability Report 2021, 2021)
Retail ROI: H&M Group
H&M Group sank to a loss in the second quarter of 2020 as the pandemic caused sales to
plummet 50 percent year-on-year, but it has since recovered faster than expected. The fast-
fashion giant’s chief is focusing on more sustainable business models to drive growth in the
coming years. When Helena Helmersson stepped into the top job at H&M Group in January
2020, fast fashion was already under pressure, facing disruption from ultra-fast digital native
competitors and growing scrutiny for chasing unbridled growth amid a climate crisis. The
pandemic forced leaders like Helmersson to find ways to adjust to the many disruptions and
constraints that came with the crisis. Some retailers were forced into bankruptcy; others
cancelled next season’s orders, leaving their suppliers in the lurch, even as pressure to answer
for the social and environmental impact of business decisions continued to mount. H&M was
one of a few major retailers to pay garment suppliers for orders already produced or in
progress. While Helmersson managed to return the group to profitability faster than
expected, H&M’s future success will hinge on whether the company can finally crack
omnichannel retail and scale-up sustainable business models while still generating growth
and profit. (H&M, Transperancy, 2022)
Digital Sprints Digital adoption has soared during the pandemic, with many brands finally going online and enthusiasts embracing digital innovations like live streaming, customer service video chat, and social shopping. As online penetration accelerates and shoppers demand ever-more sophisticated digital interactions, fashion players must optimize the online experience and channel mix while finding persuasive ways to integrate the human touch. With the global pandemic keeping people at home, 2020 may be remembered as the year in which fashion retail made a definitive shift online. Over just eight months, e-commerce’s share of fashion sales nearly doubled from 16 percent to 29 percent globally, jumping forward six years’ worth of growth.
6. Strategic Decisions
6.1 Expansion through Concentration 6 .1. 1 Technological Advancements
Innovations such as Livestream commerce have captured the imagination and helped to
bridge the gap between physical and digital by bringing human interaction to the digital
shopping experience. Virtual fashion is likely to emerge as a not insignificant opportunity for
brands both as a revenue stream and as a channel for product discovery. (H&M, Innovation,
- H&M Foundation’s Global Change Awards funds early-stage innovations that have the
potential to build a planet-positive fashion industry.
- Our Circular Innovation Lab supports innovators and start-ups in joint development projects
around circularity, from early-stage proof of concepts to capsule collections.
- H&M CO: LAB is our venture capital arm that invests in new and developing technologies.
- The Laboratory is our wider internal innovation hub that supports our brands and business
with research and idea exploration.
6.1. 2 Visual Search
Image recognition helps customers find the right product by making relevant
recommendations based on pictures that the customer has taken or been inspired by.
H&M has also unveiled its first Indian celebrity campaign to celebrate the tie-up. The campaign features Bollywood names including Harshvardhan Kapoor, Aditi Rao Hydari, Diana Penty, Amyra Dastur, and Aditya Seal wearing H&M’s latest collection. Over the next year, momentum in e- commerce will only accelerate. Fashion executives see digital as the biggest opportunity by far for 2021, with 70 percent of executives expecting growth of more than 20 percent in their ecommerce channels. New digital opportunities are leading to creative solutions for marketing, design, and new revenue streams across the fashion industry. A partnership between H&M and Myntra, for example, will create a wider reach of audience, while other collaborations exist between fashion companies and designers. H&M already runs its e-commerce store in India but the tie-up with Myntra, one of India’s largest online fashion retailers, will bring the brand to a large demographic of new customers. (Fashion, 2021)'
- 3 Production Adaption Strategy
6. 3 .1 Sustainability
As consumers become more engaged with sustainability issues, circularity will be the key that unlocks the door to a more sustainable future. However, it is not the kind of revolution that can be led by a few leaders, while others wait and see. Rather, a collective effort is required, in which fashion companies, customers, and all participants in the value chain collaborate.
To date, players that feature sustainability at the centre of their branding have been at the forefront of circular practices, as well as some established fast fashion brands owing more so, perhaps, to the resale value of their stock rather than their eco aspirations. However, looking forward, we expect mass-market brands to scale their efforts. In addition, aggregators are well-placed to launch resale and repair programs, combined with an enhanced in-store experience. Marketplaces can build on their size and logistical capabilities. As consumers become more engaged with sustainability issues, circularity will be the key that unlocks the door to a more sustainable future.
As circularity grows, digital enablement will be critical. As the traditional linear fashion value
chain transitions into a circular system, consumers will be incentivized to engage beyond an
initial purchase to engage in circular business models, which in turn will support data
collection that can shape a brand’s business going forward as shown in Figure 2. (H&M,
Circular & climate positive, 2022)
H&M Offers to:
- Offer rental options such as subscription services and the option to buy rented products at
a discount
- Borrow online marketplace techniques to filter, sort, and group assortments, or leverage
retailer-curated collections
- Enable peer-to-peer business, including resale and rental, and sweeten the deal with
logistics and digital solutions
- Create timeless collections, reflecting the declining prominence of seasonality
- Offer tips for care and repair
- Enable returns and recycling
- Develop data strategies to inform business decisions.
- Leverage store networks to create in-store circularity hubs Figure 2 - Swedish fashion retailer H&M Group's net sales increased by 12% in the first half of 2021 compared with the same period in 2020, while net sales in the second quarter of 2021 increased 75% yearon-year. Source: https://hmgroup.com/wp- content/uploads/2021/07/The-full-report-PDF.pd
H&M’s strongest URL is hm.com, which generates the bulk of its net sales in Germany. Between 2019 and 2021, hm.com grew its net sales from SEK33 billion to SEK54 billion and currently contributes around 85% to H&M’s eCommerce sales. According to the company, there is no end to this development in sight. H&M has thus set itself ambitious goals: By 2030, the fashion retailer plans to double overall sales compared to 2021, counting more than ever on a strong eCommerce business. (ecommercedb, 2022)