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Transcript of H&M presentation
Raw material prices , freight and labour costs (particularly in the Far East) are rising, and coupled with the impending VAT increase and unfavourable foreign exchange movements, clothing prices on like-for-like items are expected to rise by at least 5% next year (Mintel 2010)
Increasing globalization, presents a challenge as well as an opportunity for the Fashion Industry, the weak pound has attracted more tourist trade (Mintel 2010) 1 in 3 people (39%) have been spending less on clothes this year than last equating to around 20 million adults (Mintel 2010)
Deflation is the results of growth in ‘disposable fashion’ ongoing pressure to find ever cheaper sources of supply, continued strength of sterling during the boom years and increasing competitive pressures (Mintel 2010)
Cotton prices have risen dramatically • There is more choice than ever before in the UK’s clothing mass market (Mintel 2010)
• Youth unemployment is high and rising and nay cut backs in spending by the young will have a disproportionate impact in the fashion market (Mintel 2010)
• Latest fashion trends may not resonate with the female population at large (Mintel 2010)
• The internet has growing appeal for a range of different reasons including greater choice, more players (Zara, H&M and Gap have all moved online this year) a better service proposition and competitive prices (Mintel 2010)
• Interest in and the influence of m-commerce and social media in multi-channel retailing remains low at present. But this is expected to change as smart phone penetration is rising fast and retailers are looking closely at how best to engage users through these mobile devices (Mintel 2010)
Fashion industry faces option to use fair trade materials
Fashion against Aids
H&M goes GREEN • Many fashion retailers have been scrutinized for child labour, unethical labour standards and use of dangerous materials (Blomqvist & Posner 2004) Porter's Five Forces Threat of substitutes - Low Customers can move freely between retailers
Lack of differentiation between retailers
Market experiencing slow growth resulting in price wars
Most competitors are of similar size and power, with access to the same resources
Clothing signifies socio-economic class
Counterfeit clothing often problematic, although not so much in UK
The Retail Marketing Mix (McGoldrick 2002) 1. Product Design H&M Womenswear aimed at fashion minded people of all ages
Menswear focussed on modern basic and latest trends
Childrenswear targets different age groups in a 'fashionable, durable, safe, practical and comfortable' way
H&M also operates as Cos in 8 locations within the UK, including 2 concessions in Selfridges. This brand extension offers high fashion designs at an affordable price
Collaborations - Stella McCartney, Jimmy Choo, Lanvin 2. Shelf Price On average 40% cheaper than next most expensive and closest competitor Zara H&M - offer fashion and quality and the best possible price
Emphasizing 'fashion, quality & price' (Drake & Marley 2009) 4. Advertising Current TV commercials shown on website
Website features 'social media room'
UK website became transactional in September 2010
Transactional websites operate in eight countries: Sweden, Norway, Denmark, The Netherlands, UK, Germany, Austria and Finland 5. Product Range H&M offers a broad a varied and selection in womenswear, menswear, teen clothing and kids clothing
UK customers can now purchase H&M home products online through its main site 6. Shelf Space H&M developed a quick response model to shorten lead time
Stores are re-stocked each day to increase the turnover of individual items
Vertical integration - Delivered to shelf in 21 days
7. Logistics Design stages involves the centralisation of planning ideas
In production H&M operates within two distinct supply chains located in Asia and Europe
8. Information H&M is deeply serious about CSR responsibilities but does not flaunt this
Keeping CSR messages out of marketing campaigns is strategic. They do not want to use this as a differentiator 9. Customer Relationship H&M is critically dependent on maintaining customers trust amidst rumours of unethical practice Portfolio Analysis BCG matrix Multi-channel retailing (From a view of customer management) Stone, Hobbs & Khaleeli (2002) look at multi-channel retailing in the form of multi channel customer management, using more than one channel or medium to manage customers in a consitent and co-ordinated way across all media channels. Multi-channel customer management is important for H&M due to increasing customer requirements along with rapid innovations in new channel technology H&M's Multi- channel portfolio encompasses both on-line and offline transactional services, Direct Marketing (catalogues) I-phone applications, social media (Twitter, Facebook) Transactional website only launched Autumn/Winter 2010, at the same time as its closest competitor Zara. Topshop and River Island have offered transactional websites for years E-newsletter, catalogue. All channels communicate a consistent message, conveying the H&M mantra - fast fashion at a low cost H&M Retail Design and Store environment Consumption is not just to do with transactions, but EXPERIENCE (Holbrook & Hirschman (1982) Store Design: Store Image, Layout, Atmospherics, Space Management, Opportunities to create impulse purchasing In the PUV chart the area where H&M lacked most in comparison to competitors was store experience and service. Comments included - 'messy' 'unorganised' 'too hot' 'bad layout and lighting' Could the importance of H&M's efficient supply chain be causing problems in terms of customer experience? Barnes & Lea-Greenwood (2010) 'emphasis must shift from the supply chain to building an effective and flexible retail environment' in order to sustain and gain competitive advantage H&M describe their store and its display windows as the most important communication channel with its competitors. However a Mintel report (2009) found that the consumer group that H&M targets value the basic functional aspects of store design such as attractive changing rooms, wide aisles and product signposting more important.
Hennes & Mauritz more commonly known as H&M is a Swedish fast fashion retailer with business centralising around the simple premise of offering fashion and quality at the best price.
H&M is rapidly expanding, with 250 new stores opening worldwide in the year 2009, it grew its operations to over 2,000 stores in 35 international markets, producing sales of €110 billion (Mintel 2010).
In the UK, H&M also operates in eight locations as COS, including two concessions in Selfridges, offering high fashion designs at affordable prices.
H&M recently launched an online service which became available in the UK in 2010 which offers customers the newly developed ‘Home’ range. Introduction to The Strategic Vision of H&M -
To continue creating ethical business and CSR whilst continuing global expansion How is H&M currently perceived?
'I love the fashionable clothes for cheap prices'
'H&M is a store I always visit for its variety and quality of clothing'
' The shop is always messy with clothes all over the place even some garments lying on the floor!' Who are H&M?
H&M is a Swedish fast fashion company offering fashionable garments at low prices
Strong ethical and environmental policy (Mintel 2010) Locational Positioning
An essential part of a retailers strategic approach in order to optimise their decisions
Davies & Clark (1994) model classifies shopping trips on the basis of two principle drivers which influence consumer behaviour
1) Where consumers shop for certain products/services
2) How valuable time is to them
H&M sells portable purchases with stores predominantly located on the high street. This means that H&M targets fashion conscious consumers who want variety of apparel with prices which they can compare against other high street fashion retailers. Competitor Analysis Zara River Island Topshop Headquartered in La Coruna, Spain
Part of Inditex group
Corporate strategy = Fast affordable fashion, low volumes per style, changing product lines frequently
From catwalk to shop floor in a short time period
Target - middle class urban women
Low marketing spend
Unique style and affordable fashion
Target - young individuals
Focuses on offering a more affordable alternative to premium brands
Middle market price positioning
Launched in 1964 - Now more than 300 stores in the UK
Part of Arcadia group plc
Corporate strategy focuses on 'converting catwalk styles into affordable clothing'
Targets younger consumers
Partnership with iconic Kate Moss enhanced reputation
Causal Mapping SCORE Analysis Cos appears in the Ballast section, as the Fit between the parenting opportunities and characteristics is quite low although their is some degree of fit between CSF's and parent characteristics (i:e good value fashion). Competitive Rivalry - Moderate - High Threat of new entrants - High Bargaining power of suppliers - Low to Moderate Bargaining power of buyers - Moderate - High Low brand loyalty amongst consumers, where loyalty exists it is more likely to be towards the designs.
Low buyer concentration - no collective bargaining
Increasingly price sensitive buyers
Retailers located at the end of the value chain - no scope for forward integration
Trade liberalisation has resulted in supplier power decreasing drastically
Suppliers in the UK lack diversity and therefore are reliant on apparel industry for survival
Switching costs for retailers is low
Harmonising Wheel (Vallaster 2010) External Analysis Political Economic Social Technological Environmental Legal Internal Analysis Zara - River Island - Topshop
- Increase in UK sales in 2009 by 7% to £564 million
- Success since launch of I-phone application
- Success of social media useage
- Celebrity & Designer links - Weakened economy and new store openings last year resulted in a decrease in operating profit of 8%
- Large volumes do not guarantee all stock will be sold, risking price reductions or increased stock costs - This needs to be carefully managed
- Customers not targeted enough
- Rise in popularity of online shopping - H&M is one of the last fast fashion retailers to implement a transactional website.
- Success in designer collaborations - Lanvin, Rihanna, Lagerfeld. However could this detract from the original H&M brand?
- Development of homeware line - Is the brand solid enough to extend into this area?
- Global expanision opportunities - Is the climate strong enough to cope now? Trading volatile with little consumer confidence Options (Opportunities and their possible risks)
Strengths: including Support & Services Challenges: What capabilities are needed? Responses
Using Score as alternative to SWOT - as it allows continuous improvement and is measurable. SWOT can often ignore the broader context and focus solely on the particular issue at hand which is not suitable when conducting a macro-environmental analysis Effectiveness Parenting Matrix The Customer Experience Cheap Monday appears in the Edge of Heartland section as there is a high fit between parenting characteristics and opportunities and a medium fit between Cheap Mondays CSF's and parenting opportunities Thank you for listening
Questions? Low initial capital requirements
Low switching costs
Easy access to distribution channels
Lack of economies of scale
Suppliers easily accessible, and much of production is outsourced