H&M's Fashion Forward Future

Getting Dressed!
for the Future!

Yu-Ching Chiang!
Christine Chung!
Keenan Timko!
Melissa Wu!

Simply Stylish… Simply You.

Situational Analysis of H&M!
Strengths! Weaknesses!
• High penetration rate! • Stagnating growth
• Broad appeal! in mature regions!
• High brand value! • Local competition in
• Mix of brand core with new markets!
fast-fashion ! • Retaining &
attracting the right
people!

Opportunities! Threats!
• Expanding product • Increasing raw
categories! materials prices!
• Channel expansion! • New competitors!
• Expansion into • Different consumer
emerging markets! preferences!
• Supply chain
optimization!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Identifying the Problem!

Market • Encourage existing customers to buy more!
• Maintain position in markets with low growth
Saturation! rates!

Technological • Expand the number of channels to
purchase products!
Trends! • Need to address social networking
opportunities!


Deﬁning the Objective
• To create opportunities for proﬁtable and
sustainable long-term growth !

– Maintain our 10-15% annual growth target for
number of stores per year!
– To increase market share in low-growth
regions!


To Improve Position In Low-Growth Regions
!

European & American markets generate 90% of total sales. Market shares
have been falling in Western Europe from 29%  25% during 2005-2010


Fashion Forward : Increasing H&Mʼs Online Presence

North American
Online Store!

H&M Club!

H&M Mobile
Application!


Tapping
into
the
E-‐commerce
Space

• Rise
of
e-‐commerce
and
m-‐commerce

– Fastest
rising
pla8orm:
35%

• Convenience
is
key

• Key
demographic
for
m-‐commerce:
25-‐34
yr
olds

U.S.
Smartphone
Users
by
Age

64%
of
Smart
Phone
Users
are
18-‐44
Years
Old

5%
10%
18-‐24

13%

25-‐34

18%
29%

35-‐44

45-‐54

25%
55-‐64

65+


Fastest
Growing
Pla8orm:
Mobile


Bringing Online Store to America

• Already present in
Western Europe!
• Integrate with H&M
Fashion Studio!
• Recent e-commerce
trends!


Apparel
is
biggest
category
in
online
sales,

growing
at
high
rates

2013
Forcasted
Online
Sales
for
Selected
Categories
(USA;
$B)

Furniture
3.7

SporXng
Goods
3.9

Jewelry
5.5

Books
7.1

Oﬃce
products
7.4

OTC
medicines
9.6

Toy
and
video
games
10.4

Consumer
electronics
19.2

Appliances
home
improvement
30.3

Computers
and
accessories
36

Apparel
accessories
and
footwear
40.3

0
5
10
15
20
25
30
35
40
45

2009-2013 CAGR for Apparel accessories and footwear is +11%.


Accumulating H&M Points

• Transfer
spending
into
rewards

• Exclusive
deals
for
club
members

– H&M
Sweepstakes

– H&M
Shopping
Sprees

• Perks
for
points

– New
arrivals

– Into
physical
stores


Integrating with Smart Phones

• Interoperable mobile applications!
• Coupon codes!
• Rewards program!
• Fashion Studio!


Dollar Spent Becomes Redeemable Points

• Every $200 dollars spent = $5 rewards!
• H&M Sweepstakes every year!
– Chance to meet guest designers!
• Ex: Matthew Williamson!
– Fashion show tickets!
• Ex: Copenhagen Fashion Week!
• H&M Shopping Sprees!
– Regional; every 20 stores/rafﬂe!
– 4 times/year, $300 each person!
• Monthly perks can include freebies!
– Articles under $5!


Beneﬁts of ion Forward

Attractive for price-sensitive
consumers!

Inexpensive to implement!

Increase multi-channel platform!


:
Establishing
a
Way
of
Life

• A lifestyle brand through category
expansion !
– Embody H&Mʼs values and aspirations!
– Leverage the creative talents of fashion-
forward guest designers!

H&M

Apparel
?

Home


Establishing
a
Lifestyle
Brand:
Home

• A larger furnishing
and home décor
section of the store!
– Signiﬁcant opportunity !
– One-stop shop!
– Includes bedding,
curtains, candles, and
other home
accessories and
textiles!


Establishing
a
Lifestyle
Brand:
H&M
Home

• Sales
as
point-‐of-‐purchase
and

online
ordering

– Use
of
in-‐store
displays
for

design
ideas
and
templates
from

noted
designers

– Store
as
point
of
purchase

– Opportunity
for
online
ordering

for
delivery


Sample
Site


The
Talent
Behind
the
Talent

• Leverage
creaXve
talent
of
well-‐known

designers
and
stylists

– The
style
geniuses
behind
the
actors,
singers,
and

fashionistas

– Promotes
being
your
own
trendseaer


Recognizing
the
Unheralded
Genius

• The
unheralded
hero

behind
the
famous

ones

– Resonate
with
creaXve,

edgy,
and
street-‐smart

H&M
customers

– “live
an
H&M
lifestyle”

– Mold
the
“H&M
Man”

&
“H&M
Woman”


Example
Lifestyle
Themes

• OrganiChic!
Core • Urban Sophistication !
Themes! • Effortless Edge !

Fast-‐
Fashion
• Forties Fox!
Themes

• Pastel Pretty!


Beneﬁts
of

Lifestyle

Brand
enhancement
and

diﬀerenXaXon

Product
category
extensions

DetecXon
of
popular
consumer

trends


Value
ProposiXon
of

MulX-‐
channel

IntegraXon

Reinforcing

AcXviXes

ConsolidaXon
of

Brand
Image
and

Loyalty


Deﬁning a Target Market
!
Age
Gender
LocaXon

MoXvaXon

• 15-‐35
year
• Female
• US
• Cost-‐
olds
• Western
conscious

Europe
• Convenience

• Scalable

CreaXng
trendy
H&M
women
with
diﬀerent
lifestyles


Market
Segment
Overview


Comparing with Competitors
!

Online
Store
X
X
X

Rewards
Program
X
X

Home
TexXle
Line
X
X

Guest
Designers
X
X

Mobile
ApplicaXon
X
X
X


PromoXng


Combining
H&M
Lifestyle
and
Fashion

Studio


CreaXng
Your
Own
Lifestyle


Implementing Forward!


Implementing Lifestyle!


Projected Net Income from!


Managing Potential Challenges

RISK
SOLUTION

B2C
Supply

Chain
Replicate
Stockholm
model

TransiXon

Storeroom
One-‐room
displays,
order-‐in-‐
Space
Cost
store,
and
buy
online
opXons

High-‐capital
Gradual
rollout,
then
ship
from

Outlay
one
distribuXon
center


Alternative 1: 
Human Resources Initiative!

1) Training programs for employees up for
promotions!
2) Campus ambassadors to attract new talent!
• Rationale!
– showcase “H&M spirit” on campuses to attract
young new capital!
– Maintain employee morale and prepare
internal employees for administrative roles!


Alternative 2: 
Vertically Integrate the Supply Chain!

• Outsourcing production to independent
suppliers  In-house production facilities!
• Rationale: !
– Shorter lead time from creation-to-shelf!
– Increased quality control!
– Unique consumer feedback system that
detects popular trends!


Methodology Used to Assess Options

Decision
Strategic
Simply
Stylish,
AlternaPve
AlternaPve
2:

Variable
Importance
Simply
You
1:Human
VerPcal

Resources
IntegraPon

Proﬁtability
35%
9
6
5

Strategic
Fit
20%
8
7
4

Growth
20%
7
7
6

Opportunity

Scalability
15%
9
8
6

Sustainability
10%
8
8
5

Total:
100%
8.3
6.9
5.2

Situation  SSSY Implementation  Financials  Risks  Alternatives!

Your Winning Strategy!

MulX-‐channel

IntegraXon

Reinforcing

AcXviXes

ConsolidaXon

of
Brand

Image
and

Loyalty

Appendix
!

• Key
Industry
Trends

• H&M’s
Strengths

• Threats
&
Weaknesses

• Successful
Rewards
Program

• ROI
on
Talent
Endorsements

Key
Growth-‐Driving
Industry
Trends

Brand

building
and

diﬀerenXaXon

Driving

growth

Brand
and

oﬀer
MulX-‐Channel

extensions


Identifying Strengths!
High

penetraXon

rate

Mix
of
brand

core
with
fast-‐ Broad
appeal

fashion

Supply
chain
High
brand

pracXce
value


Addressing Threats & Weaknesses
!
Weaknesses

• StagnaXng
growth
in
mature
regions

• Local
compeXXon
in
new
markets

• Retaining
and
aaracXng
competent
people
in
organizaXons

• Low
customer
loyalty

• Low
switching
costs

• High
degree
of
product
diﬀerenXaXon

Threats

• Increasing
raw
materials
prices

• New
compeXtors

• Diﬀerent
consumer
preferences

• LogisXcal
challenges
(entry
into
new
high-‐growth
markets)


Creating a Successful Rewards Program!

• Focused
on
making
loyal
customers
even
more

loyal.

• Focused
not
just
on
transacXons
but
on
core

strategic
values.

• Focused
on
the
individual

• Enabled
by
new
technologies

• The
human
touch.


ROI
on
Talent
Endorsements

• European
companies
pursued
talent
to

endorse
their
brand
-‐>
successful
ROI

– Past
success
of
Jimmy
Choo’s
work
with
Project

Pep
AIDS
FoundaXon
20x
ROI
and
drove
in-‐store

sales
33%

– Jamie
Oliver
Sainsbury's:
ROI
of
27:1;
£1.12
billion

in
incremental
revenue


H&M's Fashion Forward Future

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