H&M: 8 Lessons for Retailers

The apparel kingpin H&M has made remarkable strides from a single store, established by H&M founder Erling Persson in Sweden in 1947, to an ever-expanding ‘fast-fashion’ business, with 4553 stores in 71 markets and 171,000 employees worldwide. One of the foremost market leaders in fashion retail, H&M has come on top in revenue growth and brand success through a unique value-set and brand strategy. The brand is known for its value for money approach without compromise on quality. They have a strong belief in technological advances and a customer centric approach. The towering stature of the H&M Empire owes itself to their attention to detail, knack for using innovative social media marketing and effectively cutting their costs for production and manufacturing through outsourcing. They uphold a strong value set that is inclusive and employs a strong teamwork ethic. H&M understands customer preferences that helps H&M keep their dynamic ideology of not compromising on quality, while giving them the most value for money, as their business model is referred to as ‘cheap and chic’.

Retailers can learn multitudes of valuable lessons from H&M’s success. Some of these are:

Technology can be a facilitator

Technological advances have revamped how retailers make customer experience better. H&M, being one of the forerunners in fashion retail to make use of inventive technology, has benefited greatly from it and is not new to the concept of technology enabling better customer experience.    

Whether it is consumers paying in the changing rooms, interactive mannequins or virtual runways where customers can catwalk, or enabling stores to transfer data real time back to the headquarters, H&M has "been there done that". H&M adapted online sales earlier than most retailers and majorly expanded online in 2006, serving customers across multiple channels. It has seen dividends of adapting to latest trends and continually surprising its customers.

Retailers can learn that technology is on their side to make them more successful. The easiest way for retailers to adapt to changing technological trends is to offer online retail options so customers can go online and shop in the comfort of their homes as well. They also need to prioritize their technology initiatives and work with more important technologies first and then move on to obscure ideas as the first technology initiatives pay off. One important guideline for Retailers is to focus on customer centric technologies first with a direct impact on interacting with customers.

Know Customer Preferences and Predict Fashion Trends

Customer is central to every business and retailers who invest in the knowledge and understanding of customer preferences and trends acquire leadership positions in the industry. Those who don’t will become irrelevant with the passage of time.

Understanding what customers like and dislike has been pivotal to H&M success. More than 200 designers are constantly looking at customers’ buying behavior, preferences and trends to determine what to design. Runways and fashion shows are also under close observation to know what trends are in vogue. Customer preferences are changing rapidly and trends take effect in short bursts. A retailer’s ability to understand the philosophy behind these ever-changing trends and providing them with purchasing options that are known to be fascinating to them is the true centerpiece of their success. Retailers must think of customers as central to their store operations, constantly make an effort to talk to them and to understand what they love and fulfill their said and unsaid needs. Alienating customers can hamper your growth and will stop you from achieving greatness.

Leverage Outsourcing

H&M looks at two big seasons with long production cycles and outsources these productions to developing countries. Unlike Zara they have a hybrid model where long production cycles are outsourced resulting in lower costs while shorter production cycles are kept closer to home for speed and agility. H&M doesn’t own any factories and their selection process is rigorous. They work with their suppliers closely to ensure that the right quality product is delivered so consumers are offered remarkable fashion at affordable prices.

Outsourcing has its advantages and retailers can leverage it to their benefit. Slower economic growth, higher competition and increasing customer sensitivity to price are the main reasons why more and more retailers are making use of outsourcing. Retailers should look to outsourcing to reduce costs and increase competitiveness to their advantage. They should, however, look to working with suppliers who are capable of delivering strong products and have an unparalleled track record.

Strike the Right Balance: The Quality- Price Scale

 H&M is driven by the motto ‘fashion and quality at the best price’. This means that customers are offered the best of fashion and quality at affordable prices. With this philosophy, outsourcing makes all the more sense, as it can help cut the average cost of production. A balance between quality and price of a product has proven to be critical for H&M’s success in drawing the customer segments that want to enjoy the best in fashion but are sensitive to upticks in pricing at the same time.

It is not an easy feat to maintain this balance as it requires rigorous planning and flawless execution. Retailers can learn from this balancing act which hangs cozily between high end fashion with low prices and unpopular low quality products with low prices. Despite your retail specialty, learning to implement this delicate balance can bring more and more customers your way.

Social media is Power

Social media has been as viral as its content and H&M has caught up with virtual marketing trends. According to Sprinklr bench marking H&M has the highest, about 8.1 million engagements. It is the most talked about brand, with about 84.8k mentions on Facebook and has the largest audience with 36.9 million followers. Today’s customer is active across all social platforms and presents a great opportunity to retailers to connect to their existing and potential buyers. Customers are addicted to social media and by providing the right content to satiate their cravings, businesses have the opportunity to display the creative side of their business. All businesses must embrace social media and use it to their advantage. By writing creative, engaging and unique content, they can relate to audience which is relevant to their product range. This channel is only going to get bigger and better and retailers need to leverage the momentum.

Shared values and culture

Shared values and culture can be a powerful cohesive force to connect organizations into a single thread of unified thinking. It not only brings employees together but also influences customers and strengthens their loyalty to the retailer. Whether making financial decisions, or working with suppliers, or making employee related decisions, culture can be a strong driver of success. H&M is one of a kind in terms of culture and the way that they live by their values from the times of Erling Persson in the 1940s to Stefan Persson in 1980s to the times of CEO Karl-Johan Persson. It is not just visible in their communication but is reflected in the way they do business as well- with their Swiss egalitarian ways to simplicity, to cost consciousness and openness. 

H&M is extremely focused on their employees and believes in their involvement at every level. Store managers are especially central to their strategy and they have enough autonomy to cater to specific customer preferences that best suit their customers.

Retailers can unify and implement a culture that best represents them. There is no right or wrong way of going about it. Cultures are just as unique as individuals who start these organizations and one can learn from those passed before us have achieved. 

Optimize your Outlet Localities

 H&M always picks the best location and considers this central to their brick and mortar stores. Retail has always been about location and rightly so. The reason is that the ease of customers to find you in high foot traffic areas can be an important factor in retail success. It can’t be the sole factor but it is an important factor that cannot be ignored.

More foot traffic means more customers looking at your product. With the right product and the best price as well as a great shopping experience, customers will be drawn to your product. If you’re thinking of starting a new store or launching a new business, how customers are going to find you is an important consideration. Store location that customers can easily find is likely to put you ahead of competition.

Collaborations Go a Long Way

Since its inception, H&M has forged a number of collaborations with designers and celebrities and customers have been in love with these collections and campaigns. Starting in 2004 with Karl Lagerfeld, in 2005 with Stella McCartney, Elio Fiorucci, SolanageAzagury-Partridge, in 2006 with Viktor& Rolf, in 2007 with Viktor and Rolf, in 2007 with Roberto Cavalli and in following years with various other designers like Versace, Marni, Isabel Marant and Alexander Wang and so on.

H&M has also collaborated with style icons such as Madonna, Kylie Minogue, David Beckham, Anna Dello Russo and Beyonce.

These collaborations have resulted in increasing the H&M fan base and goes to show how working with influencers can help push your business higher. Retailers must look at ways to collaborate with others in the industry that can help present the audience to certain segments that haven’t been tapped into or to increase sales in the existing customer base.