How to compete on prices? Strategic overview of H&M's new strategy

Fashion is the most dynamic industry, which is not only glamorous, but trends relate to the commercial success of the collection which can make or break any fashion business.

As a management professional, we all have read and learned that competing on Prices is not a good strategy but how do you compete with a ?competing brand whose core competence is

a)?? Fast fashion and a large collection of styles and trends (arriving daily at stores)

b)?? Mass Prices

c)?? Quality (poor, clothes worn out in a couple of washes)

d)?? Quick turnaround of clothes (fashion ramp to their e-commerce site in 2-3 weeks – rapid production & supply chain)

The above competencies are of SHEIN , the company worth $100 billion — more than fast-fashion predecessors H&M and Zara combined. The world’s leading fast fashion retailer.

In this article, I am going to talk about H&M repositioning to make its niche in the fast fashion segment.

Case Study H&M.

At the outset of the competition, H&M too participated in lowering its prices to compete with Shein but lost since mass production and selling low on prices is a different ball game wherein, you work on leveraging your

- supply chains (procurement from different factories with rapid production and ensuring the trends and styles are produced fast and are put on their website).

- quality takes a back seat; High fashion quotient & fast delivery becomes the mantra.

Now H&M, a Swedish retailer, is on a course correction wherein they intend to position themselves higher than SHEIN but lower than Zara in terms of prices.

The retailer aims to differentiate itself from Shein’s budget-focused market by elevating its brand and increasing the fashion component of its assortment.

The fast-fashion chain is focused on driving profit and sales by getting the newest fashions into stores as quickly as possible.

Following the example set by its biggest rival, Inditex SA-owned Zara, the Swedish retailer is looking to move more of its production to places like Turkey and Mexico to bring it closer to key markets in Europe and the US.

H&M intends to produce more relevant clothing ranges and getting them into shops quickly will make them compete effectively.

Brand believes that it will positively impact H&M’s bottom line due to fewer write-downs related to unsold products — a problem that has long dogged H&M.

The retailer is also continuing to cut overhead costs and is targeting an operating profit margin of 10 percent this fiscal year - from 6.2 percent last year.

However, H&M has not changed its strategy of offering customers

“the best combination of fashion, quality, and sustainability, at the best price.”

Shein has emerged as the world’s largest fast-fashion retailer, capturing an estimated 18% market share, according to the report.

Its success is attributed to its low-priced offerings, with $8 dresses, $5 T-shirts and $2 jewelry.

Shein’s app has gained popularity among European users, surpassing its user base in the United States.

?In response to Shein’s growth, H&M is repositioning itself to target upmarket shoppers.

H&M’s recent collaboration with the brand of late fashion designer Paco Rabanne during Paris Fashion Week exemplifies its efforts to attract aspirational shoppers.

I still recall witnessing H&M's collaboration with Jimmy Choo and when it was launched in the Mall Of Emirates store in Dubai, the collection was sold out in a couple of hours.

It was my first time experiencing such a craze of designer collaboration at affordable prices.

By partnering with renowned designers and celebrities, H&M aims to enhance its brand image and appeal to a more discerning customer base.

In another recent move, H&M said in September that it would begin selling?secondhand clothing ?from its flagship London store, providing customers with both value and a way to engage in “a circular fashion industry.”

Learnings:

Competition is good as it allows for improving internal processes and makes us take a step back to relook at our core competencies and re-invent strategies to target competition with renewed power.

If you are a business owner operating in the beauty/fragrance genre & want to grow your business & need a retail expert to help you achieve your “Vision to Reality” framework then feel free to schedule a discovery listening call over a #coffeechat.

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