H&M's recipe for success
Since 1947, H&M, the Sweden-based vertical retail chain, has made its mark on the apparel industry, mixing the latest trends with fashion classics. Like some of its global competitors, such as Gap and Zara, H&M has cut a swath across the supply chain, successfully managing 680 stores, more than 900 suppliers and 21 production offices worldwide.
But what is the recipe for success that keeps H&M expanding year after year?
One part concept…
H&M didn't gross 35.9 billion Swedish kronas (SEK) ($3.4bn) in 2000 by being lucky. According to Karen Belva, public relations manager and spokesperson for the store, H&M's business concept lays the foundation for the company's success. “Our business concept is really what attracts the H&M customer: Fashion and quality at the best price. Because we do carry all these different lines in our stores, we allow our customer to address [his or her] personality, and that's really important.”
She further notes that H&M can offer department store variety without being a department store. “You can come into H&M, and if you want a pair of jeans or a pair of khakis, you can find them. If you want a trendy little one-shoulder top or something lacy or something hip, you can find it,” she adds.
The harmonious melding of classic and contemporary brings the customers in and keeps them coming back, says Belva. “You don't have to go to another store. It's like one-stop shopping, and that's very appealing,” she adds.
…One part brand
Worldwide, H&M has more than 680 retail outlets catering to women, men, teen-agers and children. In addition to streetwear, the majority of H&M stores offer underwear, accessories and cosmetics. Though the company reports that its primary market is fashion-conscious women aged 18 to 45 years - or those who feel they fit into this group - H&M merchandises 16 clothing concepts designed to appeal to a broad consumer market. For women, the lines go beyond the traditional and trendy Clothes and Hennes brands, encompassing maternity with Mama; leisure with LOGG/LOGG Sport; and Bib, aimed at plus-sized women. The same variety of brands, which are all H&M private labels, can be found for the rest of the family.
And yet, that's not all. The company also offers its lines via a mail-order catalogue, H&M Rowells, although this option is only available in Norway, Sweden, Finland and Denmark.
According to the company, there are no plans to expand its portfolio of brands in the future because the firm already is hitting its target niches with its current line-up. Between all of its lines, H&M is offering looks ranging from basics to classics to fashion-forward styles to young men's and juniors apparel to children's wear and maternity wear, notes Belva.
Add a strict code of conduct…
Behind H&M's clothes is a very savvy production environment with few middlemen buying large volumes cost-consciously, Belva notes. “We have over 900 suppliers who manufacture our goods, half in Europe and half in Asia,” she says.
H&M currently buys more than 400 million garments a year. The firm does not own factories, but plays an active role in quality assurance with its supplier base.
As part of these efforts, the firm enforces a strict vendor code of conduct. “If a supplier wants to work with H&M, [it] must abide by our code,” says Belva.
For suppliers, this compliance includes: ensuring that products are manufactured under good working conditions; adhering to H&M's strict environmental policies; and delivering goods of high quality at the right price, Belva explains.
To prove its commitment to its code, the company performed 2,400 code-of-conduct inspections in the year 2000. “There's a whole team keeping close watch over our suppliers,” Belva says.
…Mix with smart logistics
Logistically speaking, H&M maintains a tight rein on all aspects of the supply chain, acting as importer, wholesaler and agent, Belva notes. H&M has 13 distribution centres in Europe and Asia as well as one in the United States. Goods shipped from European suppliers are sent via rail to stores in Europe, while goods coming from Asia are shipped by sea. Currently, Germany is the company's largest retail market, followed by Sweden, Norway and Austria. The US remains a strong area of growth for the company.
Belva notes the ease with which garments move into the stores. “It works smoothly - our production, sourcing and buying,” she emphasises, pointing out that the standard delivery time from design to the store floor is approximately 12 weeks. That turn-around time is standard worldwide, and doesn't vary with different global markets, Belva adds.
Allow for expansion…
In terms of the company's growth markets, recent expansions into the US, Spain and France have proven successful. Since September 2001, H&M has opened 12 new stores in the US along the eastern seaboard, including locations in New York and Boston, among other cities. In France, H&M has purchased many of the Marks & Spencer stores not taken over by Galeries Lafayette, increasing its exposure in the world's fashion capital, the company reports.
Spain has proven to be an important market for H&M, with sales in the company's first year in the country amounting to SEK 187 million ($18m). In an attempt to bolster this business, the company plans to open four more stores in Spain, focusing on Madrid and Barcelona.
Although the mail-order market has proven successful for H&M in serving Sweden, Norway, Denmark and Finland, accounting for revenue of SEK 35.9 million ($3.5m) in 2000, Belva notes that there are no plans to expand that business currently. “It's really something that's going to take time to logistically set up the system,” she says. “Right now we#;re concentrating on our stores.”
…Serve with great prices
Often the most important ingredient to success for a global retailer is perseverance in good times and bad. Many retail companies have been put to the test in the wake of the terrorists attacks of September 11, but H&M reports it has felt little, if any, negative impact on its business.
“Our prices are always great… [so] after something like September 11, or [because of] unemployment or the way the economy is going, people who would normally be shopping in a higher bracket are looking to us for good buys. So it really doesn't affect us in a negative way,” Belva observes.
She further notes that while many stores have been marking down their prices, H&M is not following suit. As Belva concludes: “Obviously we always want the economy to be good, [but] even negative effects on the economy don't have negative effects on us because of our concept: fashion and quality at the best price.”
Tracy Haisley is assistant editor of Bobbin
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