Arket marks a move away from H&Ms fast fashion towards a "slow fashion" brand

Arket marks a move away from H&M's fast fashion towards a "slow fashion" brand

H&M's new Arket concept is quite unlike anything previously seen from the retailer. Rather than adopt a faster sourcing strategy, the company has opted to introduce a new brand to cater to shifts in consumer behaviour and progress towards a more sustainable business model. Bernadette Kissane, senior analyst for apparel and footwear at Euromonitor International, takes a closer look.

H&M hasn't been living up to expectations recently: the company's first quarter results of 2017 highlighted net sales growth of 7%, falling short of the company's 10-15% target.

A difficult economic climate and tough competition in southern and central Europe, as well as the US, hampered sales development. Profit after tax continued to slump and was down by 3% during the first quarter of 2017, following disappointing sales development and higher markdowns.

As rivals Inditex and Fast Retailing continue to gain from H&M's losses, market conditions are expected to remain difficult for the company throughout 2017 – making the launch of its new brand Arket even more interesting.

Laying the foundations for a sustainable future

In the latter half of the year, H&M will launch its new store concept Arket. The concept will be rooted in Scandinavian design, highlighting simplicity and functionality, suggesting a move towards building a sustainable lifestyle brand.

In a bid to secure its position as an innovative leader, the company continually seeks alternative ways to operate in a more sustainable way and Arket appears to be its latest development.

The new 'slow fashion' focus is on quality and longevity, while designs are typically more timeless and simple, in an effort to transcend fast changing fashion trends

By utilising its brand portfolio the company is increasingly moving towards "slow fashion" brands rather than fast fashion, with higher price points and more premium positioning. The focus is on quality and longevity, while designs are typically more timeless and simple, in an effort to transcend fast changing fashion trends.

While H&M is still expanding its eponymous fast fashion brand rapidly, the fact that it is building its brand portfolio in slow fashion, motivated by a commitment to sustainability, illustrates the company's long-term strategic plan.

H&M to launch new Arket brand amid Q1 profit fall

A new kind of store

The timeless approach to design will be complimented by a new store format that seeks to minimise effort and provide a space where consumers can relax.

Faced with mounting pressure from a growing competitive market and an increasingly hyperconnected, demanding consumer base, H&M is seeking to redesign the physical store in an effort to stay ahead of the curve and attract conscious consumers in the ever-expanding digital age.

With the aim of providing a memorable experience, the company plans to introduce a Nordic style restaurant offering a variety of healthy food, directly targeting the health conscious consumer and tapping into the growing trend to stage food experiences in store.

Perhaps more interesting, is the company's decision to host third-party brands, such as Adidas and Nike in store and incorporate an innovative ID system that allows consumers to find products easier, creating a convenient shopping experience for time-restrained shoppers.

Although e-commerce continues to grow rapidly, the channel is not expected to overtake store outlets in terms of value sales, with apparel and footwear specialists maintaining a steady CAGR of 2% to 2021.

While digital produces growth, the vast majority of sales will continue to take place in store where consumers can touch and try on the products, a crucial component when making a fashion purchase.

As e-commerce adopts the transactional role, physical selling spaces will continue to be repurposed into brand beacons, used to engage with consumers and promote brand values rather than operating as profit centres. Exploring this concept with Arket will certainly place the company in a solid position for future innovative retailing strategies across its brand portfolio.

Opportunity in lessons learned

Arket has been unveiled to much fanfare in the past few months, with H&M announcing a second store location in London's Covent Garden, in addition to the first set to open on London's Regent Street this autumn.

On paper the concept looks promising, tapping into the current zeitgeist and providing minimalist fashion that's made to last, in a setting that adheres to the ongoing shifts in consumer behaviour and demand for experiential retail.

While Arket enables H&M to explore and experiment with retail and product innovations, such as adapting the weight of fabrics based on the weather, the company will need to address the lacklustre performance among its existing brands.

In order to truly reap the benefits of this innovative concept, the company will need to implement the lessons learned across its portfolio; only then will it impact the bottom line. 

About the author: Bernadette Kissane is a senior analyst for apparel and footwear at Euromonitor International, where she is responsible for publishing research studies related to corporate strategies, market entries, competitive intelligence and opportunity analysis in the global apparel and footwear industry.