The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
This article is published in tandem with Inside H&M’s $4 Billion Inventory Challenge, BoF’s latest case study exploring H&M’s long-term strategy to survive and thrive in the new retail paradigm. Exclusively available to BoF Professional members, download and read the case study here.
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LONDON, United Kingdom — H&M, the world's second-biggest fast-fashion retailer, had a problem that was only becoming more visible. Its rise was stalling and along with an increasingly outdated business model, the retail group was grappling with waning customer engagement with its core brand. As a result, H&M's net profit has been in decline every year since 2015, and in its first-quarter report in 2018, the group disclosed that its inventory levels had risen to $4 billion.
H&M’s problems, however, are far from unique. Retailers such as Diesel and Arcadia group have both filed for bankruptcy in the United States as nimble online-only brands such as Boohoo.com and Fashion Nova, and low-cost retailers such as Primark, make the competition even fiercer.
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In response to its inventory challenge, H&M devised a plan to invest and improve in four key areas: digital platforms — from online shopping to data-rich customer forums and loyalty programmes; infrastructure of supply chain and logistics; the desirability of its products and physical stores; and finally, future-proofing its business operations to avoid repeating the same mistakes.
Years into its turnaround, there are signs that H&M’s investment is paying off: sales increased 11 percent in the first half of 2019 and its customer loyalty programme now counts over 43 million members. However, the company’s inventory levels have remained stubbornly high at $4 billion and its profits slid 11 percent in the first half of 2019 compared to a year earlier.
On July 25, BoF Chief New York Correspondent Lauren Sherman, Senior Correspondent Sarah Kent and Chainge Capital Chairman John Thorbeck, who has advised numerous brands and retailers, including competitors of H&M, held a live conversation with members of the BoF Professional community. The discussion focused on the details of H&M’s inventory challenge, learnings from its strategy to resolve it, and how other players in fast-fashion retail have addressed similar problems.
Digital Strategy: Self-Disruption Versus Self-Destruction
Globalised Supply Chains: What Are the Risks/Rewards?
Future-Proofing: The AI Question
Related Articles: Inside H&M's $4 Billion Inventory Challenge
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