H&M Apparel Chains
Apart from Spain’s Zara, the Swedish retailer Hennes & Mauritz (H&M) differentiates itself from most apparel chains for its idiom “treat fashion as if it were perishable produce. ” In Europe, H&M is considered to be an industry leader because it offers the “on-trend” look at an extremely lower price. In 2000, it decided to begin to establish a predatory marketing strategy of expansion within the US.
The strengths of H&M are that it is a well-known company worldwide; it responds quickly to trends, particularly in its similarities to haute couture and the catwalk within a turnaround cycle speed of 3 weeks; and it is recognized for its incredibly low prices on trendy, seasonal apparel. The weaknesses of H&M are that it is relatively unknown in the States; it has yet to distinguish and set itself apart from inexpensive American apparel chains; and its goods are not high-quality. Primary Problem: Flawed Marketing Research The absence of a definitive marketing strategy is of primary concern.
With benefit of hindsight, some deficiencies in H&M’s research design merited attention. It was geared towards the simple idea of expansion rather than establishing genuine market presence. Because it tried to expand too quickly, it imprudently purchased outlets too big and in poor locations, instead of building up its presence more slowly and carefully. H&M believed no competition could ever be more on-trend and more fashionable than they. However, H&M showed the fallacy of attempting growth beyond immediate capabilities in a growth-at-any-cost mindset.
The rationale for embracing great growth is that it needed to run with the ball if it were to ever get that rare opportunity to suddenly double or triple sales. But there are times when a slower, more controlled growth is prudent. Secondary Problem: External Factors Apparently, it did not learn from Benetton’s past mistakes. For example, it too had tried to establish a strong presence in the US and had failed. Similarly, The Gap, a US company, also tried to further expand but choked because of the numerous retailers with their offshore resources being able to knock off current fashions much more quickly and competing favorably.
Discount stores, such as Wal-Mart and Target, have big boxes in the suburbs also with offshore facilities enabling them to offer current fashion at low prices. This means that even if H&M is first to introduce the fashions, within weeks the competition could offer similar merchandise. In addition to obvious competitors, H&M did not underscore or create enough attention to its prospective customers of its distinguishing characteristics. Certainly, it recognized the importance of the dyadic relationship by hiring salespeople with similar characteristics to their customers. But it still was not effective in communicating its formula.
Recommended Solutions 1. Instead of just wholly owned subsidiaries, H&M could enter into a joint venture with an American department store to at least build some presence and recognition. Licensing is a fairly low-risk method for entering into a joint venture. An example of this sort of arrangement would be what Guess has with Macy’s stores. Although H&M may have given up most of the profits, this would be a prudent manner in expanding its recognition throughout the US. H&M should still own and operate facilities in the US where it is more urban and less surrounded by discount stores. . The symbolic value of H&M needs to be underscored either through an advertisement campaign or celebrity endorsements. Although celebrities demand big bucks, the endorsements are worth the price if done in moderation and with the best of the best. Obviously, H&M recognized this in 2007 when it contracted with Madonna to do commercials and magazine advertisements. Of course, the effectiveness of these methods is difficult to measure but as long as the communication is remembered, recognized, or recalled, this will instill further presence in H&M’s goal of expansion.