H&M ready to wage war against online competitors
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H&M ready to wage war against online competitors

Twenty years ago, affordable luxury brands like H&M had disrupted their traditional luxury forebears. Gone were the days when you had to spend a lot to look good. These new fashion houses, with their unshakably cool and brash branding, shook up the clothing world. But they’re not new anymore – and they, in turn, are being disrupted. H&M, still the company in the sector to beat, is not taking it lying down. Online is where it will wage its next war for supremacy.

Today, online retailers like Zalando, Amazon, and Asos are piling the pressure on H&M – which, despite this strong competition, is still the world’s second-largest clothes retailer by sales. But CEO Karl-Johan Persson, grandson of H&M’s founder Erling Persson, wouldn’t have it any other way.

Speaking to the Financial Times, Persson said:

“Online is affecting footfall in the physical stores in more mature markets. At the same time we see it as an enormous opportunity. We think it’s a great combination to have a great network of physical stores which are also profitable plus a profitable online store.”

H&M has chosen to focus its efforts online, leading to the first change in its financial guidance for over a decade. In years past, the company shot for between 10% and 15% increase in the number of physical stores it opened – now, its shooting for 10% to 15% annual growth in total sales.

hm graph

H&M is also looking at other avenues for growth, including the recent development of a number of new brands: Weekday, Cheap Monday and Monki.

These new brands and online targets have something in common: both strategies are likely to be costly in the short term. New brands, according to Persson, take several years to turn a profit. And a sensible online strategy will see H&M fork out over deliveries, logistics, and returns: new must-haves in online retailing that do not, frankly, come cheap.

Still, H&M have no qualms about committing to these long-term strategies. According to Persson:

“For us to continue to grow 10% to 15% five years from now, ten years from now we need to plant new seeds. And with the base continuing to grow, we need more seeds. The competitive landscape has changed a lot with pure online players doing very well. But we have most focus on our customers and ourselves. There is still so much we can do to expand ourselves, and that’s our focus.”

Disclosure
Dominion holds H&M in its Global Trends Luxury Fund.


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