Posts Tagged 'H&M'

Will an off-price concept fix H&M?

H&M is jumping on the off-price bandwagon with a new concept called Afound, with the objective of liquidating its goods more effectively. (It’s also a hot segment with a lot of new players over the past few years.) Here’s my comment from a recent RetailWire discussion about what really ails the company:

I’m not sure that another off-price brand in an increasingly overcrowded market is a long-term solution to H&M’s problems. They need to address a few core problems in their existing stores first, as the article points out:

1. How does H&M move faster in the product development cycle, to compete more effectively against Zara and even Forever 21?
2. How does the company figure out a more effective liquidation strategy for its existing stores, instead of leaning on a new concept?
3. How does H&M play catch-up on omnichannel, considering it was late to the party?

H&M stores have always avoided the chaotic, “treasure hunt” feel of a typical Forever 21 store — and with a bigger focus on basic, affordable “wear to work” apparel for budget-minded shoppers. But this has come at the cost of becoming boring and predictable, compared to Zara’s unbeatable speed to market.

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H&M switches to quarterly reporting

H&M is joining most other retailers in reporting comp-store sales on a quarterly basis, not monthly. I joined other RetailWire panelists in commenting on this change:

I agree that there used to be too much focus on monthly comp-sales numbers, given changes in the promotional calendar, holiday shifts from one year to the next, and weather deviations. So I understand H&M’s desire to report quarterly sales as a more accurate measure of its business trend.

On the other hand, it’s hard to conclude that the retailers who switched from monthly to quarterly reporting awhile ago saw any benefit to their sales trend. (In some cases, just the opposite.) If anything, the change has put even more spotlight on quarterly earnings rather than the long-term strategic view for many of these companies.

Are fast fashion retailers guilty of overexpansion?

An interesting RetailWire discussion about whether fast fashion retailers are discovering (just like traditional department stores) that there is too much of a good thing when it comes to square footage and store locations. Here’s my point of view:

Fast fashion retailers (especially Forever 21 and H&M) have expanded very quickly as real estate has become available during the past five years. (This includes Forever 21’s move into some vacated mall anchors.) They are probably finding — like other brick-and-mortar retailers — that there can be too much of a good thing when it comes to square footage. And some of those store openings have been in regional malls that are in decline anyway.

it doesn’t help matters — during this period of overexpansion — that fast fashion retailers are suffering from the same malaise as department stores. (Only the off-pricers seem somewhat immune right now.) Given weak demand for apparel, and the lack of a sales-driving trend, it’s tough for most fast-fashion stores to gain traction.

Primark builds out its brick-and-mortar locations

Primark (a British fast fashion chain) is expanding in the U.S., not only in vacated Sears stores but in other locations. They are in no hurry to establish a robust online presence, preferring to open stores first. Here’s my comment from a recent RetailWire discussion on the subject:

I agree that Primark has plenty of opportunity to build its brick-and-mortar footprint before worrying about the complexities of “omnichannel”…after all, it’s not as simple as just starting a website anymore. H&M is a good example of a company late to the e-commerce party while busy opening stores — and building its brand awareness — coast to coast. This isn’t Primark’s only option, but there is nothing wrong short-term with the road they are taking.

JCP parts ways with Mango (or vice versa)

The partnership between Penney and Mango (in the guise of its MNG brand) outlasted both the Ron Johnson era and the company’s recovery under Mike Ullman. But the two companies are parting ways, after several years of trying to bring a fast-fashion model to JCP. Here’s my recent RetailWire comment on the topic:

I’m surprised that the MNG initiative lasted as long as it did at JCP. It’s one of the few recent initiatives that preceded and then outlasted the Ron Johnson era, along with the more successful Sephora shops. Many stores continue to struggle with their “fast fashion” offerings, perhaps because their product development and sourcing models are different from the specialists in this area like H&M or Zara.

But JCP is taking another whack at fast fashion with the introduction of its Belle + Sky line, rolling out this fall. Maybe Penney feels that the upside potential on the margin side is higher without a partner requiring licensing fees and perhaps a share of revenues.

Ralph Lauren hires outside the luxury box

The management transition has begun at the company Ralph Lauren founded years ago. He’s hired the head of the Old Navy division, whose previous background was at H&M. Here’s my comment, from RetailWire:

Time will tell whether Mr. Larsson’s evident business acumen extends to the importance of brand image at Ralph Lauren. More than almost any company crossing multiple retail channels, Lauren has maintained a focus on near-luxury (and higher) lifestyle merchandising. Most people know what the Lauren brand stands for, which is a credit to Mr. Lauren’s vision and consistency over the years.

You have to assume that Ralph Lauren was sold on Mr. Larsson’s own vision for the company, not simply his ability to manage fast fashion or global sourcing. But clearly some kind of management succession at a big public company like RL was bound to happen, and probably overdue.

American Eagle takes a page from fast fashion

Most RetailWire panelists agreed with me (on a recent discussion thread) that American Eagle is wise to grow its inventory at a slower pace than its sales. It’s really an overdue effort to learn from the best practices of fast fashion retailers, and here’s my comment:

If any of the “Three A’s” of specialty retail had figured out how to improve their supply chain and product development, they probably would not have lost as much market share to the “fast fashion” masters of the art like Forever 21, Zara and H&M. It’s not just about the right merchandise content, but also about speed to market — and speed to exit a downtrending idea. Cutting down on lead times, and sourcing closer to one’s stores, is critical to making it happen.

So American Eagle is right: There is no reason why inventory levels need to grow at a faster pace than sales growth. In fact, just the opposite…if “just in time” sourcing and smart inventory allocation are working as they should.


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