Getting Dressed!

for the Future!

Yu-Ching Chiang!
Christine Chung!
Keenan Timko!
Melissa Wu!

Simply Stylish… Simply You.

Situational Analysis of H&M!
Strengths! Weaknesses!
• High penetration rate! • Stagnating growth
• Broad appeal! in mature regions!
• High brand value! • Local competition in
• Mix of brand core with new markets!
fast-fashion ! • Retaining &
attracting the right
people!

Opportunities! Threats!
• Expanding product • Increasing raw
categories! materials prices!
• Channel expansion! • New competitors!
• Expansion into • Different consumer
emerging markets! preferences!
• Supply chain
optimization!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Identifying the Problem!

Market •  Encourage existing customers to buy more!

•  Maintain position in markets with low growth
Saturation! rates!

Technological •  Expand the number of channels to

purchase products!
Trends! •  Need to address social networking
opportunities!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Defining the Objective
•  To create opportunities for profitable and
sustainable long-term growth !

– Maintain our 10-15% annual growth target for

number of stores per year!
– To increase market share in low-growth
regions!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

To Improve Position In Low-Growth Regions!

European & American markets generate 90% of total sales. Market shares
have been falling in Western Europe from 29%  25% during 2005-2010

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Situation  SSSY Implementation  Financials  Risks  Alternatives !
Situation  SSSY Implementation  Financials  Risks  Alternatives !
Fashion Forward : Increasing H&Mʼs Online Presence

North American
Online Store!

H&M Club!

H&M Mobile
Application!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Tapping  into  the  E-­‐commerce  Space  
•  Rise  of  e-­‐commerce  and  m-­‐commerce  
– Fastest  rising  pla8orm:  35%  
•  Convenience  is  key  
•  Key  demographic  for  m-­‐commerce:  25-­‐34  yr  olds  
U.S.  Smartphone  Users  by  Age  
64%  of  Smart  Phone  Users  are  18-­‐44  Years  Old  

5%  10%   18-­‐24  
13%  
25-­‐34  
18%   29%  
35-­‐44  
45-­‐54  
25%   55-­‐64  
65+  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Fastest  Growing  Pla8orm:  Mobile  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Bringing Online Store to America

•  Already present in
Western Europe!
•  Integrate with H&M
Fashion Studio!
•  Recent e-commerce
trends!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Apparel  is  biggest  category  in  online  sales,    
growing  at  high  rates  
2013  Forcasted  Online  Sales  for  Selected  Categories  (USA;  $B)  
Furniture   3.7  

SporXng  Goods   3.9  

Jewelry   5.5  

Books   7.1  

Office  products   7.4  

OTC  medicines   9.6  

Toy  and  video  games   10.4  

Consumer  electronics   19.2  

Appliances  home  improvement   30.3  

Computers  and  accessories   36  

Apparel  accessories  and  footwear   40.3  

0   5   10   15   20   25   30   35   40   45  

2009-2013 CAGR for Apparel accessories and footwear is +11%.

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Accumulating H&M Points

•  Transfer  spending  into  rewards  

•  Exclusive  deals  for  club  members  
– H&M  Sweepstakes  
– H&M  Shopping  Sprees  
•  Perks  for  points  
– New  arrivals  
– Into  physical  stores  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Integrating with Smart Phones

•  Interoperable mobile applications!

•  Coupon codes!
•  Rewards program!
•  Fashion Studio!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Dollar Spent Becomes Redeemable Points  

•  Every $200 dollars spent = $5 rewards!

•  H&M Sweepstakes every year!
–  Chance to meet guest designers!
•  Ex: Matthew Williamson!
–  Fashion show tickets!
•  Ex: Copenhagen Fashion Week!
•  H&M Shopping Sprees!
–  Regional; every 20 stores/raffle!
–  4 times/year, $300 each person!
•  Monthly perks can include freebies!
–  Articles under $5!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Benefits of ion Forward

Attractive for price-sensitive

consumers!

Inexpensive to implement!

Increase multi-channel platform!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Situation  SSSY Implementation  Financials  Risks  Alternatives !
 :  Establishing  a  Way  of  Life  
•  A lifestyle brand through category
expansion !
– Embody H&Mʼs values and aspirations!
– Leverage the creative talents of fashion-
forward guest designers!

H&M  
Apparel   ?  
Home  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Establishing  a  Lifestyle  Brand:  Home  

•  A larger furnishing
and home décor
section of the store!
– Significant opportunity !
– One-stop shop!
– Includes bedding,
curtains, candles, and
other home
accessories and
textiles!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Establishing  a  Lifestyle  Brand:  H&M  Home  

•  Sales  as  point-­‐of-­‐purchase  and  

online  ordering  
– Use  of  in-­‐store  displays  for  
design  ideas  and  templates  from  
noted  designers  
– Store  as  point  of  purchase    
– Opportunity  for  online  ordering  
for  delivery  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Sample  Site    

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 The  Talent  Behind  the  Talent  
•  Leverage  creaXve  talent  of  well-­‐known  
designers  and  stylists    
– The  style  geniuses  behind  the  actors,  singers,  and  
fashionistas  
– Promotes  being  your  own  trendseaer  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Recognizing  the  Unheralded  Genius  

•  The  unheralded  hero  

behind  the  famous  
ones    
– Resonate  with  creaXve,  
edgy,  and  street-­‐smart  
H&M  customers  
– “live  an  H&M  lifestyle”  
– Mold  the  “H&M  Man”  
&  “H&M  Woman”  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Example  Lifestyle  Themes  

•  OrganiChic!
Core •  Urban Sophistication !
Themes! •  Effortless Edge !

Fast-­‐
Fashion   •  Forties Fox!
Themes     •  Pastel Pretty!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Benefits  of      Lifestyle  

Brand  enhancement  and  

differenXaXon  

Product  category  extensions  

DetecXon  of  popular  consumer  

trends  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Situation  SSSY Implementation  Financials  Risks  Alternatives !
Value  ProposiXon  of    

MulX-­‐
channel  
IntegraXon  

Reinforcing  
AcXviXes  

ConsolidaXon  of  
Brand  Image  and  
Loyalty    

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Defining a Target Market!
Age   Gender   LocaXon     MoXvaXon  

• 15-­‐35  year   • Female   • US   • Cost-­‐

olds   • Western   conscious  
Europe   • Convenience  
• Scalable  

CreaXng  trendy  H&M  women  with  different  lifestyles    

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Market  Segment  Overview    

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Comparing with Competitors!

Online  Store   X   X   X  

Rewards  Program   X   X  

Home  TexXle  Line   X   X  

Guest  Designers   X   X  

Mobile  ApplicaXon   X   X   X  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 PromoXng  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Combining  H&M  Lifestyle  and  Fashion  
Studio  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 CreaXng  Your  Own  Lifestyle  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Implementing Forward!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Implementing Lifestyle!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Projected Net Income from!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Managing Potential Challenges

RISK   SOLUTION  

B2C  Supply  
Chain   Replicate  Stockholm  model  
TransiXon  

Storeroom   One-­‐room  displays,  order-­‐in-­‐

Space  Cost   store,  and  buy  online  opXons  

High-­‐capital   Gradual  rollout,  then  ship  from  

Outlay   one  distribuXon  center  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Alternative 1:

Human Resources Initiative!

1) Training programs for employees up for

promotions!
2) Campus ambassadors to attract new talent!
•  Rationale!
– showcase “H&M spirit” on campuses to attract
young new capital!
– Maintain employee morale and prepare
internal employees for administrative roles!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Alternative 2:

Vertically Integrate the Supply Chain!

•  Outsourcing production to independent

suppliers  In-house production facilities!
•  Rationale: !
– Shorter lead time from creation-to-shelf!
– Increased quality control!
– Unique consumer feedback system that
detects popular trends!

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Methodology Used to Assess Options

Decision   Strategic   Simply  Stylish,   AlternaPve   AlternaPve  2:  

Variable   Importance   Simply  You   1:Human   VerPcal  
Resources   IntegraPon  
Profitability   35%   9   6   5  

Strategic  Fit   20%   8   7   4  

Growth   20%   7   7   6  
Opportunity  
Scalability   15%   9   8   6  

Sustainability   10%   8   8   5  

Total:   100%   8.3   6.9   5.2  

Situation  SSSY Implementation  Financials  Risks  Alternatives!

Your Winning Strategy!

MulX-­‐channel  
IntegraXon  
Reinforcing  
AcXviXes  

ConsolidaXon  
of  Brand  
Image  and  
Loyalty    
 Appendix!

•  Key  Industry  Trends  

•  H&M’s  Strengths  
•  Threats  &  Weaknesses  
•  Successful  Rewards  Program  
•  ROI  on  Talent  Endorsements  
Key  Growth-­‐Driving  Industry  Trends  

Brand  
building  and  
differenXaXon  

Driving  
growth  

Brand  and  
offer   MulX-­‐Channel  
extensions  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 Identifying Strengths!
High  
penetraXon  
rate  

Mix  of  brand  

core  with  fast-­‐ Broad  appeal  
fashion    

Supply  chain   High  brand  

pracXce   value  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Addressing Threats & Weaknesses!
Weaknesses  

• StagnaXng  growth  in  mature  regions  

• Local  compeXXon  in  new  markets  
• Retaining  and  aaracXng  competent  people  in  organizaXons  
• Low  customer  loyalty  
• Low  switching  costs  
• High  degree  of  product  differenXaXon  

Threats  

• Increasing  raw  materials  prices  

• New  compeXtors  
• Different  consumer  preferences  
• LogisXcal  challenges  (entry  into  new  high-­‐growth  markets)  

Situation  SSSY Implementation  Financials  Risks  Alternatives !

Creating a Successful Rewards Program!

•  Focused  on  making  loyal  customers  even  more  

loyal.    
•  Focused  not  just  on  transacXons  but  on  core  
strategic  values.    
•  Focused  on  the  individual  
•  Enabled  by  new  technologies  
•  The  human  touch.    

Situation  SSSY Implementation  Financials  Risks  Alternatives !

 ROI  on  Talent  Endorsements  

•  European  companies  pursued  talent  to  

endorse  their  brand  -­‐>  successful  ROI  
– Past  success  of  Jimmy  Choo’s  work  with  Project  
Pep  AIDS  FoundaXon  20x  ROI  and  drove  in-­‐store  
sales  33%  
– Jamie  Oliver  Sainsbury's:  ROI  of  27:1;  £1.12  billion  
in  incremental  revenue    

Situation  SSSY Implementation  Financials  Risks  Alternatives !