Is H&M’s brick before click strategy working?

Mar 19, 2014

H&M Group has never been in any rush to pursue online sales, particularly in the U.S. Back in 2012, when launching e-commerce sites in other countries, the fast fashion retailer announced its U.S. site would not go live until the summer of 2013. At the time, analysts expressed disappointment with H&M’s slow pace, suggesting it would give rivals such as Zara a competitive advantage.

While some may still feel H&M is being too deliberate when it comes to its online business (it just launched its site in France), the company’s overall numbers are headed upward. Sales at the company increased 12 percent during its first quarter (Dec. – Feb.) over the same period a year earlier. Sales in February were up 11 percent, despite harsh weather in the U.S. and other markets where H&M does business.

The retailer has achieved its sales gains, largely, because of an aggressive approach to opening stores. Over the past year, H&M opened 374 new locations (a 13 percent increase) in markets around the world, and plans to open a similar number this year. The company, which currently operates in 53 markets around the globe, announced last month that it would open its first stores in Australia, India and the Philippines later this year.

According to Bloomberg Businessweek reports, H&M is looking to new lines to broaden its appeal. The company launched a new line of workout clothing, H&M Sport, in January to compete with Gap, Lululemon, Uniqlo and others in the space.

Do you think H&M should be more aggressive on the e-commerce front than it is now? What do you see as the keys for the chain’s success in the U.S. and in other markets going forward?

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14 Comments on "Is H&M’s brick before click strategy working?"

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Jason Goldberg

H&M needs to get more aggressive at “owned digital” even if it’s not e-commerce. E-Com for fast fashion is notoriously hard and I get why H&M is struggling to have timely inventory information available online to sell. Although I would argue, here are outsized returns available for companies that can figure this out.

But even if you can’t be great at selling online, you MUST have a strong digital footprint to support your stores. 75%+ of your shoppers are pre-shopping you online, they are using Google and Google Maps to decide where to shop, and H&M simply doesn’t have a proper digital footprint.

Saying you have a bricks before clicks strategy in 2014 is a bit like saying you have a bricks before phonebook strategy in 1994.

Dick Seesel

H&M is competing globally against the likes of Zara and Uniqlo. It’s understandable that the company’s focus is on brick and mortar expansion, and especially getting the content right in each country where it operates.

Still, given the overall maturing of brick and mortar retail (at least in the U.S.), it looks like a good time for H&M to redouble its move toward a true omnichannel strategy.

Camille P. Schuster, PhD.

Opening 300+ stores takes time and attention to do it well. Creating an online presence takes time and attention to do it well. While putting off doing online sales may hurt sales in the short run, doing online sales poorly may also be detrimental to sales. Doing something poorly just to be able to say you have done it is not a good idea. If consumers have a bad experience online they are less likely to frequent the physical store. So waiting to do online well makes sense.

Kelly Tackett

Fast fashion is notoriously hard to pull off online, and H&M has proved that it’s no exception. With so much of H&M’s assortment being an impulse buy and the in-store shopping environment being such an important part of the overall experience, I can see why H&M hasn’t been in a huge rush.

That being said, a more aggressive online push, encompassing increased fulfillment options such as click & collect, would provide H&M a sales boost. That boost will become increasingly important as H&M exhausts category extensions and further, profitable store growth opportunities dwindle. Fortunately for H&M, the latter is not a near-term scenario.

Richard J. George, Ph.D.

While it is difficult to argue with H&M’s recent success via new store openings, the future will be omni-channel and delays may be costly.

The key to success going forward in the US and elsewhere is to not try to be all things to all people. Instead, build on assortments that it has customer permission to stock and sell.

Marge Laney
3 years 6 months ago

Their sales increases are being driven by new stores. Comp sales for stores open more than a year are barely positive and have been that way for awhile.

Is lack of internet presence the cause? Let’s just say it’s probably not helping.

Fast fashion is a highly competitive, margin challenged segment with some very big players; Zara, Forever 21, et al. Growing revenue without destroying margin for these discount brands is very tough.

On the other hand, with online apparel returns running north of 50% (a real margin killer) their measured approach could be smart. The buying decision for apparel is not final until the try-on is complete. Online sales are always going to be challenged by returns due to fit.

The greatest advantage the brick and mortar store offers for them (and anyone else) is getting the customer into the fitting room which reduces the probability of returns and increases the probability of a positive buying decision.

Ryan Mathews

The short answer is, “Yes, if they can do it right. No, if they are unsure what they want to do or how to do it.”

The fact is it’s a lot cheaper to develop a great website than it is to keep opening stores and H&M has to be pushing close to the point of diminishing returns.

Pushing a brand through physical expansion works (today) but it is expensive and shopper behaviors are changing.

I’d say it’s past time to at least be aggressive on a parallel digital path.

Liz Crawford

Why mess with success? Sales are going up.

The truth is that fashionistas shop H&M differently than they shop say, Banana Republic or J.Crew. These other retailers feature hotly anticipated online “Look Books” and seasonal lines of clothing. Shoppers look to them for seasonal trends, and to consider which outfits and looks to invest in.

In contrast, H&M has trained its shoppers to stop by the store frequently to see what styles and trends are “knocked-off,” or able to be picked up for less. A shopper may end up with a fairly hefty basket ring, but much of that will be impulse on top of the original traffic-driving garment.

So, in sum, I am not sure it’s a big deal…only because the shoppers are using the retailer a bit differently. And – it’s good sometimes not to try to fight the others on their turf.

Kate Blake
Kate Blake
3 years 6 months ago

They appeal to a client that doesn’t have a credit card and does have limited cash. Low-end clothing with the need to try on makes this a good idea.

Kenneth Leung

I think the key is H&M needs to own the online brand mindshare regardless of its distribution strategy. Fast fashion is fickle and it is driven more by store sales, but the audience is very heavily driven by social media and web. Given social media sales is not a big thing yet, owning the mindshare on the web and social media and doing store sales can do fine for H&M.

Craig Sundstrom

I think the observation “but sales are up” is missing the point: they’re up despite no e-presence, not because of it. Unless, of course, one wants to argue it’s only one type of expansion at a time (you can’t walk and sell gum simultaneously), but I find that a feeble excuse. This isn’t some restaurant owner needing to give individual care and attention to each opening…expand your IT department.

Perhaps it’s wrong to single out H&M though. We’d probably be shocked at the (dis)honor roll of large, well-known companies whose e-commerce is essentially nil.

Christina Ellwood
Christina Ellwood
3 years 6 months ago

I would think mobile is more important for H&M’s customers than ecommerce given the age of their target customer. And much of the fun is shopping with friends so it makes sense they would prioritize stores.

Mark Price

H&M definitely is missing out on an opportunity, not just for incremental sales, but for engagement of their core customer base, which is younger and heavily digital — mobile in specific. The key, you see, is not just to drive sales — you can do that in the short term through aggressive pricing and some good design (both of which H&M has). The real question is what drives customers to return to H&M when Heartbreaker and others are just around the corner, and also strongly online?

Digital, especially mobile, is a critical missing feature and the gap will be seen in retention numbers over time.

gordon arnold
H&M’s use of e-commerce and its ability to reach out to otherwise closed markets is a very sound approach to capture real sales growth. Competition from e-commerce retailers in a depressed world market must be met with expanded sales efforts that include tried and new venues. The plans to grow a business are never successful when contrived in an economy that is long gone with no visible signs of returning. Additionally, e-commerce is not cheap contrary to the common opinion of a majority of retail gurus. It costs even more where the competition is from around the world and often in triplicate. Moving into smaller lucrative markets with a well contrived and fluid plan allows for real revenue and profit growth. It will also provide for demographic information that will support higher dollar sales support efforts. As for increasing brick & mortar stores in the good ole USA, there is no better time than right now. With wealth and spending habit demographics settling in and wage and real estate at very low investment levels, now is the time like no other time before. Anyone wishing to move further int the 21st century retail market in a big way might want… Read more »

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