Is clothing-giant H&M conquering the future of retail?
"We are more prepared to cope with the new digitized world than I think we have explained to the stock market. I do not see the threat picture being painted - I see great opportunities". The words are from H&M’s main owner Stefan Persson, and was said to Swedish business newspaper Dagens Industri at the end of 2017.
With 4500+ stores, 170-thousand employees and roughly $30 Billion in revenue, H&M is one of the largest fashion retailers in the world. Seeing the company stock drop 33% in 2017 is making the iconic company push forward on all fronts, evaluating new ways to conquer the prospective and uncertain world of fashion merchandizing, while researching ways to change retail in general.
H&M strategies include an intensified push towards E-commerce, the closing of regular stores, while at the same time opening outlet-stores to move excess inventory, as well as more openings of specialty stores such as H&M Studio, Nyden and Arket, which follow recent concepts; H&M Home, COS, and & Other Stories.
I live just minutes away from one of the companies more interesting tests, which opened its doors about two months ago. H&M’s test-store sits inside a neighborhood mall at Karlaplan and features a handful of new ways of operating, some of which are prominent and can be experienced within the store, while other developments are based on data-gathering and the use of new technology.
I’ve highlighted ways the company explore the future of retail below:
Online Data decides the store offer: By compiling data of online purchases as well as search-patterns for the local market, i.e. the online consumer behavior in the immediate area of the store, H&M has chosen items they know fit the demographic of the surrounding area. There are also fewer items in this store and it is less crammed with merchandise, which in it self makes for a premium, more luxurious feel. Green plants and light wood fixtures accentuate and add warmth to the otherwise minimalistic and clean in-store design. Even the classic red H&M logo has been made white to better fit the store profile and possibly the taste of the clientele in this rather upscale neighborhood.
Creating a local feel to a global brand: As a global company it can be difficult to create a small or charming feel to a store, but in this one H&M has definitely found ways to do just that. As you walk in, you see a small café right by the entrance where people can sit and socialize (or drop off an uninterested husband). The walls display art from the local galleryFotografiska and H&M has made other neighborhood collaborations evident by giving their counterparts full credit at each offer, being it coffee, fresh flowers, or yoga-mats. By naming these partners H&M feels more locally oriented, giving shoppers ways to support neighborhood businesses even though they are obviously making the purchase from the giant.
The STEAMERY is one of several local partners who get an introduction within the store.
Technological advancements: The tagging system of each store-item is an example of new technology. Apparently the system is not up just yet, but every tag on a piece of clothing, plate or candle is going to be unique, allowing store manager to identify in real-time the exactly number of items in stock of each size and color. I’ve been told they can even scan items in bulk, as opposed to scanning individual tags, which would make for huge advantages in keeping stock up to date, perhaps even having the system order more on its own.. In the future this feature should also allow shoppers to identify if an item is sold out at a particular store, where it is available, as well as suggest viable alternatives or items to mix and match. The technology is called RFID (Radio-Frequency Identification) and has been around for use for different passes, pay-system and booking systems for years, in an array of technological variations.
Is this enough? In 2018, the retail industry will continue to shift towards online and in particular to mobile. We see brands committing to delivering more of an experience in the offline environment and being less pushy in regards to making a sale in their flagship stores. Omnichannel and smart cohesiveness between sales points, delivery on demand etc, are other examples of areas where retail will develop further. We see many brands falling behind the innovators in regards to infrastructure and logistics, and a big question remain as to how emerging companies connected to Amazon’s dominating business model will affect big retailers like H&M.
Possible consequences: In Swedish fashion in general, and in upmarket areas like Östermalm you see clearly how people follow trends from season to season. Swedes are highly influenced by what is hot at the moment and if large chains such as H&M start to develop more localized offers this trend might become increasingly evident, giving us even more homogeneous fashion, or interior design, for example. Buyers in these stores already follow trends of course, but having the data-analytics team of big corporations further narrow our choices would surely make us dress more alike. As a reaction to this, small boutiques and stores with very unique fashion should be able thrive and act as a counterpart, as not everyone wants to dress like their next-door neighbour.
The coming year: 2018 will be an important year for retailers. Big and small. The challenges are many in terms of both balancing the online & off-line approach, as well as managing strategies for best service and distribution. But, I also see tremendous opportunity for retailers to strengthen their brand and connection to customers by finding their own ‘perfect match’ between convenience and personalized service. Finding that niche way to deliver the goods or personalizing the interaction of a purchase can make a company stand out to key consumers, just as much as the product it self.
At Visual ID we are currently developing future retail environments for a big Swedish retailer and I look forward to sharing this progress at another time.