Is H&M Changing Its Business Model?

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By Published On: September 24, 20190 Comments

Swedish retailer, H&M, may be changing the way it sells its clothing. The fashion giant has made huge success in its self-branded product, both online and in its physical stores. But after 70 years, it seems like it will see a shift in its business model.

The apparel company has been selling its own clothing since its inception in 1947 and has now become one of the fastest recognised fast-fashion brands in the world.

At this current time, it sells in 62 countries, with 4,500 stores and is the second-largest fast fashion brand in the world, after Zara. Despite selling online in 33 countries, it does not currently have an e-commerce platform in Australia.

For decades now, the H&M business model has looked exactly the same – H&M products that are manufactured and sold at low prices and acts as an alternative to the luxury items taken off the runway. No matter what you choose to purchase, from a skirt to a mug for your kitchen, all items have been manufactured under the H&M brand name.

However, this may all begin to change, thanks to H&M’s latest announcement. The Swedish retailer showcased its most recent sales report for the last quarter, showing an uplift in sales by eight per cent. Between June 1 and August 31st this year, H&M sold SEK 65,572 million (AUD 101,139.26 million). “Well received summer collections and increased market shares show that the H&M group is on the right track with the change work,” the company explained in a press statement.

With the sales lift throughout the last quarter, the brand has listed a few job opportunities looking for a Head of External Brands. “The purpose is to complement our offering with external brands to add excitement and energy, and we see great opportunities for growth and to find new customers,” the description reads. “We have set a first vision of what we would like to do – now we will set the plan on how to test and scale this for H&M. We are now looking for you who want to lead the team that will make it happen!”

Is This Something New?

While this is something that’s not inherently new for the brand, it’s certainly a step away from what it’s used to. “We have external brands elsewhere in the group, and also within H&M we have it on, for example, cosmetics. So it’s really nothing new,” said Nils Vinge, the Head of Investor Relations and H&M. H&M group currently owns several other brands, including Cheap Monday, Monki, COS, & Other Stories, Weekday, Arket and H&M Home.

H&M has collaborated with many designers for bespoke collections, such as Moschino, Balmain and Karl Lagerfeld, among many others. These collaborations began in 2004, and often feature pieces that are exclusive to H&M stores. These exclusives last for a limited time but still hold the H&M label alongside the third-party designer.

Although the brand often collaborates with third-party designers for these collections, a search for external buyers can be seen as a considerable shift in the brand’s overall business strategy. If the Swedish brand were to start selling external brands within its store, they would sell at a much higher margin than the self-0branded apparel, as seen with its exclusive collaborations.

Within certain stores in Sweden and Norway and Iceland, the retailer has begun selling external cosmetic brands, which are available both in-store and online. “We can confirm that we will start offering selected external brands and products at H&M. We will be adding a curated selection of external brands that complement the H&M offer,” said a spokesperson for H&M.

Although these external brands will only be tested prior to a full launch, they will be available for purchase via omnichannel platforms, both in-store and online. It’s not certain if Australia will be part of this testing.

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About the Author: Power Retail

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