Market analysis H&M Company

1. Introduction

Fast fashion is a rising trend in the global fashion wear industry. The development of fast fashion has had an increasing influence on the clothing industry across the varying spectrum ranging from production to retailing. Although product sales are the main motivation behind profits, retailers ought to focus on meeting the consumer service standards. Service quality has proven to be the driver of the attainment of customer loyalty and attraction of potential consumers. This paper therefore, will seek to present and analyze H&M market strategy. First, the paper will assess H&M’s environment, customer considerations and market mix. Finally, the paper will provide strategic recommendations for H&M Company.

1. Background

H&M Company is one of the top clothing dealers in the industry. The company is a retailer and its operations are fundamentally situated in Asia, Europe, and North America. Globally, the company has more than 1500 outlets (Ding, 2011, 4). One of its core market strategies is to offer unique designer clothes to the whole population across the globe at affordable prices. It builds its strength through its ability to harmonize retail channels operations such as the internet, stores, and catalogs within the varying geographical locations. It also strengthens its market approach through the provision of impartial product mix which attracts a number of potential consumers. Today, the company is an international fashion and design firm with a high number of stores, markets, and a very strong digital presence. Conversely, the company faces the increasing threat of reduction of sales within the European zone intensified by the strong competition from Zara Gap and Uniqlo. The three brands within the industry have therefore endeavored to take different market approaches. These approaches have thus been successful and most especially in Zara and H&M brands (Arlbjørn, 2008, 55).

 

1. Marketplace, environment, and competitors

OZUEM & AZEMI (2018, 76) asserts that the fast fashion industry is growing at a rapid rate. The author continues to argue that the top leading companies in this industry include Zara, Gap, Uniqlo, and H&M. These three companies have been competing for years for differentiation and in taking their positions within the market. Zara and H&M are the leading brands in the market.

1. Porter 5 forces

According to Youell (2013, 110), H&M adopts the porter 5 forces so as to determine the competitive strength and ultimately the pleasant appearance of that market.

The risk of new entrant is quite high in the clothing industry since minimal capital is required. Moreover, there are numerous manufacturers who are available and this result to formation of an open market for all entrants (Youell, 2013, 110).

Suppliers have a low bargaining power in this industry since there are numerous suppliers who are homogenous and have little differentiation. Rapid globalization and international trade have offered more options for retailers to outsource foreign manufacturers from low wage nations. This has thus resulted in increased competition (Youell, 2013, 110).

Excess accumulation of retailers in the market has increased the bargaining power of buyers. Buyers are therefore at free will to switch from one brand preference to another.

Though there lack direct substitutes for clothes, there are retail substitutes. For instance, the online stores who offer another medium in which clothes are marketed and sold (Youell, 2013, 111).

Competitive Rivalry intensity rate has increased to higher levels following the high number of homogenous retailers (Youell, 2013, 111).

 

 

 

 

 

 

 

 

 

 

 

 

 

1. SWOT analysis

Strengths Reputable brand image Cheap but trendy apparel Great geographic locations	Weaknesses Brand loyalty Customer loyalty High dependence on third party suppliers Cheap products affect apparel quality
Opportunities teen market Online market Improved lifestyles Expansion of emerging markets such as China	Threats Economic recession High competition from primary competitors e.g. Zara and Gap Increased labor costs Evolving apparel fashion trends High risks in Foreign exchange fluctuations

 

 

 

 

1. Customer considerations

H&M Company applies the STP market model in their operations. The STP process illustrates the connection between the overall market and the ways through which the company chooses to compete with other competitors in the market.

• Segmentation

This is an approach used by the company to sub-divide the market or the population into subdivisions which are defined by homogenous characteristics. H&M majorly uses the demographics and psychographic segmentation so as to have a wide reach to all of their customers. The company is thus spread across the world. This means that the company has a wide range of target which includes varying religions, culture as well as lifestyles (OZUEM & AZEMI (2018, 67). They, therefore, carry out their marketing in a different way within all the varying regions. H&M has classified the market into different lifestyles, age groups, class, and the home setting.

1. Target

H&M targets potential customers to whom they wish to sell their products to. They target customers who belong to a class of fashionable and stylish customer class. The targeted group is those who value shopping as they find it more of a social activity that provides pleasure in their daily lives. These consumers have a tendency of following what is trending without investing much finance. H&M therefore highly targets young people and women who are believed to be more of shoppers than men (OZUEM & AZEMI (2018, 67).

1. Positioning

H&M Retailer Company is on the lookout to provide customers with trendy, stylish and high-quality clothing at the most affordable prices possible. The company offers fast fashion type of clotheslines that ranges from the runway to racks within the record time. They focus on selling clothes that are highly influenced by the European culture to other American markets (OZUEM & AZEMI (2018, 67). In addition, H&M Company specializes in a wide range of brand categories of all gender and age-group wear. They also produce accessories and footwear for all gender and all for all ages.

1. Market mix
2. Product

H&M Company has expanded their market through bringing in six unique brands into the market. These brands have been so successful in meeting the needs of the target market and those of consumers within different segments. The company offers homogenous shopping brands across different regions. Most of the consumers shop at H&M due to their affordable pricing and features. The company’s stores have different departments. Each department in the company provides various clothing lines in order to attract a large population as possible (Markovic & Rakocevic, 2014, 1779). This enhances convenience within the company. As a result of the convenience found within this company, most of the consumers are attracted to purchase goods from the company.

H&M often focus on selling high-quality products that are inspired by the trending fashion and for a matchless price. They thus invest so much into coming up with new product lines. One of the common products is the cheap Monday brand that meets the needs of all sexes in relation to fashion and design. This brand has the influence of street stylish and youth subway way of lifestyles. At its core, the company offers new denim frenzy which it prides itself in with an enormous range of apparel and accessories at relatively low prices (Markovic & Rakocevic, 2014, 1779). H&M products and services go through a product life cycle that involves introduction, growth, maturity and decline level. Marketing personnel often use this product lifecycle process to project the future of the products and services.

• Price

H&M pricing strategy is designed based on the consumers’ needs which involve getting fast fashion trends at affordable prices. For the company to cut on the cost of production, they have implemented on some cost-cutting strategies. The company has made an effort to outsource production to nations where the labor cost is minimal (Markovic & Rakocevic, 2014, 1779). Outsourcing is arranged basing on the different products and this has helped in reducing the transportation cost. The high fashion apparel which targets the European market has a short product life and thus is made in Turkey. Moreover, basic H&M products are produced in Asia since they allow long transportation period and put up with lower risks. H&M often carry out strict cost control strategies. For instance, the company reduces most of the privileges such as cellphone privileges to executives within the company. Also, only a few of the executives have secretaries. This has allowed the company to attain a low price apparel fashion business.

• Promotion

H&M target audience mostly includes young women who want to be trendy at relatively lower prices. The company invests in a multi-channel promotion approach which includes advertising, digital promotion through the internet, and sales promotion. This wide array of promotion channels has increased the exposure of H&M company products and services. Young people, therefore, have a lot of access to information about what the company offers (Markovic & Rakocevic, 2014, 1779). H&M focus on promotional actions with two features. The company often uses posters that are in a trendy style and always have the price of the company’s product. On the other hand, the company’s website contains prices displayed at obvious positions. The company always highlights their relatively low prices unlike other competitors, Zara and the Gap who put their prices online but on small fonts. However, as H&M Company focuses on highlighting their prices, they build awareness of their low prices to potential consumers (Markovic & Rakocevic, 2014, 1780).

1. Place

H&M Company has had great expansion since its foundation most especially in 2016 when the company added more than 427 stores. It has grown its reach through the use of both online and physical medium of sale. H&M logistics are characterized by their focus on simplicity, consistency, and precision. The company invests in designing and outsourcing apparel. Basic products within the company are made in Asia while trendy apparels are made in Turkey. The company values owning outlets rather than owning factories. Successful distribution strategy within the company determines the realization of the H&M’s business plan (Markovic & Rakocevic, 2014, 1779). The company’s distribution channel is that of direct distribution where goods are conveyed directly from producers to customers. Cutting on the middle transaction reduces the cost to the company and guarantees quick delivery. H&M chooses to sell their products in their stores. Their choice of store selling is of importance to them as it assures their consumer's basic access. However, the control of the numerous numbers of stores increases the managerial cost. As a result, the company has commenced on online sales in a number of areas. H&M international network has continually grown and it is planning to promote their apparel line (Markovic & Rakocevic, 2014, 1779).

1. Recommendation
2. Ansoff strategy
3. Market penetration

H&M should focus on market penetration for new products and new markets. This involves motivating the current consumers to buy more products. The company should launch new products frequently as this will assist in maintaining the customers as they come back, again and again, to check out on the trending designer. It should also focus on having unique selling positions which ought to differentiate its clotheslines and other products from other competitors such as Zara and the Gap companies. Advertising is one of the elements of market penetration. This helps in convincing consumers and reminds them of the apparel (Zawadzka, 2015, 48). The company should, therefore, endeavor to reach out to most of their target market through advertising as it will greatly contribute in convincing customers to purchase their products.

1. Market development

H&M should establish expansion strategy that will focus on the already existing products and markets. This will be enhanced by improving the cost position. This will, therefore, call for the company to strategize on how they will reduce their cost of production so as to attain a reduced pricing strategy. An alternative approach for differentiation ought to be implemented in the company as this will help in distinguishing the company’s brand amongst all of their competitors hence increasing the competitive edge for H&M. The company should also endeavor to focus on the best consumers who will help the company to meet their sales goals. It is also recommended that the company ought to strategically innovate so as to remain competitive within the market.

Ding, 2011, 49 claims that one of the main challenges facing H&M compared to its competitors is that the company holds a quarter of its stock within its stores. The large stock is made up of fast fashion products that are produced internally and later distributed to independent factories. However, the competitors have a different approach as they move quickly through their stores where they replace their stocks with fresh designs. The keeping of large stock by H&M results in increased expenditures and can lead to wastage once fashion keeps on changing. The company should, therefore, concentrate on rebranding their products and redirecting their market.

• Product development

Product development for the company involves launching of new apparel into the existing market. The company should, therefore, consider coming up with new possibilities.  They should invest heavily in developing products with new features, for instance, producing cosmetics that have different and unique new shades. H&M products are temporally and thus it is required that the company should focus on maintaining their innovations and products development so as to remain on top of the market. This helps marketers in developing an effective market strategy for the clotheslines developed by the company.

• Diversification

However, H&M’s goal to reduce their overreliance on the European market is sensible due to the prolonged recovery and the numerous strong opportunities existing in other places. Therefore, it is recommended that the company should consider renovating their already existing stores so as to drive more sales from the company (Youell, 2013, 116). This increases returns hence increasing chances of diversification.

1. Conclusion

As evidenced by the above analysis, it can be concluded that H&M has greatly made efforts to accomplish their stability and growth across the world. The company has maintained a strong brand preference for teenagers due to its cutback based pricing with the trendy apparel. The H&M secret to its success lies in its focus on fast fashion. It takes a shorter time for their fast fashion products to reach the market from the designer’s office than the ordinary fashion designs. The company, therefore, uses a strategic approach to evaluate some of these competitors seeking to evaluate their strengths and weaknesses. The information obtained from this analysis is helpful to the company as it will assist in improving the efforts of the company. They have also formed a strong brand recognition that seeks to have a selective brand with a strong clothe line focusing more on product development of their apparel line. The fast fashion industry is often dominated by the change in tastes and preferences and therefore consumers are highly unpredictable. H&M Company should, therefore, invest in research and development approaches. This involves conducting periodic research on the products that the company offers. This will help to determine whether the existing products are still appealing to consumers. This way, successful measures can be taken to assist in coming to terms with the existing market desires across all regions. The company has also focused on macro environmental factors affecting their company hence have been able to realize digital marketing opportunity. It is important to note that all of the company’s efforts are geared towards maintaining their leading position in apparel fashion industry. H&M has always new products being introduced in the market. However, being a clothing brand, it does not necessarily require innovation of a whole new clothing line. Most importantly, its focus should be on staying on the top of the fast fashion trend. With great product development, market penetration, diversification and market development, the business will be able to successfully take their position in the global market.

 

 

 

 

 

 

 

 

 

 

1. References Top of Form

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Arlbjørn, J. S. (2008). Northern lights in logistics & supply chain management. Køge, Copenhagen Business School Press.

Ding, H., 2011. The importance of strategic management: A case study of H&M.

Markovic, A & Rakocevic, S.B. (2014).Proceedings Of The Xiv International Symposium Symorg 2014: New Business Models And Sustainable Competitiveness. FON.

OZUEM, W., & AZEMI, Y. (2018). Digital marketing strategies for fashion and luxury brands. Hershey, PA, IGI Global, Business Science Reference.

 Youell, M., 2013. An Analysis of the Growth and Success of H&M. How They Could Impact the Largest Swiss Watch Company, Swatch Group, p.108.

Zawadzka, S., 2015. Implementation of Marketing Strategies Practiced by Western and Eastern European Fashion Brands: H&M and Reserved Case.