FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS INDIVIDUAL WRITTEN ASSIGNMENT Major: Strategy and Innovation Using relevant theories and company illustration
HISTORY AND INTERNATIONALISA TION PROCESS
History 2
Founded in 1947, H&M Group is a global design company with 4,702 stores in 76 markets and 56 online markets At H&M Group, the team believes in making great design available to everyone Its family of brands and business ventures offers customers around the world a wealth of fashion, beauty, accessories, and homeware, as well as modern menus with fresh and local produce at some of the brands’ in-store eateries (fashionabc, 2022) Persson learned fashion retailing from his father, Erling Persson, who founded a women’s clothing store, Hennes (“Hers”) in Vasteras, Sweden, in 1947 The company added a store in Stockholm and soon became a fixture of fashion in the Swedish market, eventually extending its reach to other European countries Men’s clothing was added through the 1968 acquisition of Swedish hunting-gear retailer Mauritz
Widforss After that time, the firm was commonly known as H&M Persson, who joined the family firm in 1972, helped lead its European expansion and was present when the first British store opened in London in 1976 He assumed leadership as H&M’s managing director and CEO in 1982 when his father became chairman of the board (Orwig, 2023)
Vision & Mission
H&M, founded in 1947, aims to make fashion accessible to everyone, democratizmeg the privilege of the few The brand supports a circular fashion industry with net-zero climate impact and envisions becoming net-zero across its value chain by 2040 H&M's mission is to make fashion accessible for all, fostering innovation and enhancing customer offerings They constantly challenge themselves, seek fresh approaches to business, and invest in new materials, technology, and business models to lead transformative changes in product creation, recycling processes, and customer engagement with fashion and design.H&M's commitment extends to every aspect of their operations, including resource usage, reuse practices, working relationships with people, and supplier standards Their goal is to empower customers to understand and participate in the social and environmental narrative of their products, enabling them to make informed choices and perceive sustainable options as appealing As the fashion industry evolves, H&M is in a constant state of transformation, dedicating over two decades to enhancing the sustainability of its business Their commitment to ongoing learning, investment, and action is resolute (Orwig, 2023)
Internationalisation Process
The brands of H&M Group are available through physical stores and digital channels in markets globally We have around 4,375 stores in 77 markets with online sales in 60 markets (H&M Group, 2023) In 1974, HM was listed on the Stockholm Stock Exchange In 1976, the HM brand appeared in the UK In the 1980s, the name HM spread all over the Nordic world and spread throughout Europe In 2000, HM's first store in North America was located on Fifth Avenue, New York In 2006, with the first store opened in Dubai, HM gradually attacked the Asian market Since March 2013, HM's stores have expanded to South America Since January 2014, HM has successfully penetrated the African market with small-scale production plants So far, HM has been present in 58 countries
3 with a total of 3,610 stores HM operates online in 21 countries, with the largest concentration in Germany with 416 stores
HM has a total of 800 large and small factories, 3,500 stores, and 100,000 employees Other brands that Erling Persson owns are COS, Monki, Weekday, Cheap Monday, and Other Stories (CELEB, 2020)
NET SALES 2022 NET SALES 2021 NEW STORES (NE NUMBER OF STORES
SEKM SEK M DURING THE YEAR 30 NOV 2022
Figure 2.1 Sales and stores per region
In Vietnam, H&M had its first store on September 9, 2017, in Vincom Déng Khdi, District 1, HCMC, and its second store in Royal City, Hanoi opened on November 11, 2017 In addition to its beautiful, lively location, sophisticated presentation, and visual "sugging", H&M's stores in Vietnam are rated to be rapidly expanding points of sale To date, the brand has 12 stores, including 5 in Hanoi, 4 in HCMC, and 3 in Nha Trang, Da Nang, and Ha Long, respectively (Thinh, 2022)
By the late 1990s, H&M had become Europe’s largest retail clothing chain
As it grew, H&M built its reputation on “fast fashion’”—inexpensive trendy designs with wide appeal, all of which were initially created by in-house designers Their concepts were rapidly transformed into mass-market garments through a network of manufacturers in such countries as Turkey, Bangladesh, and China Persson recognized the business potential of—as well as the cultural interest in— global fashion; consequently, H&M did not alter garment designs for specific national or regional markets This strategy allowed H&M to exploit economies of scale as the firm expanded to the U.S (in 2000) and Canada (2004); it also opened its first stores in the Middle East, in Kuwait and the United Arab Emirates (2006), and in China (2007) By 2012 H&M operated approximately 2,500 stores in more than 40 countries Most of the brands sold through H&M were in-house labels, but Persson tapped star appeal by soliciting design lines from fashion designers, including Karl Lagerfeld, Stella McCartney, Matthew Williamson, Jimmy Choo, Versace, and Marni, as well as pop singers Kylie Minogue and Madonna (Orwig,
BUSINESS STRATEGY IN VIETNAM sssssssssssssssssosssssvsssessossnossnsons 5
H&M Marketing Strategy (4P) 5 °an 6x na ẽ ẻ e
In terms of product, H&M's marketing strategy stands out for fast fashion models and focuses on making the necessary changes in the products they offer According to Forbes, fast fashion is the idea of moving large volumes of goods from design to store in the shortest possible time Retailers constantly resell products with the latest fashion trends coming to customers to their goals H&M's model also requires a strong marketing team that can quickly identify customer tastes and make the necessary changes to the products they offer Of course, the essence of fast fashion is its low price, and fast fashion has been labeled cheap
“chic chic” because both H&M and Zara are renowned for their one-time quality and ease of manufacture (MISA AIM, 2021)
H&M offers a range of products, including Collection of Style, conscious— sustainable style, everyday, modern classical, kikki, premium quality, and trend The collection of style features classic and modern designs, often found in galleries and studios The conscious—sustainable style line uses recyclable organic materials Every Day is a core product line that caters to women's daily activities, while modern classical features elegant and high-end silk fabric and cotton The kikki line offers competitive prices for consumer-friendliness worldwide Premium Quality is an exclusive, limited edition line using high-end materials like leather, fur, Pima Cotton, and cashmere (NGUYEN, 2022)
Due to the use of fast fashion models, this brand is pricing its products at cheap, average prices, suitable for the majority of customers.H&M's main competitors are GAP and Zara Compared to these two brands, H&M products are
5 cheaper To deliver soft products to customers, H&M has reduced production and shipping costs to a minimum The focus is on reducing costs And compared to its competitors, H&M has a larger range of brands and products Besides, H&M’s price marketing strategy also targets different customer segments By developing different brands, H&M aims to expand and capture multiple customer segments at varying spending levels Each H&M brand has a different price and style For example, the Collection of Style is sold at a higher price and targeted to European markets, and the Monki, which is also part of H&M, is usually only half the price of the Collection of Style and is targeted at younger, more dynamic designers as well (MISA AIM, 2021)
Figure 3.1 Revenue of H&M in Vietnam in 2017 and 2020 (million U.S dollars)
In 2020, H&M generated 54.3 million U.S dollars in revenue in Vietnam, indicating a significant increase from 2017 Vietnam is an emerging market in Southeast Asia, which has a growing middle class and a population with an increasing purchasing power (Statista Research Department, 2023)
In analyzing H&M's Place Marketing strategy, H&M has built a comprehensive and diverse distribution system to help customers reach products quickly and effectively H&M sells its products through exclusive stores located
6 in major cities around the world (about 4,135 stores) In some countries, due to regulatory issues, H&M offers its products through franchise partners H&M has also offered its products through an online store, where customers can choose from a list of available products, buy and pay online The product will then be delivered to the address the customer has reserved.H&M products are also available in major shopping centers In Vietnam, this brand has been present at Vincom, Aeon Mall, and Besides, H&M does not manufacture its products directly at the company but uses a network of distribution centres around the world (MISA AIM, 2021)
Each distribution center will process orders and ship to stores in one or more of the countries that the center is responsible for Each store will not store inventory and will always have to pick up products from distribution centers Whenever a product is paid for, the distribution center immediately receives the data and plans the shipment in real time The brand is also working with about 30 suppliers in over 40 Vietnamese factories Suppliers in Vietnam provide H&M with major products such as fashion accessories, shoes, coats, woolen clothes, textiles, etc
To welcome the New Year 2023, H&M launched a special BST introduction campaign with a vibrant red color and a diverse style for a wide range of customers The campaign featured Miss World Vietnam 2019 Lung Thy Linh, singer Song Luan, and prominent faces on social networks from Vietnam,
Singapore and Malaysia, such as Hehe, Jestinna Kuan, and Christian Kuan to celebrate different fashion styles as a message to our customers: “With H&M you will always be beautiful in your way.”
Not narrowed in space and traditional style, H&M7’s 2023 New Year’s Eve campaign brings viewers to wonderful moments inspired by self-love, music, and fun, expressing an adventurous spirit that inspires all to discover and celebrate your style A special sticker Zalo Happy New Year has been designed specifically for the Vietnamese market so that customers can easily send New Year's greetings to relatives and friends on the 2023 Chinese New Year.
Sustainability Strategy
We aim to grow our business in a way that decouples our financial growth and profitability from the use of finite natural resources so that businesses and communities can thrive within planetary boundaries In early 2022, we strengthened this ambition by introducing a goal to double our sales (from a 2021 baseline) while halving our greenhouse gas emissions! (from a 2019 baseline) by
2030 (H&M Group Sustainability Disclosure 2022, 2022) United by our values, we have an ambition to lead the change towards a circular fashion industry with net-zero climate impact, while being a fair and equal company We will continue to listen to our customers and meet them where they are while inspiring them to develop a new relationship with fashion (H&M Group, 2023)
H&M's Vietnam Expansion 9
Since Vietnam’s inception in WTO in 2001, Vietnam removed many non- tariff barriers including “quantitative restrictions on imports, quotas, bans, permit requirements, and licensing requirements.” (U.S Department of State, 2014) However, there are still some existing industry-specific trade barriers in Vietnam For example, price stabilization and restriction are implemented by the Vietnamese government when prices are too high or low for essential goods Other examples of trade barriers include import taxes on automated products and services, permits on foreign investment in cinema construction only through local joint ventures and land use rights Vietnamese land, a property of the state, cannot be owned by investors or any Vietnamese nationals (U.S Department of State,
To H&M’s advantage, the retail industry in Vietnam has very few trade barriers and restrictions for foreign investment Thus, being one of the fastest growing countries in the ASEAN economy along with liberal retail policies, Vietnam is an obvious country of interest for EU business expansion The country’s openness to foreign investment has been the cause of many trade reforms and lower trade barriers For example, Vietnam provides investment incentives to foreign investors such as exemption from import taxes on necessary materials required for manufacturing that cannot be found in Vietnam (UKEssays.com, 2017)
3.3.2 Policies Restricting FDI in Vietnam
One complication for FDI in Vietnam is that Vietnamese authorities have different definitions of a foreign-invested enterprise In practice the level of foreign investment that qualifies an entity as foreign differs from province to province Unlike other countries in the region, such as China or some of the other ASEAN member states, Vietnam does not maintain a Negative List of industries with foreign equity ownership caps (Restrictions on Foreign Direct Investment in Vietnam, 2015) With the enactment of the Law on Investment and the Law on Enterprises however, the country is moving in the direction of such a Negative List system The two laws, in addition to various other laws and regulations, apply
9 to industries that are termed ‘conditional’ When investing in conditional industries, the government examines the investment proposal and may choose to impose additional requirements The distribution sector such as retail is considered
‘conditional’ in Vietnam and may prone to additional requirements from the government of Vietnam (Restrictions on Foreign Direct Investment in Vietnam,
Online Store in Vietnam 10
The H&M online store is launched on both the website and the mobile app, with a variety of code templates for every audience, such as children's clothes, men's and women's fashion, sportswear In addition, online stores offer exciting shopping experiences through many utilities such as easy search for goods with images, quick availability updates, and a variety of payment methods including payment on receipt and payment by bank card Special online store H&M launched at the same time as the Hello Member customer-friendly program with many attractive offers such as a 15% discount on the first order when registering to become a Hello Member, special gifts on the birthday, free shipping for invoices over VND 499,000 with Hello Member and free delivery with Member Plus members, online shopping customers can also proceed with the exchange of products within 30 days after the purchase along with many other offers from partners of H & M Vietnam
Circular Ecosystem 10
Shifting to a circular ecosystem is the key to decoupling our business growth from resource use There is still a long way to go on this journey — for H&M Group and our peers — and we recognize the need for systemic change across the fashion industry and our business (H&M Group Sustainability Disclosure 2022, 2022) We focus on integrating circularity across our entire ecosystem by building on the synergies and interconnections of all parts of our value chain
We know a lot about the environmental impact of a circular fashion industry, but we have a lot to learn about the impact on people, including understanding what it means for jobs across the fashion value chain In 2021, we worked with several partners on keeping w This report looked at the impact on employment of moving to a circular fashion system and recommended how to create a just, fair, and inclusive fashion industry Since it was launched, we have worked with the report’s key learnings to build our knowledge and to define how we can secure fair and equal circular jobs across our value chain (H&M Group , 2023)
Vietnam recorded similar year-on-year patterns of average wages among suppliers during the nine months reported but with slightly higher numbers in
2022 The Covid-19 pandemic and related lockdowns that impacted the industry in previous years did not recur Wage levels in June and July 2021 were inflated by COVID-19-related subsidies to maintain operations during local lockdowns — these subsidies have since been stopped, with wages returning to normal levels as a result Statutory minimum wage covering four regions minimum wages regulated by the government increased by approximately 6% in July 2022 The increase varied depending on the living expenses in respective regions There was a slight decrease in wages in February as a result of the Tet holiday, which decreased workers’ attendance (a trend observed every year)
Average number of workers x2 ——đ—e—e—_ o @—_ằ Ộ (thousands) aU 30 2 +9 AT SUPPLIER FACTORIES IN VIETNAM
FOR THE FIRST NINE MONTHS OF 2022 COMPARED TO 2021
7399.0 Gross average wages (VND, thousands)
AT SUPPLIER FACTORIES IN VIETNAM FOR THE FIRST NINE MONTHS OF 2022
Average gross wage (2021) Average minimum wage (2022)
Figure 3.3 Detailed wage & worker data in Vietnam
There was a downward trend in the number of workers during the year This was mainly due to factories facing hiring challenges to mitigate worker changes due to a severe worker shortage in the Vietnamese labor market.
INTERNATIONAL STRATEGY 12
Logistics and Distribution 12
We are innovating across our global network by developing new, highly automated logistics centers These are designed to create additional capacity, flexibility, and speed between sales channels, enabling improved availability For example, in the first half of 2023, a new logistics center in Ajax, Canada is scheduled to start its operations, supplementing those recently opened on the US East and West Coasts These new highly automated facilities create further capacity for our continued expansion in North America (HM-Group-Annual-and-Sustainability, 2022) In some markets, our online customers can choose from a range of preferred delivery options such as receiving and retuming items using a bicycle delivery service, electric vehicles, or by foot This, in combination with using biogas, Hydrotreated Vegetable Oil (HVO), and electric vehicles from the logistics center, helps to reduce GHG emissions compared to conventional delivery options We are continually testing and developing new options, as well as scaling initiatives to more markets We work solely with ocean carriers that are verified by the Clean Cargo Working Group protocol Air freight makes up less than one percent of our inbound volumes, and we are active members of BSR’s Sustainable Air Freight Alliance, which drives the environmental agenda to reduce GHG emissions and promote responsible transport We have also created frameworks for the design and construction of new distribution centers, focusing on employee well-being as well as reducing pollution and waste, using renewable energy, and supporting biodiversity (H&M Group Sustainability Disclosure 2022, 2022)
PESTEL Analysis 13 cíằNm (na ae
It is no secret that H&M is a global brand operating in a lot of countries
On one hand, this is a huge gain for the brand, on the other it also is a gateway to political tensions around the world; countries like Turkey, Egypt Lebanon, etc where H&M has franchises have very unstable and unpredictable political climates (MOMIN, 2021)Another change in strategy that the brand introduced was franchising; they now have franchises in many countries some of which have political instability thereby keeping the brand on its toes at all times Franchising was not a part of H&M’s growth strategies in the past They got into franchising to curb regulatory disputes in different countries Every country has its own set of rules and requirements that international businesses must adhere to, such as trade legislation and consumer protection policies So as long as the world politics remain stable (which is wishful thinking) H&M has their work cut out for them (MOMIN, 2021)
Political instability can disrupt supply chains, increase costs, or force H&M to close stores or withdraw from markets Regulatory changes, such as labor, health and safety, environmental standards, and taxation, require H&M to stay updated to avoid legal issues and damage to its reputation International relations between Sweden and the countries where H&M operates or sources its products can also impact H&M's business Government incentives in the retail and fashion industry can either benefit or harm H&M, such as subsidies or tax breaks in the textile industry Labor laws, including wages, working conditions, and workers’ rights, also significantly influence H&M's operations and costs (THE STRATEGY STORY, 2023)
H&M's sales are influenced by various factors, including economic growth, exchange rates, inflation, and interest rates Strong economic conditions lead to increased disposable income and spending on clothing, while downturns or recessions can decrease non-essential items H&M operates internationally, exposing it to fluctuations in foreign exchange rates, which can affect costs, pricing, and profitability A stronger Swedish Krona can make importing goods more expensive and exporting cheaper, while higher interest rates can increase borrowing costs and affect H&M's profit margins (THE STRATEGY STORY,
Like any other business, the Covid-19 pandemic has been bad for H&M as well Consumer purchasing behavior has changed drastically ever since the virus spread because the supply chains were drastically affected The world faced an economic recession in light of this disease For quite some time, approximately 80% stores of H&M were closed down because of the lockdown situation in many countries which naturally caused them to lose 18% of their net sales in 2020 However, the brand did play it smart by focusing intensively on online selling during this difficult time, which couldn’t completely eradicate the loss but it kept it on its feet Besides this, the US dollar currency rates always remain a threat for H&M Brexit was another incident that adversely affected the sales of the brand That’s because, although it was expected that the US dollar would fall, they
14 increased taxation on their imports which made it very expensive for the people in the US to purchase H&M (MOMIN, 2021)
The brand has been affected by the pandemic so they understand how important it is to be careful of the people and the environment around them H&M Foundation donated US $500,000 to WHO to counter the devastation caused by Covid-19 This foundation also helped people particularly women in Bangladesh who were one of the most affected groups by the pandemic because they work in the ready-made garment sector As today’s consumers have become increasingly aware and learned, hence much more conscious of the businesses they support, brands have had to prioritize sustainability in their operations and activities over the years H&M has been very successful in not only identifying this need but also adapting to it; they have received recognition for their CSR activities In 2018 their sustainability report won them a place as the first runners-up for the best report award.H&M is known to take care of their employees at every level by paying fair wages They are also known for their efforts in promoting gender equality by giving many women the opportunity to work for them They have more women working in senior-level positions than they do men because they want to give opportunities to women (MOMIN, 2021)
The fashion industry is experiencing a surge in demand for sustainable and ethical practices, with brands like H&M embracing this trend with their
"Conscious" collection Consumers are increasingly aware of the environmental impact of their clothing purchases and are seeking brands that use sustainable materials and ethical labor practices The demand for diversity and inclusivity in fashion is also increasing, with a broader range of sizes, representation of different body types, races, and genders, and adaptive clothing for people with disabilities The rise of e-commerce has also changed consumer behavior, necessitating H&M to ensure its online shopping experience is user-friendly, efficient, and meets delivery times and return policies Health and wellness trends could also influence the types of clothing and accessories consumers seek, with increased demand for athletic wear, activewear, and natural, breathable materials Demographic changes in target markets could also influence product demand (THE STRATEGY STORY, 2023)
For a very long time, the owner of H&M was keen on improving their existing supply chain by introducing the latest technology trends to make it far more efficient They finally made huge investments on this matter in 2020 and they paid off quite well They have recently opened a brand new high-tech logistics center in the UK This center will become the road map for more to follow Other than this they constantly work with technology to improve the overall customer experience and satisfaction They want their processes to be smooth, quick, and hassle-free Recently in 2020, they introduced a feature for “WeChat” users in China who also had H&M memberships to be able to purchase products without paying immediately; they have the option to pay later if they don’t have the cash on hand This feature was also launched in Spain and a total of 12 other countries H&M plans to normalize this option for customers all around the world Their mobile application also has a rewards system that gives customers points for each purchase These points can then be used to purchase gifts and other products (MOMIN, 2021)
H&M is leveraging AI and ML technologies to improve its operations, including personalized product recommendations and predictive analytics These advancements can also support H&M's sustainability goals by reducing environmental impact and carbon emissions Virtual and augmented reality technologies can enhance online shopping experiences, such as virtual fitting rooms and interactive product displays However, H&M's increased reliance on digital technologies makes it more vulnerable to cyber threats, necessitating robust cybersecurity measures to protect the company and its customers (THE STRATEGY STORY, 2023)
The fashion industry relies heavily on weather conditions in the countries where fashion products are sold This is why H&M sends relevant products to the different countries where they have stores, to minimize wastage and to curb costs
However, as per the recent climate changes and the weird shifts in weather observed around the globe, H&M now has a tough time accurately forecasting emerging weather conditions to send the required supply of clothes The fashion industry is one of the most environmentally taxing industries to exist because its production processes heavily pollute the surroundings H&M also contributes to this pollution however, they are aware of it It is one of H&M’s long-term strategic goals to become 100% sustainable i.e recyclable in 2030 This means that they would reuse and recycle all of their products instead of harboring new raw materials (MOMIN, 2021)
The fashion industry's environmental impact is a growing concern, with retailers like H&M focusing on sustainability through waste reduction, water and energy use reduction, sustainable materials, and carbon emissions reduction H&M _ has implemented initiatives like its "Conscious" collection and garment recycling program Climate change could affect the availability and cost of raw materials, particularly cotton, and transportation and logistics Stricter environmental regulations, including waste management, energy use, carbon emissions, and certain chemicals, could increase costs for H&M Consumer attitudes towards sustainability are also changing, with many becoming more environmentally conscious and seeking sustainable products These factors could influence H&M's perceptions and purchasing decisions (THE STRATEGY STORY, 2023)
Recently the brand came under fire with allegations of discrimination against ethnic minorities in certain stores in Sweden Hidden camera footage which was popularized by a local news channel made it seem that the salespeople were very different in their treatment of people of different ethnicities especially ones who were returning some products such as asking for unnecessary documentation from them which was not being asked of other people The matter was inquired in detail H&M _ has been tied to racial discrimination quite a few times in the past as well such as when a manager and a few employees were fired because they changed the name of a product in the store to include a racial slur Appropriate legal action was also taken against them It’s not all bad with the
17 brand though; H&M adheres strictly to world laws, especially in regards to the countries they operate in They don’t allow underage employment, the suppliers they work with also are law-abiding, they ensure safe working conditions for their employees all around the world, and they promote equality against discrimination of any form; racial, gender, ethnic, religious, etc The brand also believes in being transparent; they develop and produce many financial as well as other performance reports to the public (MOMIN, 2021)
Risk management 18
During 2022 there was a further increase over 2021 in the ratio of risks related to external events — such as the war in Ukraine, transport costs, inflation, and energy costs in Europe — compared to business risks Increasing numbers of purchases are being made online, which have become an increasingly important part of the customer experience Customers are looking for a smooth, simple, and inspiring experience in which stores and online interact and enhance each other
In recent years the H&M group has therefore made substantial investments to provide this As the competitive landscape is redrawn by new business models and players, profitability in the industry has been impacted by increased competition (H&M Group, 2023)
As one of the world’s leading fashion companies, the H&M group’s brands attract great interest and are constantly in the spotlight To safeguard and manage its brands, the H&M group must continue to be developed and run according to its values, which are characterized by strong business ethics It is of utmost
18 importance that the H&M group lives up to the high ambitions set out in its policies and guidelines on business ethics, and that anyone involved in the business has good knowledge and insight into the procedures for the production of its products It is also crucial that the H&M group can reach its sustainability goals and ambitions Accurate, transparent, and reliable communications can prevent occurrences of reputational risk and can also help mitigate the consequences of any incidents (H&M Group, 2023)
Nearly half of the group’s sales are made in euros, while the most significant currencies for the group’s purchasing are the US dollar and the euro Fluctuation in the US dollar’s exchange rate against the euro is the single largest foreign currency transaction exposure for the group Large and rapid exchange rate fluctuations, particularly as regards the US dollar as the most important sourcing currency, may also have a significant effect on purchasing costs — even if this may be regarded as relatively competition-neutral over time To hedge flows of goods in foreign currencies and thereby reduce the effects of future exchange rate fluctuations, payments for the group’s flows of goods — 1 the group’s purchases of goods and, in the majority of cases, also the corresponding foreign currency inflows from the sales companies — are hedged under forward contracts on an ongoing basis to the companies H & M Finance AB and H & M Hennes & Mauritz GBC AB (H&M Group, 2023)
4.4 H&M compared to fast fashion companies
Fast fashion retailers are characterized by abandoning traditional seasonal collections and leveraging their slick infrastructure to deliver high and frequent drops of newness The cadence of deliveries across all market sectors was disrupted as factories closed due to COVID-19 This is evident in the fall of arrivals between March and June As the industry adjusted to the new normal, order cancellations due to sluggish sales saw arrivals struggle to return to pre- COVID levels Over the three months ending in November, Zara is the only retailer from the analyzed range to see a YoY increase with arrivals up 11% Arrivals are down 2% at Nasty Gal, 8% at H&M, and 31% at Topshop compared to 2019 Even with this higher injection of stock, Zara can sell through newness quickly Of the new products arriving over the past month, the majority of SKUs
19 sold out in an average of eight days compared to an average of 12 at H&M (EDITED, 2020)
The fashion industry’s big names such as Zara and H&M are known for driving overproduction of apparel, which is predominantly outsourced through supplier factories in developing countries H&M’s two main suppliers are located in China and Bangladesh, for instance While the former also happens to be where most of the Inditex Group’s products are manufactured, the Spanish fashion retailer also has suppliers around European countries, such as Portugal and Spain (Smith, 2022)
UNIQLO adidas and val 1 millic > doll
Figure 4.1 Leading European fast fashion brands based on total revenue worldwide in 2019 (in million GBP)
Based on the revenue figures from the company's financial year 2018, Spain-based retailer Zara (Inditex) ranked as the leading fast-fashion company in Europe In that year, Zara generated around 22 billion British pounds, surpassing the annual revenues of British retailers Marks & Spencer and Primark combined Fast fashion companies often receive criticism for a string of reasons, the main ones revolving around environmental and ethical issues Besides concerns around materials used in the production of clothes, unsold apparel that may end up sitting
20 in companies’ inventories and clothing products that reach consumers but end up getting discarded create immediate problems Recent studies looking into discarded textile items demonstrated that in Europe total textile waste produced per person was as high as nearly 15 kilograms, most of which went to landfills to complicate the matter even further (Smith, 2022)
Company-wide online net sales, which include all of the nine brands described above, illustrate the devastating effect of the pandemic on business This impact is most evident in the decline in sales experienced by the H&M Group in
2020, when online net sales fell by 17.5% to just overUS$20 billion (Koutsou- Wehling, 2024)
Figure 4 2 H&M Group's Online Net Sales And Year-On-Year Growth
Despite the full impact of the pandemic from 2020 to 2021, H&M Group managed to grow again The Group therefore increased online net sales by US$3 billion in one year to US$23.2 billion in 2021, a 14.3% recovery from the previous year With revenues stabilizing again in 2022 at a growth rate of 2.6%, it appears that the company’s restructuring and diversification initiatives have achieved their goal (Koutsou-Wehling, 2024)
According to a report in June 2021 titled “Synthetic Anonymous“, H&M’s conscious line has allegedly been found to contain a higher percentage of damaging synthetic materials compared to its main line Moreover, the report identified H&M as the worst offender when it comes to false green claims with 96% false claims H&M’s recycling program is also not without its flaws While they confidently state in a myriad of their ads that they will use fabrics donated to them to create new clothes, the reality is that only 35% of donated garments are utilized Most of their clothes consist of blended materials that don’t break down easily, like a studded sweater containing 52% polyester, 41% acrylic, 4% wool, and 3% elastane Donated clothes are more often than not resold in markets in countries like Kenya or dumped in landfills Only 0.7% of the clothes manufactured by H&M were recycled material according to their report in 2018, essentially proving that even their recycling program is not sustainable (Goil,
While H&M confidently states in its ad campaigns that it aims to reduce waste and that we, the consumers can help them do so by shopping from their conscious line, the reality is that shopping from H&M doesn’t reduce waste but adds to it Most of the products in the Conscious line are made of blended materials such as polyester, acrylic, wool, etc which do not break down easily These products will not be recycled but end up in a landfill (as plastic recycled for clothes cannot be recycled again) and so your noble quest to shop more sustainably goes quite literally to waste (Goil, 2022)
H&M has always wanted to promote the initiative of persuading customers to bring old clothes (from any brand) into containers at H&M stores around the world The motto is "H&M will recycle and create new textiles, and you'll have vouchers for use at H&M Everyone benefits!"The sense of "conscious use" that fast fashion companies like H&M create for customers may sound good, but it's not that simple Only 0.1% of all clothing that charities receive is recycled to create new materials, according to H&M's director of sustainability Henrik Lampa With the speed of usage being pushed by fashion companies through trends and shortened seasons of life, clothes purchased from them may be too old if they are used after about a year, even after just a few washes Many second-hand stores have rejected items from fashion chains such as Forever 21, H&M, Zara, and Topshop Cheap items always come with low quality, not sold back at a good price And the bigger problem is that the shops get too many of these things Set in the context of the fast fashion industry, millions of tons of clothes are dumped into the environment every year User behavior is changing sharply With the amount of clothes that are not used or only worn once or twice and thrown away because of a "fashion bug,” the environment has suffered a huge amount of waste Burial or incineration of waste from H&M, Zara Shein, etc., also emits greenhouse gases and contributes significantly to climate change Some materials take a lot of time to break down like leather bags take 50 years, polyester dresses take over 200 years (VU, 2022)
CHAPTER 5: CONCLUSION Companies are made up of humans And no human is perfect, nor is it capable of achieving change overnight Especially when you have to move a gigantic tanker that houses thousands of complicated production chains, stockholders, and consumers who demand more sustainable and fair fashion, but are used to low prices I truly believe H&M is putting a lot of effort and resources into altering its course toward democratizing sustainable and fair fashion So I'll cheer on every step in the right direction, instead of solely focusing on what the fashion giant doesn’t do I think H&M Conscious can be a great alternative for people with a small budget and little time on their hands to roam Vinted or other second-hand platforms and stores What bothers me is the way the brand boosts its efforts and results, leaving out its shortcomings Is it naive of me to ask for a more humble, detailed, and honest assessment of where H&M Conscious currently stands? It’s the only way you can let consumers make a truly conscious