H&M: International Marketing Success Story

H&M is a Swedish clothing retailer specializing in “fast fashion” and “cheap chic” styles for men, women, and children. The firm generated around $8.5 billion in global sales in 2009, making it the world’s third largest fashion retailer, after Gap Inc. (#1) and Zara (#2). When H&M opens a new store, it is accompanied by much attention and interest. From New York to Berlin to Tokyo, store openings typically receive massive media coverage. The Pasadena, California, store launch was covered from news helicopters, and numerous people slept outside the store the night before it opened. Such excitement is typical of H&M store launches worldwide. The firm began as a women’s clothing retailer, Hennes, in 1947 and later merged with the Swedish men’s store Mauritz. Management changed the name to H&M to simplify worldwide perception of the brand. Initially, H&M was cautious with international expansion, restricting its reach to nearby European countries, where Germany, France, and Britain became top markets. In 2000, H&M opened its first U.S. store on Fifth Avenue in New York. Most recently, the firm expanded into China, Japan, Russia, South Korea, and the Middle East. Today, H&M has 75,000 employees operating more than 2,000 stores in thirty-seven countries. Internationalization has not proceeded without missteps. On the heels of the spacious Fifth Avenue store launch, H&M opened several more outlets in the United States. Nevertheless, the success of its Manhattan store did not consistently translate to other locations. Some new stores were too big, forcing management to downsize them. In the United States, H&M quickly learned that styles vary between cities and suburban locales. Management focused trendy fashions in city stores and maintained more conservative items at suburban mall stores. A decision to launch a colorful apparel collection backfired, forcing retreat to traditional styles with subdued shades. Compared to Europe, top management noted that U.S. stores need to be more inviting, and U.S. salespeople prefer focusing on a single segment, like children’s wear or men’s clothing.

Rapid Response Retailing

H&M emphasizes fast turnaround, the ability to take a garment from design to store shelf in three weeks. Though this falls short of competitor Zara’s two-week turnaround, H&M’s prices are usually lower. Known for its flexibility, H&M constantly monitors sales, restocking stores daily to quickly replenish popular merchandise. Another cost-saving measure comes from outsourcing apparel manufacturing to 700 independent suppliers via twenty production offices, primarily in Asia and Europe. Large quantities of materials are ordered from suppliers, allowing economies of scale that are passed on to consumers. Rapid response retailing means that H&M ensures the right product gets to the right stores at the right time. It requires careful cost control and management of lead times with suppliers, factories, and distributors. The approach results in prices substantially lower than competitors.

Market Segments and Branding

The H&M brand symbolizes “fashion and quality at the best price.” Men’s and women’s collections emphasize innovative styling for fashion-minded people of all ages. Strong branding increases marketing effectiveness, stimulates brand loyalty, and enhances customer confidence in purchase decisions. It helps customers know what H&M stands for—simple, stylish fashions offered at popular prices. The brand drives management decisions on how to design products and where and how to launch new stores. Most H&M stores are located in Europe, where brand awareness is substantial. However, brand awareness is still limited in other parts of the world. In some markets, building a strong brand remains challenging. Weak brand image limits H&M’s sales potential and its ability to recruit and retain employees, who are crucial to long-term success.

Marketing

H&M has more than 100 in-house designers who interpret apparel trends and create fashions accessible to everyone. H&M collaborates with well-known designers, offering limited edition clothing lines in some stores. For example, collaboration with Chanel design chief Karl Lagerfeld drew large crowds to H&M stores, selling out the exclusive line in only three days. Other design partners include Stella McCartney, Madonna, and Roberto Cavalli. At the Tokyo store opening, H&M introduced a collection with Comme des Garçons, one of Japan’s most respected fashion houses. The initial response exceeded expectations, with customers waiting in line for three days before the launch. H&M employs unique strategies to reach target markets and attract customers to new stores. Management is careful to choose the location of stores in each city, preferring exclusive shopping districts with high traffic. Stores are intended to be fun, inspiring, and inviting, with interior design and displays that communicate what H&M stands for. Together, the products, shop floors, displays, and staff make up the whole package that communicates the H&M brand. The firm employs conventional promotional tactics such as print advertisements and catalogues, as well as more novel approaches. H&M Magazine offers readers a mix of fashion and the latest lifestyle trends. The firm has its own Facebook page and sends out “tweets” on Twitter, maintaining a social network with fans around the world. The H&M YouTube site offers Fashion TV and inspirational films. Use of celebrities like Benicio Del Toro and Molly Sims helps maintain a trendy image. H&M experiments with nontraditional methods to communicate with customers. Partnering with marketing agencies Mobiento and Adiento, H&M launched a mobile marketing campaign targeted to 20- to 40-year-old women. The campaign included banner ads placed on carrier portals and media sites, and a Web site with click-through slideshows and animated images of the firm’s latest designs. Beyond promoting new additions to its apparel collection, the campaign drove customers to the H&M Club and its loyalty rewards program. Consumers received alerts and mobile coupons redeemable at nearby stores. Recently, the firm expanded beyond traditional apparel by venturing into the home textiles business. H&M Home’s products, including pillows, towels, curtains, and other textile products, are sold online and by mail. With this addition, H&M now competes with Spanish retailer Zara in the home textile market

Global Strategy and Localization

H&M management follows a global approach by emphasizing a uniform global brand and similar apparel in all its stores. Company designers at headquarters draw inspiration from key markets so that different regions’ styles are incorporated into apparel designs. The product assortment is 80 percent the same in all markets, and local managers adjust the remaining 20 percent to fit local tastes. Apparel offered in the Tokyo stores is essentially the same as that offered in Europe, but the presentation is modified. The head office provides substantial guidance on global strategy, while store managers localize tactics to their markets. At individual stores, local managers can adapt pricing, advertising, and product range to suit local conditions. The firm offers smaller sizes in Asia, conservative apparel in Islamic countries, and garments adjusted for seasonal differences between the northern and southern hemispheres. In a fickle industry, H&M has been a smashing success. The firm has applied skillful marketing to triumph in markets around the world.

1. Visit H&M’s Web site at www.hm.com. What are the characteristics of H&M’s global market segment(s)? How does H&M position itself in the minds of target customers around the world?

2. How does management at H&M use global branding and global product development to create and offer its fashions? How does the firm use marketing mix elements to market its offerings around the world?

3. A key aspect of H&M’s strategy is to provide value to customers by maximizing perceived product benefits, minimizing prices, or both. Given this, how can H&M further increase the value of its offerings to customers? That is, what steps can management take to increase the benefits and reduce the prices that its customers encounter when shopping for H&M products?

4. How does H&M strike a balance between standardization and adaptation of its marketing program? What advantages does H&M gain from standardization? From adaptation? What factors drive management to adapt offerings in particular markets?

5. Increasingly, H&M targets emerging markets like China, Russia, and Saudi Arabia, which are often characterized by distinctive cultures, lower incomes, and inexperience with leading-edge fashion. Thinking in terms of marketing program elements, what can management do to ensure H&M succeeds in these markets?

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