Managing Customers and Markets
Sustainability of H&M in Competitive Apparel Market
With an ever-increasing numbers of competitors gaining traction globally and more big retailers stepping into the low-cost fast-fashion industry, H&M has encountered difficulties in prolonging its competitiveness to retain consumers and surviving in the keen global apparel market. However, H&M has set its insight in finding new ways to maintain industry leadership and ranked 23 in the Best Global Brands 2012 while its main competitor Zara only at 37. This paper will examine the strong positioning of H&M by using 3Cs (Company, Consumer and Competition) and STP (Segmentation, Targeting and Positioning) analysis. Moreover, the study will also demonstrate how unique marketing strategies (4Ps) help H&M to gain profitable market share and build brand loyalty.
Don't use plagiarized sources. Get Your Custom Essay on
Sustainability of H;M in Competitive Apparel Market
just from $13,9 / page
Apparel retail industry has intense competition in the global market.
H&M (originally known as Hennes & Mauritz) with the business concept of “Giving the customer unbeatable value by offering fashion and quality at the best price” is a fashionable clothing company established in Sweden in 1947. H&M is successful because of its fast response to the fast-fashion market by offering wide range of high quality apparels of the best designs under the name of an inexpensive clothing label through extensive retail channels. H&M, ranked 23 in the Best Global Brands 2012 (Interbrand, 2012), is the second largest apparel retailer in the world, just behind Inditex Group which owns one of the successful brands Zara. H&M is also able to meet the rapidly changing demand prevalent in fashion retailing by designing the most
fashionable products to meet consumers’ needs.
H&M, which is positioned as lower end with high quality, finds itself in threatening position with the emergence of aggressive new competitors such as Uniqlo and Forever 21 at the lower end of the price scale. Not only does H&M have to catch up with its main competitor Zara, it also needs to sustain the market share in the pie of the competitive and fast-changing industry in face of rising promotion costs and shrinking profit margins.
Besides, owing to wide range of brand choices in the apparel market, consumers have low costs in switching from one brand to another. Thus it is difficult for H&M to build brand loyalty.
This paper will study how H&M sustains growth among competitors by examining its positioning of taking advantages of core competences to hold on to customers in today intense competitive fast-fashion market at both strategic and tactical levels (3Cs and STP) and how effectively unique marketing strategies (4Ps) helps H&M to gain profitable market share and build brand loyalty.
3Cs Analysis (Company, Consumer and Competition)
3Cs analysis is crucial in understanding the current market faced by H&M before setting up its objectives and initiating Segmentation, Targeting and Positioning (STP) for tactical marketing plans.
1.1 Company Analysis by Using SWOT Analysis
In order to unfold what H&M is, SWOT analysis is used to capture the key strengths and weaknesses of H&M with an aim to identify its core competences, opportunities and threats.
- Good company reputation with positive financial performance and assets No stores and manufactories owned which makes ways for flexibility and
adaptability Having few middlemen
- Short lead-time (2 weeks to 6 months)
- Balancing between fashion, quality and price by employing renowned fashion designers and adopting effective procurement strategies Sustainability and social responsibility
- Wide geographical market presence
- High costs of advertising
- Outsourcing production to independent suppliers: lacking direct control over the manufacturing processes, quality problems may arise
- Development of online sales opens new source of revenues
- Business expansion in new and existing markets through retail stores and digital platforms such as websites, mobile apps and social media Strong demand for high fashion at affordable price in the market
- Intense competition and choppy global economic conditions
- High bargaining power of consumers
- Changing preferences of consumers due to low cost of switching brands
1.2 Implication of SWOT Analysis
SWOT analysis helps H&M to identify its core competences and competitive advantages “quality, sustainability and continued high profitability”. The implication of SWOT analysis is about matching the strengths to opportunities while converting weaknesses or threats into strengths. From the analysis, we can see that H&M has stronger strengths and more opportunities than its weaknesses and threats. Therefore, it is believed that H&M has the ability to react to the choppy global economic conditions and ever-changing consumers’ preferences by offering fashionable products at low price without sacrificing quality.
2.1 Competitor Analysis
Competitor analysis is an assessment of the strengths and weaknesses of current and potential competitors. There are many closest comparable competitors competing with H&M, they are Zara, Gap, Uniqlo, Forever 21, Abercrombie & Fitch and Bershka. Points of parity include ready to wear trademarks, products for all men and women, good value products, affordable price and retail clothing stores (Skema Research Center, 2012). The strengths of these competitors may threaten H&M’s position as the world market leader.
Zara’s lightning-fast supply chain allows it to follow fashion trends and deliver goods in near real-time. Its strengths include strong style identity, wide store presence, good reputation with less advertising campaigns (less costs) and ownership of its production which ensures Zara having better control of its product quality. However, Zara’s pricing is more expensive than H&M. According to The Wall Street Journal (2013), Zara is approximately about 60% more expensive than H&M.
Gap’s strengths are iconic, inventive, American designs with mid-market stance (Gap, 2013). As for the weakness, Gap has a longer lead-time (around 90 days), it is less fashionable and does not offer attractive price.
Uniqlo’s clothing is diversity in colors and innovative e.g. producing heat-tech, safe and comfortable casual wear. It focuses on technological differentiation, using longer product development cycles and offering high-quality basics that appeal to a large consumer base. To compensate the narrower choices of items as compared to its competitors, Uniqlo makes it up by offering one single item in many colors (The Economists, 2010). As for the weakness, the core collections of Uniqlo are basic, not fashionable with limited target segments.
2.1.4 Forever 21 and Abercrombie & Fitch
Forever 21 and Abercrombie & Fitch, which target young people, have similar
strengths as H&M: low price and fashionable, but their market shares are relatively small.
2.2 Implication of Competitor Analysis
Competitor analysis provides both offensive and defensive strategic information to H&M to identify opportunities, threats and predict competitors’ behaviors. It definitely helps H&M to formulate, implement, monitor and adjust efficient and effective marketing strategies. From the competitor analysis, we can find that H&M has competitive advantages over Zara in terms of price, over Uniqlo in terms of products diversity, over Gap in terms of short lead-time and fashion styles, over Forever 21 and Abercrombie & Fitch in terms of market sizes. As for the threats, the main challenge of H&M is to react to the global expansion of Zara and Uniqlo which also have sufficient capitals and large market shares.
3.1 Customer Analysis
Market segmentation, which divides consumer markets into well-defined groups by looking at descriptive characteristics, is important in identifying who is served, what their specific needs are, and how can better communicate with them (Kotler et al, 2012). Since H&M is now under global expansion resulting in extensive markets share around the world, its consumer market is segmented based on the following variables: geographic, demographic, psychographic and behavioral segmentations (H&M, 2013):-
3.1.1 Geographic Segmentation
H&M has expanded substantially in recent years with markets in Asia, Middle East, North Africa, North America, Europe and even online markets. That means there are many segment variables including religions, cultures and lifestyles which H&M have to consider before initiating its marketing plans in different markets.
3.1.2 Demographic Segmentation
H&M has divided the market into convenient groupings based on gender and age: men, women, teenagers, children and mothers-to-be, which consists of several sub-segments, such as newborn (0 to 6 months), baby (2 to 18 months),
children (18 months to 8 and from 9 to 14), teenage boys and girls (aged 14 to 18) and men and women (aged 18 to 45). For women, there is also special sub-segment based on stage of life: maternity wear. Different products and exclusive offerings are produced to satisfy different groupings (H&M, 2013).
3.1.3 Behavioral and Psychographic Segmentation
The target customers of H&M belong to the group of fashionable and trendy with price-sensitive mind who are normally frequent buyers. New market niches of mothers-to-be and women in larger sizes are also identified and concentrated marketing is directed for their special needs and wants. Besides, to target special groups who are conscious about manufacturing problems like safety working conditions, children labor, animal testing and models’ body figure, H&M has also launched a new category for this group.
After segmentation, H&M’s targeting is identified. Although H&M targets several market segments with different marketing mix for each and plans to expand globally, its main target consumers are women aged 18 to 45 who are looking for fashionable apparels at affordable price. H&M’s largest market is in Germany, followed by the US, UK and France.
H&M creates its value proposition “fashion and quality at the best price” and its market positioning can be visualized on the following positioning map to show how H&M designs its attributes to differentiate from the competitors: high quality at low price.
Burberry Dolce & Gabbana
Abercrombie & Fitch
In the orange highlighted section of Figure 1, we can see that there are few competitors having the “low-priced” and “quality” attributes as H&M. They are Zara, Topshop, Uniqlo, Abercrombie & Fitch and Stradivarius.
Market Share +
Abercrombie & Fitch
Market Share -
Apart from high quality at low price, Figure 2 shows that H&M has extensive market share and fashionable style among its competitors. Gap and Zara have the closest market shares, the former is less fashionable than H&M while the latter is as fashionable as H&M, so Zara is the closest competitor. Uniqlo, a new competitor to H&M, has been rapidly growing and getting considerable
market shares with diversified products in the world especially in Asia, threatening H&M’s market position.
4Ps Marketing Strategies (Product, Price, Place and Promotion) After doing 3Cs and STP analysis, we can find that H&M positions itself as fashionable, high-quality with low price. Its targeted consumers are women aged 18 to 45 who are looking for trendy products at affordable price and the main competitors of H&M are Gap, Zara and Uniqlo.
Apart from sustaining in the keen market competition, building brand loyalty is also very important. The idea of fast fashion industry is to provide fashionable clothes at lower price. If there appears a competitor with better offer, customers will switch to that brand without hesitation. H&M faces the threats that customer has a good ability to switch to another brand without any losses. In the following part, we will study how H&M works hard to build brand loyalty and become preferred by using 4Ps strategies. Those similar strategies adopted by its competitors will not be discussed.
H&M employs hundreds of designers at its headquarters in Sweden. Thus, new styles are constantly being created and put into production. With tight control on product lead-time, H&M can move more rapidly than any of its competitors and continue to deliver fresh styles to its stores every week. To stand out from its competitors Gap, Zara and Uniqlo, H&M continues to be partnering with big-name designers, celebrities and high profile supermodels such as Design Director of Chanel Karl Lagerfeld, Chef Designer of Chloe Stella McCartney, Singer Madonna and top model Kate Moss to preserve high fashion at the best price. This product strategy also helps H&M to attract consumers and build brand loyalty.
Moreover, H&M owns a wide product mix for women, men and children. For example H&M provides sportswear, club-wear, cutting-edge fashion and accessories for women; provides trendy leisurewear and seasonal fashion wear for men and safe and durable relaxed wear to children. The product shelf time varies from couples of weeks to six months. One special product
strategy that H&M adopted is that those high-fashion garments are only produced in limited quantity with short available time to preserve an image of exclusivity and create a sense of scarcity in consumers’ perception while modern basics are produced in unlimited volumes with longer shelf time. This strategy helps H&M to attract new customers and retain loyal customers. Another product competitiveness point for H&M is that H&M offers clothes for mothers-to-be and women in larger sizes which are not available in Zara and Uniqlo stores. The percentage of bigger women is growing continuously due to increasing wealth of nations. With the reasonable prices, H&M faces nearly no competition within its competitors.
Furthermore, while observing the increasing attention to health and beauty, H&M introduces cosmetic lines with products for body, hair, skin and make-up. These cosmetic lines are specifically designed to target women aged 18 to 45 who are looking for trendy products at affordable price. The unique cosmetic lines will definitely help H&M to increase its profit margins. More than that, there is a sub-brand called H&M Home which provides fashions for every room in the house. Towels, bed linen, curtains and other home textiles in trendy colours and prints are sold in H&M stores (H&M, 2013). More than apparels, H&M diversifies its products to cosmetic and home fashions.
Unlike its competitors, H&M business operations aim to be run in a way that is economically, socially and environmentally sustainable. H&M has launched its international collection entitled “Conscious Collection” since 2011 by highlighting its dedication to environmental protection and worker safety. This collection targets consumers who are conscious about manufacturing problems like children labor and animals testing. Recently, H&M is named the world’s largest user of organic cotton and it aims to improve upon this practice by switching to 100% sustainable cotton by 2020 (H&M, 2013).
H&M’s pricing position is towards to the lower end of the scale. In order to offering low price, H&M outsources the production to independent suppliers, primarily in Asia and Europe, through H&M local production offices. High fashion products in limited quantities are produced in Europe to assure
short lead-time whilst basic products likes T-shirts and other casual wears are produced in Asia to cut down production cost. Thus H&M can maintain its sale prices lower than its competitors. In view of the deteriorating economic conditions, customers are now price-sensitive and frugal. The value pricing helps H&M to win loyal customers by charging a fairly low price for a quality offering and gain ground over major fast fashion retailers such as Gap, Zara and Uniqlo.
In addition, H&M adapts Everyday Low Pricing (EDLP) as its pricing strategy. A retailer who holds to an EDLP policy charges a constant low price with little or no price promotion and special sales (Kotler et al, 2012). Since constant sales and promotions are costly and have eroded customer confidence in the credibility of everyday shelf price, EDLP strategy helps H&M to eliminate week-to-week price uncertainty of its customers and reduce advertising costs on promotion sales.
H&M retail stores are the main distribution channel for marketing. Unlike Zara, H&M does not own any store premises, which makes way for flexibility and adaptability. As at 2012, H&M has over 2,800 stores spreading across 49 markets and it plans to open another 350 new stores in 2013 with the highest rate of expansion in China and United State (H&M, 2013). H&M makes prudent assessment by analyzing the religions, cultures, demographic structure, purchasing power, economic growth, infrastructure and political risk of a new country or city before expansion and its stores only choose to be located in the best business locations, whether in a big city or a small-town shopping centre.
Apart from retail stores, H&M began its e-commerce marketing practice since 1998 while its main competitor Zara has been relatively slow in developing its online sales started from 2010. H&M online market is increasingly growing, with particularly strong growth in mobile shopping via smartphones and tablets. Today H&M online shopping is available in many European and Asian countries with over a million visits daily. H&M’s investments will also continue within online sales and it plans to launch online sales in the
United State, the world’s largest market for e-commerce in the near future.
H&M employs both push and pull strategies in promotion. Not only does H&M produce wide ranges of innovative and trendy offerings to its customers, it also uses advertising to induce costumers. To promote H&M latest products, the company uses billboard, video, print advertisements, mobile marketing including iphone and android apps and e-marketing such as advertising in the internet in the form of banner advertisements to attract customers to learn about information about H&M products and services.
Moreover, H&M’s motto “fashion and quality at the best price” is transmitted through working with celebrities, models and advertising campaigns to diffuse H&M’s values in its sales countries in order to raise brand’s awareness and build up customer’s confidence in the long term. H&M appeals to customers by using famous celebrities to endorse its products with an aura of exclusivity but its competitor Zara does not. Zara relies more on locations of retail establishment and store windows rather than advertising to attract customers. Secondly, it is easy to find that the advertisements of H&M are in fashionable style and always with the price at prominent position when compares with Zara and Gap, H&M’s competitors. Advertising of H&M always highlights the low price to build awareness of quality at the best price.
Moreover, H&M publishes the H&M Magazine which is distributed through all H&M stores offering readers a mix of fashion, inspiration and the latest lifestyle trends. This practice is not found in other popular apparel retailers likes Gap, Uniqlo, Topshop and Zara. H&M Magazine is published four times a year and is also available on H&M website. Customer can be entertained through reading H&M Magazine by discovering new trends, advices for the beauty secrets and make-up, interviews with famous people, promotion activities and events of H&M. H&M Magazine also helps to build brand loyalty and attract consumers to follow H&M style.
Consumers use Word of Mouth (WOM) or electronic Word of Mouth (eWOM) on
internet to talk about dozens of brands each day from media and entertainment products (Kotler et al, 2012). And because personal communication from friends and relevant others is a powerful form of communication, marketers may try to design market communications that encourage WOM communication (J. Paul et al, 1999). H&M has also invited the press and famous bloggers to share its product information. One of the local famous fashion blogs in Hong Kong called POPBEE shows the latest fashion news around the world. The web master POPBEE updates the fashion blog every day. Since she is not a reporter, the fashion news is typing by her preference. H&M is very clever to invite POPBEE to join the collection preview as she will show out the special picks of the latest collection and publish product photos on her blog, eWOM on H&M is achieved.
H&M has effectively used the 4Ps strategies to stand out from its competitors and build brand loyalty. However, more strategies can be adopted by H&M to further enhance its market position in the world. Recommended strategies are discussed in the following part.
Since the mission of H&M is to provide apparel, clothing and fashion suitable for the current trend with appropriate prices, it is recommended that H&M should be more innovative in making clothing and fashion that will make them known in the marketing arena locally and internationally. Uniqlo, one of the rising competitors to H&M, produces clothes that are made of high-tech materials. The unique concept of Uniqlo is to set out apart from apparel companies whose sole purpose is the pursuit of fashion trends by using technology differentiation (Uniqlo, 2013). In view of this, H&M can explore and develop high-tech items such as heat-tech to compete with Uniqlo.
Inditex Group is one of the world's largest fashion retailers, welcoming shoppers at its eight store formats: Zara, Pull ; Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe (Inditex, 2013). Inditex’s multi-brand strategy helps to broaden its customer base. For example Bershka has successfully attracted a younger generation for Inditex. H;M should now move on to build a multi-brand portfolio by introducing new
concepts. In 2007, H;M has introduced the COS chain with a higher price positioning, but sub-brands of H;M remains narrow. Adding new, complementary brands in the future can help H;M to broaden its customer base.
In view of the global expansion, H;M should also tailor their image to local needs and wants when entering a new market. Since there are variations in customers’ shopping habits, religions, cultures and lifestyles, H;M store in the world should strengthen the brand and offer local customers the best possible shopping experience and unique value.
Furthermore, many costumers use price as an indicator of quality. Low price strategy may give H;M an image of poor quality and hinder it from attracting customers. This challenge may call for more cost in promotion and hire professional designers to uphold its product quality. In addition, to maintain the low price policy, H;M has recently given up the customer service. Fitting and cashier in H;M stores usually have long queues. Sales staff is relatively less as compared to the number of customers. It is not easy for the customers to get help when they encounter problems or issues. Therefore, H;M has to devote budgets to improve sale services so as to provide positive shopping experience to its customers.
In the fast-fashion industry, having unique competitive advantages is always a difficult task. Under the global expansion, H;M has faced keen competition with Gap, Zara and Uniqlo. Moreover, in the clothes market, consumers always have a big choice in between brands. H;M encounters the challenge of building strong brand loyalty. However, for staying in the market in the long run, H;M has always moved and followed the needs of the customers by strengthening its positioning and perfecting its marketing strategies. Although H;M still has rooms to further improve its marketing plans, it has already done a great job to sustain competitiveness and retain consumers with a view of its successful global expansion in the world. References
Gap (2013), Retrieved from http://www.gapinc.com/content/gapinc/html/aboutus/ourbrands/gap.html on 10
H;M (2013), Retrieved from http://www.hm.com/hk/ on 21 April 2013.
Inditex (2013), Retrieved from http://inditex.com/en/who_we_are/our_group on 25 April 2013.
Interbrand (2012), “Best Global Brand”, Retrieved from http://rankingthebrands.com/The-Brand-Rankings.aspx?rankingID=37;year=523 on 20th April 2013.
J. Paul et al (1999), Consumer Behavior and Marketing Strategy, McGraw-Hill.
Kotler et al (2012), Marketing Management: An Asian Perspective (6th ed.), Pearson.
Skema Research Center (2012), “Competition”, Retrieved from http://fastfashiontrend.wordpress.com/2012/12/07/competition/ on 10 April 2013.
The Economists (2010), “Uniquely positioned”, Retrieved from http://www.economist.com/node/16436304 on 10 April 2013.
The Wall Street Journal (2013), “H;M struggles to compete in high-street fashion”, Europe Business News, March 15 2013, Retrieved from http://www.nasdaq.com/article/hm-begins-to-struggle-to-compete-in-high-street-fashion-20130315-00141 on 15 April 2013.
Uniqlo (2013), Retrieved from http://www.uniqlo.com/us/ on 25 April 2013.
Remember. This is just a sample.
You can get your custom paper from our expert writers