- Digital disruption and changing consumer behaviours are upending the traditional retail model, leaving established players battling to stave off competition from e-commerce upstarts with lower costs and more efficient business models
- H&M group is battling shrinking profits and sluggish growth that have left it with a $4 billion inventory problem
- The company’s years-long transformation strategy is beginning to pay off, but this is still a work in progress. Sales are improving, but inventory remains at elevated levels
LONDON, United Kingdom — H&M group’s cheap-but-trendy offering helped it dominate the high street for much of the last twenty years. Now, it’s struggling to keep from falling out of fashion.
This case study explores H&M Hennes & Mauritz AB’s long-term strategy to survive and thrive in the new retail paradigm. It’s among a cohort of established players scrambling to adapt to changing consumer behaviour and the rise of e-commerce — trends that are re-making the high street.
Faced with an onslaught of competition from digitally-native players with lower costs and more efficient supply chains, the fast-fashion giant is battling sluggish growth and shrinking profits. Its inventory levels have ballooned into a $4 billion problem — a potent and costly symbol of the challenge at hand.
The company’s recognised the need for sizeable, long-term investments in order to keep pace with digitisation and meet evolving consumer demands. Its years-long transformation has focused on key pain points that are affecting retailers across the sector. To combat its digital deficit, the company has spent billions upgrading its online offering and logistics infrastructure. As retailers struggle to maintain profitability at physical locations, it’s expanded its store footprint tactically, closing challenged locations and taking steps to improve the customer experience at key sites.
In a rapidly changing market, can a global retailer that has fallen behind the times survive? The Business of Fashion examines why H&M group is struggling, and how its transformation strategy is playing out.