H&M Anlysis

 

INTRODUCTION

 

I decided to choose the company « H&M » for several reasons. First, I really believe that it is a succesful company in all around the world on which we could say a lot of things in terms of marketing strategy but also in terms of ethical issues.

 

Then, I think that we are or we all have been, at least for once, consumers of their products. But most of the people don’t really know what there is behind this success and what does the company to be and to stay so competitive. That’s why an analysis of the 7P’s is really interesting to have an idea and a sight on their marketing which is widely spread all over the world. In addition, I really think that we can also have a critical approach about their strategy and by this way, we could make some recommandations. 

 

1.   I.         Presentation of the company 

 

a)    The name : H&M « Hennes & Mauritz » 

 

b)    The logo : 

                                   

 

c)     Little history of the company[1] :

 

H&M was born in Sweden from a simple idea gained by Erling Perrson that was : « offering fashion to ladies at an affordable price ». From that simple thougth, and step by step, he established his first store in Vasteras, in Sweden, in 1947 and was first called « Hennes » which means in Swedish « for her ». In 1968, he bought the clothing brand « Mauritz Widforss » and from that purchase, was born the clothing chain for men and women that we know nowadays « Hennes & Mauritz ». The company name « Hennes & Mauritz » was rebranded to « H&M » because it was to long to prononce and in order to facilitate the approach with the brand name[2].

 

In the 70s, the company decided to expand their target by creating a specific department for children and teenagers. Moreover they didn’t want to stop here : they became that chain of stores that sells not only clothes but also own-brand cosmetics and accessories ! H&M launched a few chains and brands like « COS » (« Collection of Style »), « Cheap Monday », « Weekday », « Monky » and « H&M Home » for interior decoration.

H&M collaborated with many artists in fashion or show business such as Lagerfeld who has designed an exclusive 30 models of ready-to-wear, or Madonna and her sportswear line « M by Madonna » and just a few months ago, with David Beckham and the collection of bodywear « David Beckham for H&M »[3].

 

d)    Some key figures[4] : 

 

H&M operates in more than 40 countries and has over 2500 stores in 44 markets. They work with about 94 000 employees with the same objective : offering fashion and quality at the best price.

 

H&M’s collections are created by over 140 in-house designers with buyers, managers and pattern makers. The products are sold in stores, by catalog or internet but the « H&M shop on-line » is only available in some countries such as : Sweden, Denmark, Finland, Norway, the Netherlands, etc.

 

H&M has only 16 production offices around the world and works with 700 independent suppliers because they don’t have any manufacturing facilities. The production occurs in Asia for 60% and 40% in Europe. In 2011, H&M has achieved a turnover of SEK 128,810 million which represents approximatively 14 million euros[5].

 

e)    Their mission and objectives 

 

Their mission can be summarized in a simple quote : « offering fashion and quality at the best price ». There are two important words in this sentence that have to be explained : « quality » and « best price ».

 

The first one means for H&M that the customer has to be more than just satisfied by his purchase ; it means for them to manufacture products in good conditions which includes « a business that is economically, socially and environmentally sustainable »[6]. It is important that the client is satisfied by H&M not only for its products or outlets but also as a company.

 

Then, it is possible for H&M to ensure low prices through : the reduction of number of intermediaries, the purchase in large volumes, a broad and detailed knowledge of the design sector, fashion and textiles, the purchase of good product in the best market, the reduction of any costs at all levels and an efficient distribution system.

 

1.   I.         Analysis of the sector industry

 

The area in which H&M is part of is the textile and more precisely, the ready-to-wear or street fashion. It is a sector where the competition is really tough because the number of clothing brands is huge. This is a hyper competitive environment that facing the company, despite its undoubted success, from its « cheap prices » policy, H&M was always able to renovate itself notably by diversifying its products and by turning to the mid/high-end.

 

1.  II.         Analysis of the competition

 

H&M is the second brand which is the most known from Sweden in the world after IKEA, and the second biggest worldwide retailer.

 

Its direct competitors are for example P&K, C&A, M&S, Zara, JBC, Esprit, etc. and very recently, Zara Home and IKEA because H&M decided to sell products for interior design.

 

Its indirect competitors are basically specialized, independant stores or luxery brands such as Louis Vuitton, Dior, etc.

 

Comparison with its main competitor

 

Zara is a spanish retailer from the company Inditex[7] (the world biggest retailer) which posses also Massimo Dutti, Breshka, Stradivarius, Oysho, ect. Zara is the main competitor of H&M because of the concept and the style « Cheap & Chic »[8] but is quite more expansive.

 

 

 

1.    III.         SWOT Analysis[9]

 

Strength : ü The concept of chic at affordable price  ü The collaboration with top designers and also artists for endorsment  ü Their good initiatives strengten their brand image  ü The limited number of middlemen	Weaknesses : ü Lots of (sometimes, too much) clothes in inventory and it’s expansive for the shop ü Buying in large volume doesn’t always mean that everything will be sold ü The period after the sales : lost of benefits because everyone has made shopping for the sales
Opportunities : ü The awareness of environmental issues are nowadays a priority in more and more countries ü New big markets are ahead of the company such as China	Threats : ü Definitly its main competitor Zara but also the other outlets like GAP or C&A ü The current financial crisis and linked to that the social tension ü The taxes on import-export from a country to another

 

MARKETING STRATEGY

 

1.   I.         Segmentation – Targeting – Positioning

 

Before going trough the STP, it is important to mention what is the benchmark market : « the generic market here is defined by all the people who wants a modern and always hype fashion that is not so expansive but not too cheap ».

 

a)    Criteria for segmentation

 

H&M used diverse criteria to determine the segments on which they had to concentrate themselves :

 

ü  Socio-demographic : men and women, from babies to old people (up to 50 years old) but who has at least a « not bad » purchasing power.

ü  Psychographic : people who has an « young » attitude with interests for fashion and whose lifestyle defines his personnality.

ü  Behavioral : people who likes to be dressed up for either special occasions or casual situations.

ü  Geographic : they only consider locations where there is a high population density.

 

b)    Their Target

 

H&M does not have only one target but several targets ! Their targets could be divided into 4 categories : first and in particular adult men and women (because they have a purchasing power) but also babies, kids and teenagers, from 0 to 50 years old who love fashion and simplicity. And who want clothing at any sizes (even for pregnant women) which are for any kind of occasion and above all at good prices !

 

c)     Positioning

 

H&M is reputated  for positioning itself as a medium/high segment. But more and more, the brand is riding on a new trend called « masstige »[10]. In fact, this phenomenon allows consumers to afford a product with a certain degree of quality but at a very affordable price. The term « masstige » is a contraction of two words : « Mass market » and « prestige ». The masstige, is the mix between a prestigious side and a brand from « mass » consumption.

 

If we have to summarize the positioning of H&M one sentence after these elements, it would be : « At H&M, the concept is to provide a good quality fashion inspiring from upmarket brands adapted to customer needs and at the best price to be affordable to the mass market ».

 

• So what differentiates H&M from the other brands are the non-stop innovation of their products, the reliability, the design and the style, the fact that tey are unique (Lagarfeld, Madonna, Beckham, etc.) and probably the most significative, the accessibility in terms of prices. But more over, there are also other elements of positioning which distinct H&M from its competitor like :

 

ü  For the decoration : a specific atmosphere in each outlet.

ü  By its commitments : promote sustainable development by using organic cotton, they are committed to the UNICEF for the project called « All For Children »[11] or to the fight against disease « Fashion against AIDS ».

ü  Offers very advantageous discounts during the sales.

 

MARKETING MIX

 

1.   I.         P-Product

 

H&M is a company that only sells products and thus, no services. Indeed, it is a company whose goal is to sell clothes, shoes, accessories and cosmetics. Their promises are to introduce customers to a nice, chic accessible fashion. And to reach those promises, they make sure that their ranges of products will be so huge that, in each category, there will be several models :

 

ü  We are then talking about a « broad[12] » assortment because we have clothing for « everyone » : babies, children and adults, cosmetics and accesories.

ü  But they also have a « deep » assortment as there are, in every category, different models like[13] : « LOGG », « Basic », « Classic », « jeans & denim », « Mama » for pregnant women, « Modern Woman », « Everyday Woman », « Baby » and « Middle-Big Boy/Girl ». Cosmetics are constituted of makeups and creams for skin.

 

Concerning the delivery of those products to the stores, the company has a very performing delivery time. In fact, it only takes 12 weeks to get an item from the design to its retail whereas most of the retailers are usually 6 months which is far from what H&M needs[14]. 

 

As we have seen before, H&M had a lot of collaborations with few artists including top designers. With such positioning (price positioning), there can be a confusion in customers’ mind. But the reason why this strategy worked and still works, it’s because H&M plays on a symbolic representation with personalities (Lagarfeld, Vercase, Jimmy Choo, etc.) - whose brands are not affordable for everyone - and on the democratization of the price.

 

H&M has realized that the masstige is an effective technique for its image and turnover. By offering a luxury experience and creating such event every year with always different trendy and creative top designers, the popular brand creates a strong bond with its customers.

 

The consistency of the mix-product

 

To conclude, the mix-product is coherent and makes sense because it corresponds to the objective of the company. H&M wants to offer good quality products, which are permanently related with the characteristics and the image that the brand wants to give, namely products which flirt with « luxury » while being accessible to a wide public.

1.  II.         P-Price

 

As already said many times before, the accessibility is one of their (many) priorities. H&M is wary of its value-for-money image so as they want to offer products at affordable prices, they permanently seeks to minimize costs of suppliers and production plants. That’s why most of the items are manufactured in Asia where labor is cheaper in those countries and why they buy large volumes of items[15].

 

By analysing this matrix that is setting out the quality axis and the price axis to dertermine in which position is a company, the pricing strategies chosen for H&M are again coherent :

 

 

• Furthermore, we could also say that they apply a psychological pricing[16]. According to my observations, this method is very often used for almost every product in order to have a positive impact on customer’s mind by playing with the prices (4,95€ instead of 5€) so we can have the impression that it’s under the unit.

 

1. III.         P-Promotion

 

Communication is essential for H&M. The company chose to have a « pull » strategy by spending a lot of money on advertising to attract final consumers. As we may see on tv or out-of-home, H&M mainly uses mass medias to maintain its image and to communicate, but in the other hand, they also appeal to non-media advertising like direct marketing, internet or simply inside their points of sale. In both case, the two objectives are to keep their usual customers and to reach new potential clients (by promoting the masstige, for example).

 

For a company such as H&M, involvement in different associations is important and they prove it by manufacturing their products with organic cottons but also by promoting campaigns like « Fashion against AIDS[17] ».

a)    Above the line

 

ü  TV and Cinema : we’ve seen them very often, they make a lot of commercial spots for every release of new collections. Whether on tv or in the cinema, there are every season a new spot to promote their products. The most famous last one was about the underwears for men which David Beckham endorsed them.

ü  Press[18] : H&M uses other media namely the press, where we often find in women's magazines articles about H&M’s new collections. But also in newspapers with big pictures of their products or promotions during the sales.

ü  Out-door advertising[19] : a lot of posters are displayed in town, on buildings, in the street, in subways, at bus stops, inside public transports.

 

b)    Below the line

 

ü  In-store[20] : H&M is a good example of (visual) merchandising. We can immediatly see when we enter a store all the techniques used to catch the attention of the customer on their products. There are large posters, prices set in evidence, showcases, extraordinary decorations and « speaker » to inform customers about their return and refund policy or about the recruitment of employees.

ü  Website : it is mainly, with the social networks (Facebook, Twitter, Youtube, etc.), the most easiest and efficient way for the company to reach the target. We can subscribe to the H&M’s newsletter[21] to have « personal » information about the company (direct marketing), fashion news, to see their promotion actions or even their reductions.

ü  « Gift card » : this technique is more and more used by brands because it allows them to have (maybe) customers who never buy their products and thanks to those cards will (have to) buy products.

ü  Word-of-mouth : when advertising becomes free for companies. Indeed, this mean is a the cheapest and most delightful way for them to promote their products because they don’t have to spend a penny. Because a client satisfied is worth at least two!

ü  The impact of the stars : when an artist wears your clothes, it makes publicity for the clothes of the brand and in particular in direction to his fans. So this also an absolut good way to reach the target.

 

 

1. IV.         P-Place

 

« H&M » wants above all to locate in areas with a high population density, especially near the offices, in city centers and shopping malls. That’s why there are almost 2500 stores spread across more than 40 markets ! We can easily find one or more outlets in big cities and locations where there is a high attendance.

 

Distribution channel

 

Almost all their global outlets are owned and managed by the company itself. So it means that their boutiques have a very specific design of their own. Of course, the style depends on buildings (number of floors, rooms, etc.) but basically, they all have the same configuration.

 

 

We are then in a logic of an exclusive[22] distribution for the reasons that in the one hand, they limit their distribution to single outlets from their own and in the other hand, at the end of the chain, H&M wants to have the control. Indeed, thanks to the fact that H&M is owner of substantially all of its stores, all located in strategic places, the benefits are numerous, including full control of its image and the opportunity to have a high reactivity.

 

1. V.         P-Process

 

The client is part of the product so he is part of the process. He has to know what’s happening to be an involved client and a client well informed is a satisfied client. The meeting between the staff and the customer is then extremely important in order to satisfy a customer at any levels.

 

To ensure the delivery of the process, there are also facilitating services in store, which means all the elements that can make the process easier. Indeed, people can ask for responses, information or clothes that are not in store to any sales advisor.

 

Although global, H&M also recognises the power of local. Whereas other firms provide a ubiquitous retail experience with the same product range in San Francisco, Paris and Tokyo, H&M thrives on tailoring the ever-changing product mix to local tastes and buying preferences.

 

Indeed, weither in the USA or in Barhein or in Europe, H&M wants to respect all the different cultures and habit of a population. For example, there are strict restrictions in countries of Middle East about advertisements and their posters had to be photoshopped like the top model Gisele Bundchen on which she was too sexy for the population[23].

 

1. VI.         P-Physical Evidence

 

There are plenty of tangible aspects to prove the existence of the chain stores and one of them is the servicescape[24] of the store (the building itself, the fitting room, the clothing rods, the shop outside window, the displays, the cashiers, etc.) but there are still few other physical elements :

 

ü  Clothes are of course part of the physical evidences even if we can’t see it directly because they never put the logo on their clothes.

ü  As mentioned, H&M has more than 2500 stores across the world and the building in Sweden most known as the « White Room[25] ». Almost all their outlets are on their own and style of each store is quite the same. It’s not difficult to find an H&M wherever we are in town because there are always lots of advertisements around us. And the H&M’s logo is really clear so we can’t be confused by another brand logo because the graphic is unique and constitutes then a physical evidence.

ü  The employees participate also to the tangible aspects of the brand : they are present in store every weekdays and on Saturday.

ü  After the purchase, the cashiers put the clothes inside a plastic bag with the logo on it. There are different kinds of bags because of the sizes, the colours, the occasion (they also offer gift wrappings for girls or boys)

ü  The gift cards, as a good tool to promote the company, are also something tangible to define the company.

 

1. VII.         P-People

 

By people, we’re talking about all the actors who are participating to the process in-store. So everyone has to be involved because otherwise, the process won’t work properly. It concerns the customers but above all, the store employees. They are those who provide the « script ». In other words, it means that they inform, give advice, clean the departments, provide the products to the customers by simply filling the shelves, try to apply the company’s strategy because they are the mirror of the image of H&M.

However, according to my interviews, it appears that there is no real strong sense of identity from the employees for the company. Even though they want to represent the brand in front of the clients and work with somehow passion and professionalism, they don’t have neither a sense of belonging to the brand.

 

Anyway, each of them is able to give advice to customers ! Indeed, they have a period of training when they are hired but they’re permanently  training during the work to have the appropriate interpersonal skills, aptitude and the knowledge of the products and the strategy of the shop. A good contact with the client is one of their sale forces and consumers have to percieve the involvement of the employees so they will be satisfied thanks to a good communication.

 

To make sure that the process happens the way that it should be, it must have in each store a real structure with organizational, functional and hierarchical links between the workers. That’s why there is a organization chart[26] which regroups all the employees and defines to each one their specific functions.

 

Furthermore, even if the color recommanded is the color black, there is no specific uniform for employees and more over, some of the employees wears clothes from other brands. By the way, it is not a something wrong or a crucial element because everyone has a necklace with the logo H&M on it and with the name of the worker. And it is not something that disturbes clients. The most important is still the ability to communicate with them.

 

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