Once a fast fashion pioneer known for its rapid expansion and global acumen, budget-friendly brand H&M is having trouble keeping up with e-commerce. After reporting its lowest sales in six years, the Swedish label said it would drastically decrease the number of store openings going forward. Though it now hopes to play catch-up both online and in-store — will H&M’s plan be enough to reckon with the rapidly-evolving e-commerce environment?
Despite being a latecomer to the e-commerce game, the Gifted brand eventually invested heavily in expanding its e-commerce. However, it did not apply the same improved practices for sister brand COS, as observed in L2’s Digital IQ Index: Specialty Retail. This could indicate the strategy behind Afound, its new physical and digital offshoot that will sell discounted products from both external and sister brands, including COS. Along with closing down unnecessary stores, H&M is pinning its hopes on Afound to help eliminate H&M’s overstock of inventory, which rose 6% in 2017.
An additional component of their online overhaul, H&M is also partnering up with Chinese e-commerce platform Tmall later this year. H&M currently has an online presence in 43 countries and a physical presence in 69, underscoring the importance of global reach to the brand. Its partnership with Tmall opens it up to the sizable Chinese market.
While H&M’s 2018 strategies signal hope for their declining sales, they also carry high risk; Afound has the potential to cannibalize H&M’s existing business while a rigid supply chain might not be able to keep up with online expansion.