What made H&M so successful?
Lessons from the Swedish fast fashion giant
Fashion and affordability don’t often go hand in hand. Yet H&M seems to have deciphered the riddle of combining cheap prices with the latest runway trends.
Through a mixture of creative marketing, fast production, and a short product life cycle, H&M has grown into one of the most recognizable brands in the world.
So how did they go about creating a sustainable business model? How did they become so recognizable? And perhaps most importantly, what are the secrets behind H&M’s success?
The Beginnings
Following WWII, Erling Persson went on a road trip across the United States, where he noticed a growing trend of women’s fashionwear.
Sensing a business opportunity, upon returning to his native Sweden in 1947, he founded Hennes (“Hers” in Swedish). The idea was to create a cheap womenswear store to make designer clothing accessible to all classes.
As the newfound fast fashion industry grew, Hennes began expanding across the country. By the 1960s, the brand noticed a gap in the market for menswear. Rather than growing organically, Hennes acquired Mauritz Widforss, a hunting apparel retailer. This led to a menswear collection and a name change to Hennes & Mauritz (H&M).
H&M has since grown into one of the most recognizable brands in the world. As of 2019, the H&M Group (the parent company) has around 180,000 employees, 4,500 stores, and $25 billion in sales. In the process, the Persson family has amassed a fortune of over $20 billion — placing Stefan Persson (Erling’s son) as one of the 100 richest people in the world.
H&M’s Business Model
Ranging from collaborations with luxury designers to investing in a growing industry, here are four key differentiating factors that give the brand a competitive advantage:
1. Fast Fashion
Though fast fashion is now mainstream, a couple of decades ago the concept was completely foreign. Back then, shopping for clothes was something people would save up for and buy only on special occasions.
That’s until the likes of H&M, Zara and Gap began selling the latest runway trends at affordable prices. This opened up a whole new clothing line as people from all social classes could suddenly afford the luxury designer clothing.
As an increasing portion of the consumers turned their eyes to fast fashion, H&M was perfectly placed to capitalize on the growth of the middle-class.
2. Collaborations
To market the brand as a luxury fashion alternative, H&M has a yearly collection with a luxury designer house. This has been a key differentiator for them against the likes of Zara and Uniqlo which rarely have collaborations.
Since the phenomenon kicked off in 2004, among the most iconic cases are H&M’s collaborations with Versace, Balmain, and Karl Lagerfeld.
To generate hype for each new campaign, the brand keeps items relatively scarce, endorses celebrities, and leverages its social media presence.
3. Short product life cycle
Like most fast fashion retailers, H&M purposely creates a short product life cycle. Though this is a risky strategy, if executed well it gives H&M an edge over competitors in two key areas: reducing the number of discounted products and generating higher customer traffic.
Reducing the number of discounted products
Though H&M does have discounts, it’s in their interest to avoid them wherever possible — as they have with collaborations.
That’s where having a short product life cycle is advantageous for creating a sustainable business model. When products are only displayed for a couple of weeks, customers are quick to buy on the spot instead of holding back for potential discounts. In their minds, taking the risk of waiting could mean missing out on buying the products in the future.
Generating higher customer traffic
The typical customer visits a fashion store once per season (four times a year) to check out the newest clothing. However, in fast fashion, H&M’s short product life cycle translates into customers popping into the store a lot more often as they’re eager not to miss out on the latest designs. This generates above-average customer traffic, which in turn maximizes the odds of a purchase.
4. Store Locations
H&M, as with many other fashion retailers, strategically locates stores in the busiest shopping districts in an attempt to get as many views as possible. In a way, this serves as an advertisement with an unlimited lifespan. Conversely, the conventional advertising routes such as TV, newspaper, or sponsorship only have a limited lifespan.
H&M currently has numerous stores in prized locations worldwide. Among the most sought-after are: Bond Street in London, Ginza in Tokyo, and Fifth Avenue in New York City.
Additionally, the company intentionally places its stores next to high-end designer brands such as Louis Vuitton, Chanel, or Dior in an attempt to elevate the image of the H&M brand.
Difficulties
In 2013, Spain’s Inditex — the parent company of Zara — overtook H&M’s title as the world’s biggest fashion retailer.
Though H&M still has a stable footing in the fast fashion industry, strong competition from the likes of Zara, Uniqlo, and Primark are reducing its market share.
On the e-commerce front, newcomers such as ASOS, Zalando, and Zappos are also turning out to be stiff competition.
Top Takeaways
- There are always people, places, or industries with a growing momentum. Putting yourself in a rapidly growing area can open up opportunities. For H&M, that has clearly been the fast fashion industry.
- Though conventional advertising still has a time and a place, a store in a prized location is an invaluable way to create brand awareness — if you can afford the investment.
- A short product life cycle gives customers a sense of urgency to buy your products. Though it’s risky, if executed well you’ll benefit from fewer discounts and higher customer traffic.
Although Zara is currently leading the way, the growing importance of Environmental, Social, and Corporate Governance (ESG) may dictate whether H&M will regain the fast fashion throne.
Further Readings
If you enjoyed this article, feel free to check out the article I wrote on H&M’s competitor, Uniqlo:
