Industry

H&M reports shift towards online and digital

H&M today said that it saw a clear shift towards online and digital in its latest financial year, although it also it still made financial sense to continue to invest in stores.

Here are some of the key themes that emerged from full-year results in which the fashion retailer, a Top100 retailer in IRUK Top500 research, reported sales of SEK 222bn (£20.3bn) in the year to November 30 were 6% up on the same time last year, but pre-tax profits, after one-off costs of SEK 24bn (£2.2bn) were 12% down on last year following increased costs and rising levels of markdowns.

Expansion online and offline
By the end of the year, H&M sold online in 35 markets, 11 more than at the same time last year. Its latest online markets were Canada and South Korea, which had a “very good start”. Offline, it had 4,351 stores in 64 markets, following the addition of 427 new stores. In the year ahead, it plans to open 430 new stores in markets including Iceland, Kazakhstan, Colombia and Georgia, while opening ecommerce stores in six new markets: Turkey, Taiwan, Hong Kong, Macau, Singapore and Malaysia.

H&M chief executive Karl-Johan Persson said that ecommerce represents “a significant share of our total sales in several markets”. But he also says that “being close to the customers is key to success and even more important as the physical and digital world become increasingly integrated.” Investment in new stores will see an early return on investment. “In view of this,” said H&M, it is only natural for us to continue expanding with our physical stores too.”

Persson said the last year was characterised, “by the shift in the industry towards an ever-growing online market and by digitalisation. We are very pleased that our online business developed very well for all our brands, both as regards sales and profitability. From an already high level we took further market share, which clearly proves that our investments in our online business have been successful. Our brands COS, & Other Stories, Monki, Weekday and H&M Home had apart from strong online sales growth also very good store sales.”

Omnichannel strategy
H&M aims to bring the digital and physical worlds closer together to give customers “a more seamless shopping experience”. That includes enabling shoppers to pick up and return online purchases in the store, and to pay via mobile. Mobile will also be a focus as a way of delivering online service, while loyalty, in the form of the customer club, will also be a tool to deliver service across channels.

Fulfillment
Next-day delivery, now available in five markets, will expand over the coming year. H&M now offers delivery time-slots in Japan. The retailer says it is upgrading its supply chain to make it faster and more flexible, investing in RFID technologies and in automated warehouses.

Advanced analytics
The retailer has started to introduce algorithm-driven advanced analytics that it says will contribute will “contribute to improvements within everything from assortment planning and logistics to sales”. It says that by investing it positions itself for long-term and profitable growth.

What the commentators say
Steve Baggi, co-founder and head of retail at Green Park, said: “Retail companies increasing their sales growth year on year are the ones adopting innovative business models and that are committed to a capital investment in new technologies. The winners are those that are increasingly integrating the brand shopping experience, rather than viewing online and offline as separate discrete channels.

“It’s therefore interesting to see that H&M will ‘rephase’ its store expansion target, in favour of a sales growth target. The boundaries are blurring between retail, technology and media and this will not just have an impact on the market place, but on the skills within it too. This year we expect many CEOs to shake things up in order to keep up with the online competition and build customer loyalty.”