Sometimes change causes short-term pain. In H&M’s case, its investment in an initially troublesome logistics system (one that required “intensive work” in 2018) set it back for a while and badly hit its bottom line. Only now is it reaping the benefits.
The Swedish-headquartered company is the world’s second-biggest fashion retailer. It says that its revamp, needed to meet growing online and budget competition, is finally delivering by supporting its move towards a more digital strategy, as it reviews its mix of stores and brands and closes some H&M stores.
The upgraded system is part of H&M’s work to increase the speed of its supply chain, and was introduced in the US, France, Italy and Belgium in spring 2018.
Chief executive Karl-Johan Persson said subsequently: “Our online sales and our newer brands performed well but the weakness was in H&M’s physical stores, where the changes in customer behaviour are being felt most strongly and footfall has reduced, with more sales online.”
The plan from here? To continue to invest in new technology and ways of working. “The efficiency of our supply chain has always been a strength but it must mirror our customers’ fast-changing needs. We are investing further to get even faster, more flexible and more responsive,” added Persson.
H&M’s technology foundation includes: building scalable, robust platforms; faster development of consumer-facing apps; and broadening its use of technologies such as cloud, RFID and 3D.
The retailer’s new IT infrastructure has so far brought the average lead-time on bringing products to market down by 15% to 20%. The system connects all stores with corporate logistics, procurement systems and the central H&M warehouse. It also integrates the design and product development teams, enabling a transparent view of the commercialisation process.
Another advantage that derives from H&M’s tech and logistics overhaul is becoming more flexible about the inventory it carries at individual stores – backed up by
more targeted and smarter merchandising.
With more than 4,000 stores worldwide, H&M is also using big data and artificial intelligence (AI) to analyse returns, receipts and loyalty card data – thereby starting to tailor its merchandise more precisely to the profile of product sales in each store. Such a localisation strategy can be hard to execute for a global chain like H&M since its model is based in part on leveraging economies of scale with its global network of suppliers.
But it is clearly achievable and well worth doing with the right tech in place. Their current tech lineup includes automated warehouses to support next-day delivery for 90% of the European market, with the subtlety in the system being enabled by algorithms, data and RFID tags.