H&M Company Analysis

Ecommerce project

Siham Affar, Gabriel Niculita, Alix Judalet

17/05/2015

Company Description:

H&M is a multinational that specializes in clothing and cosmetics. It’s one of the leaders on the front of affordable fashion. The company has their base in Sweden, but in 2014 it had about 3200 stores in 54 countries.

Their clothing lines vary from basic to business chic, and they have everything in between, including underwear and accessories. Their broad offer of clothing makes sure they reach a large target audience.

H&M does not own their own factories but has a large network of their own designers which design the clothes for the company.

Main clients

As mentioned before, since the company offer such a wide variety of clothes for men, women and children, they reach a large part of the population with their affordable clothing lines. Yet, their largest part of customers are women of the younger age group.

Market analysis:

H&M operates in the low price, high fashion end of the clothing industry. Its main competitors include Zara, which is about 60% more expensive than H&M but still reaches the same target audience. However, the budget stores such as Primark and Forever 21 have shown a rapid growth in the recent years, but can explain the declining sales of H&M.

H&M is trying to grow by opening more stores over the world but also by expanding online. They recently opened their online shop and currently it’s available in 21 countries, but they are trying to open more and more e-shops in other markets as part of their growth strategy.

Main competitors:

In the textile market, the number of competitors is extremely high and the offer really diversified. H&M market strategy is based on low prices, quality and fashion for men, women and children of all ages. Even though their more important customers are young women from 15 to 30 years old.

In this part of the market we can see that H&M is situated in between leaders in the low cost market such as Primark, Terranova, Gap, etc… and Stradivarius or Bershka that are a little bit more expensive and finally Zara, Mango or either The Kooples that are more expensive and less affordable.

Fashion

Price

H&M

H&M positioning:

Competitive advantages of the firm:

A multi canal strategy Relocation : lower production costs and price competitivity Powerful and efficient communication « fast-fashion » : rapidity of production and thus new products that follows new trends in

fashion. Strong presence worldwide with more than 3,500 stores in 58 markets. Sustainable development : Production and delivery that takes care of the environment, use

of biological products…

Market strategy of the firm:

The company is a pioneer of “fast fashion”, a term used to describe clothing collections which are based on the most recent fashion trends and which are designed and manufactured rapidly, are affordable, and are aimed at a majority of consumers. This is one of their way to differentiate from their competitors and to segment the market.

In fact, the target customers of H&M are fashionable and trendy consumers who see shopping as a social activity that offers pleasure in their life. They want to follow the trends and acquire the most fashionable without investing a lot of money. In order to satisfy this need for customers, H&M launched what is called EDLP (Every Day Low Prices) products.

To maintain the low price policy, H&M has to relocate its production, and give up some customer service. In fact, fitting and cashier usually have long queues. Sales staff is relatively less numerous as

compared to the number of customers. It is not easy to get help when you have problems or issues with the brand.

Except from the price, to differentiate themselves from their competitors, H&M invest also a lot of money on its advertising campaign and to be seen as a fashion brand, they use famous stars or designers either to be their partners or their representation in ads. (Lately, David Beckam and Beyonce were representing the brand and some of their collections were created in collaboration with Karl Lagerfeld).

As shown in the concept of indifference curve, there are two important variables in the customer purchase decision which are psychological identification, preferences, and product price. As a result, the strategy of H&M is successful in making the combination of a great design and an inexpensive clothing range of products.

H&M type of e-commerce and revenue model:

H&M is a B2C company because it sells goods directly to consumer via website or via physical stores. H&M uses a selling revenue model getting its revenue by selling goods to consumers. H&M is a bricks and clicks company because it has online distribution chanel and also physical stores.

H&M is also a mobile commerce company, because consumers can buy goods via their smartphones and tablets.

H&M website:

Sweden-based Hennes & Mauritz AB, or H&M, is planning to sell online in nine more European countries by the end of the year. The move is part of a recent e-commerce push that included a more robust web site and steps to connect its web and mobile assets with its stores.

Payment Methods:

Swedish company H & M has two methods of payment to pay off purchases: cash on delivery or payment by card. H & M does not accept any payments made in advance and the minimum age to shop on hm.com is 18 years.

Cash on delivery - simple

Pay cash upon receipt of order. Payment is made by the courier service representative.

Credit cards - fast and reliable

• accept Mastercard or Visa symbol.

• For safety, all transactions are encrypted.

• The card will be debited only after the customer's order has been shipped.

If credit card transaction is approved, the amount will be immediately blocked on the card and the customer will receive an order confirmation by e-mail. The card will be debited when the order will

be shipped. If the customer returns an article, debit balance on the card will be returned. If a card transaction is not approved, the customer's order will be canceled

H & M supports the following cards: Visa and MasterCard

H & M guarantees the protection of customer data. All information is sent in encrypted form to ensure total security of any sensitive information..

Shopping card

For card purchases made at H & M to be as safe as all information is sent in encrypted form using secure SSL protocol. This means that information is transmitted over a secure connection and customer card details can not be read by third parties. For credit card purchases, H & M is collaborating with an authorized payment agent who helps directly the customer's bank to verify if the card is accepted for purchases. Paying Agent processes the customer's card details correctly and in accordance with international security standard PCI DSS, which was created by card companies VISA, MasterCard, Diners, American Express and JCB.

This means that the customer's card details are processed with a very high level of security. When the customer pays by credit card, H & M makes an identity check.

A one-time customer-to-vendor payment is commonly used when you shop online at an e-commerce site, such as Amazon. You click on the shopping cart icon, type in your credit card information and click on the checkout button. The site processes your credit card information and sends you an e-mail notifiying you that your payment was received. On some Web sites, you can use an e-check instead of a credit card. To pay by e-check, you type in your account number and your bank's routing number. The vendor authorizes payment through the customer's bank, which then either initiates an electronic funds transfer (EFT) or prints a check and mails it to the vendor.

Cards could be seen as the 'key' to the consumers bank account, whether it is a deposit (debit), a loan (credit) or a stored value (prepaid). Cards can be used to 'unlock' and transfer the shoppers money to the online merchant. The most common worldwide used and accepted credit and debit card brands are VISA, VISA Electron, VISA Debit, MasterCard, MasterCard Debit, Maestro, American Express, Diners Club International, Discover, JCB and UnionPay. Next to these globally recognised card brands, there are also country or region-based card brands like Hipercard in Brazil, BC Card in South Korea, Dankort in Denmark and Carte Bleue in France.

We subdivide card payments into credit card, debit card, prepaid card and gift & loyalty card payments. These 4 card payment types have different characteristics which justify separate classification. They differ in terms of usage, scale, accceptance, regionality, security, costs, liabilities and more.