August 1, 2013
Will H&M Be an Instant Success Online?
H&M may be in the fast-fashion business, but the company has been painfully slow in launching an e-commerce site here in the U.S. The chain finally went live with its site (www.hm.com/us) today with low prices ("Must Haves From $4.95") and a limited free shipping offer for those who sign up to receive its e-newsletter.
The chain has been on a fast track with store openings in the U.S., but has been criticized for not getting its e-commerce act together and falling behind rivals, from Amazon.com to Zara. A RetailWire poll in September of last year found that 66 percent thought that e-commerce was important to H&M’s growth prospects in America.
For its part, H&M management has always insisted on getting its site right rather than getting it online fast. The Wall Street Journal cited a recent interview with Nils Vinge, head of investor relations with H&M, who discussed the complexity of operating an online site in the U.S. "We couldn’t just copy and paste the online shops that we operate in Europe … our volumes are so large," he said.
There remain concerns about whether H&M can profitably manage a U.S. e-commerce site.
"H&M is low-price, quite low-margin and makes it work by selling very high volumes. An issue with that is very high costs for shipping and, most significantly, returns. It’s a particular problem in the U.S.," Neil Saunders, a consultant with Conlumino, told Reuters. H&M intends to charge for returns, a potential deterrent for online purchasing.
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Discussion Questions
What will H&M need to do online to make up ground on its rivals? Where do you think it will face its biggest challenges to success in the U.S. e-commerce market?
Poll
H&M will not just make up ground — they will take ground from their rivals. H&M is an aggressive retailer that has solved many of the design-to-supply-to-sell challenges. Many of their competitors are still dealing with supply chain challenges and H&M is past them. They own loads of the target market’s mindshare from their stores, assortments and marketing. This new online commerce channel drive will set them ahead of many competitors.
In the USA, their challenge will be distribution—shipping it fast and going deeper into their target segments….getting more H&M “wearers” in North America.
I think H&M online is a bit like the grocery business in home delivery…the market is there, but it’s not clear it will be profitable. H&M’s price points are so low (I mean, like crazy low) that the cost of creating the images, updating the web site, single picking and shipping is liable to eat up all the margin. And because it’s “fast fashion,” by the time they get the stuff online, it’ll be time to sunset it.
If the company can figure out how to make money at it, it will be wildly successful.
From their perspective, H&M is not looking to make up ground. I think they are trying to hold their ground with a few adjustments, like the establishment of an ecommerce website. I think they are taking a page from Paul Anka’s song (for Frank Sinatra) and doing it their way.
It seems that H&M recognizes unique challenges in the US. Hence they want to ensure they maximize profits while providing some US necessary ecommerce components to complete (to shoppers) H&M services. Given their price points and dependence on extraordinary volume, they are not taking the position of the throwing it against the wall and seeing if it sticks.
H&M is betting on “Slow but steady wins the race.”
Enough with the clichés. Sorry.
About 7% of all retail sales is via e-commerce, but 44% of all retail sales are “web-influenced” and for the apparel category, over 70% of all sales are “web influenced.”
So H&M’s success is going to be predicated on how well H&M is able to delivery the pre-sales digital experience that its customers are seeking. We’ll all know pretty soon, but the kind of elements of their site I’ll be keeping a close eye on:
- Fitment issues – Will they offer virtual models, fitment databases, user generated fit feedback issues, in-store or in-home measurement tools, etc.?
- Social – Will they be able to deliver useful social proof in a category with a highly dynamic short lived inventory? Encourage user generated content and sharing?
- Fulfillment – How fast will they ship? Will they charge for shipping? Will they offer in-store inventory data online? Seamless buy-online pickup in store, etc.?
- Ease & Speed – Will they store personal preferences and payment info to offer a frictionless checkout process? Will they adapt the wide variety of devices I use to shop with, and recognize me across those devices? Will their site be fast?
In general, apparel has emerged as one of the more innovative categories for e-commerce experiences, so the bar is high. I look forward to seeing what H&M brings to the table.
H&M’s customers have been waiting to buy online. (And judging from the line of 200 people waiting for my neighborhood H&M’s grand opening, they’re very impatient.) If they do it right, their competitors will be very unhappy….
Let’s reframe this question within the context of omni-channel retail, not simply the launch of an ecommerce site. Omni-channel retailing, for any brand, is the effort to create a seamless, coherent, and consistent brand experience across all brand touch points. For a retailer with an experiential brick and mortar element, this becomes a significant challenge.
H&M is not simply fast fashion. That is what they do, not how they do it. My visits to H&M stores during high traffic periods indicate an almost frenzied-like experience as the target demo dives in to try to find that amazing bargain they just know is there somewhere. Unlike many apparel experiences, H&M doesn’t always feel like a destination choice: it feels like a “target of opportunity” experience for its consumer. There is almost definitely a social and experiential aspect to the shopping visit.
Capturing that in a website is a huge challenge. Creating that sense that just on the next rack might be something amazing, or on the next table, or up the escalator…that’s key to maintaining brand continuity. Online apparel doesn’t need another site to buy sweaters, tank tops and denim. It doesn’t even really need a cheap place to do that. In many ways the web is a great leveler when it comes to price in that brick and mortar merchants challenged with creating an engaging shopping experience don’t struggle as much online. It’s not hard to keep a web page clean and no one has to be paid to straighten racks and pick stuff off the floor.
H&M needs to think in terms of differentiating the experience, beyond the mechanics of path to purchase on conversion optimization. There is no doubt that H&M will find, as almost all websites do, that one of the primary roles of the site is to advertise the brand and drive in-store traffic. That said, it becomes paramount to maintain the omni-channel experience.
Yes, free shipping and returns are a fact of life for ecommerce economics. However, as insiders will tell you, the actual cost of those things is really not a deal killer, and even with free shipping offered, the use of thresholds and qualifiers often generates shipping revenue to help offset.
Don’t worry about those elements. Worry instead about creating an extension of the H&M real-world experience online.
If H&M can pull it off, it’s not about making up ground. They already have the customer base.
And, it’s not about challenges in eCommerce. It’s more about how they will use their website to meet their customers’ expectations without losing their shirts in the process. I’m in a ‘wait and see’ as to what and how much product they may actually offer for sale online.
“H&M is low-price, low-margin and and makes it work by selling very high volumes.” Gee, that sounds like the perfect model for online retailing. Online retailing provides a very efficient sales to inventory ratio and it eliminates in store overhead. Online retailing matches up well with the H&M demographics of a younger population.
This retailer will be successful, assuming they can get online execution correct. And, there is no reason why they can’t.
H&M’s fast-fashion merchandising philosophy translates to “low-risk fashion” for the online buyer. It’s inexpensive, wasn’t going to be a long-time staple in a wardrobe anyway, and is often an impulse buy. All of these characteristics translate well to an online model.
Can H&M be as appealing online as in their stores? As long as they can execute by keeping shipping low, fulfillment fast, visuals crisp—all the essentials of online efficiency—then the answer is yes. And for areas without access to an H&M store the online channel will be a big hit.
H&M’s loyal (and large) customer base couldn’t care less about making ground on its rivals or any potential hiccups. Loyal customers will shop online and I would venture to say it will not not steal from other sites, rather it will bring new customers to online shopping.
The biggest challenges will be long term, when customers start migrating to other sites looking for better quality goods.
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H&M will not just make up ground — they will take ground from their rivals. H&M is an aggressive retailer that has solved many of the design-to-supply-to-sell challenges. Many of their competitors are still dealing with supply chain challenges and H&M is past them. They own loads of the target market’s mindshare from their stores, assortments and marketing. This new online commerce channel drive will set them ahead of many competitors.
In the USA, their challenge will be distribution—shipping it fast and going deeper into their target segments….getting more H&M “wearers” in North America.
I think H&M online is a bit like the grocery business in home delivery…the market is there, but it’s not clear it will be profitable. H&M’s price points are so low (I mean, like crazy low) that the cost of creating the images, updating the web site, single picking and shipping is liable to eat up all the margin. And because it’s “fast fashion,” by the time they get the stuff online, it’ll be time to sunset it.
If the company can figure out how to make money at it, it will be wildly successful.
From their perspective, H&M is not looking to make up ground. I think they are trying to hold their ground with a few adjustments, like the establishment of an ecommerce website. I think they are taking a page from Paul Anka’s song (for Frank Sinatra) and doing it their way.
It seems that H&M recognizes unique challenges in the US. Hence they want to ensure they maximize profits while providing some US necessary ecommerce components to complete (to shoppers) H&M services. Given their price points and dependence on extraordinary volume, they are not taking the position of the throwing it against the wall and seeing if it sticks.
H&M is betting on “Slow but steady wins the race.”
Enough with the clichés. Sorry.
About 7% of all retail sales is via e-commerce, but 44% of all retail sales are “web-influenced” and for the apparel category, over 70% of all sales are “web influenced.”
So H&M’s success is going to be predicated on how well H&M is able to delivery the pre-sales digital experience that its customers are seeking. We’ll all know pretty soon, but the kind of elements of their site I’ll be keeping a close eye on:
In general, apparel has emerged as one of the more innovative categories for e-commerce experiences, so the bar is high. I look forward to seeing what H&M brings to the table.
H&M’s customers have been waiting to buy online. (And judging from the line of 200 people waiting for my neighborhood H&M’s grand opening, they’re very impatient.) If they do it right, their competitors will be very unhappy….
Let’s reframe this question within the context of omni-channel retail, not simply the launch of an ecommerce site. Omni-channel retailing, for any brand, is the effort to create a seamless, coherent, and consistent brand experience across all brand touch points. For a retailer with an experiential brick and mortar element, this becomes a significant challenge.
H&M is not simply fast fashion. That is what they do, not how they do it. My visits to H&M stores during high traffic periods indicate an almost frenzied-like experience as the target demo dives in to try to find that amazing bargain they just know is there somewhere. Unlike many apparel experiences, H&M doesn’t always feel like a destination choice: it feels like a “target of opportunity” experience for its consumer. There is almost definitely a social and experiential aspect to the shopping visit.
Capturing that in a website is a huge challenge. Creating that sense that just on the next rack might be something amazing, or on the next table, or up the escalator…that’s key to maintaining brand continuity. Online apparel doesn’t need another site to buy sweaters, tank tops and denim. It doesn’t even really need a cheap place to do that. In many ways the web is a great leveler when it comes to price in that brick and mortar merchants challenged with creating an engaging shopping experience don’t struggle as much online. It’s not hard to keep a web page clean and no one has to be paid to straighten racks and pick stuff off the floor.
H&M needs to think in terms of differentiating the experience, beyond the mechanics of path to purchase on conversion optimization. There is no doubt that H&M will find, as almost all websites do, that one of the primary roles of the site is to advertise the brand and drive in-store traffic. That said, it becomes paramount to maintain the omni-channel experience.
Yes, free shipping and returns are a fact of life for ecommerce economics. However, as insiders will tell you, the actual cost of those things is really not a deal killer, and even with free shipping offered, the use of thresholds and qualifiers often generates shipping revenue to help offset.
Don’t worry about those elements. Worry instead about creating an extension of the H&M real-world experience online.
If H&M can pull it off, it’s not about making up ground. They already have the customer base.
And, it’s not about challenges in eCommerce. It’s more about how they will use their website to meet their customers’ expectations without losing their shirts in the process. I’m in a ‘wait and see’ as to what and how much product they may actually offer for sale online.
“H&M is low-price, low-margin and and makes it work by selling very high volumes.” Gee, that sounds like the perfect model for online retailing. Online retailing provides a very efficient sales to inventory ratio and it eliminates in store overhead. Online retailing matches up well with the H&M demographics of a younger population.
This retailer will be successful, assuming they can get online execution correct. And, there is no reason why they can’t.
H&M’s fast-fashion merchandising philosophy translates to “low-risk fashion” for the online buyer. It’s inexpensive, wasn’t going to be a long-time staple in a wardrobe anyway, and is often an impulse buy. All of these characteristics translate well to an online model.
Can H&M be as appealing online as in their stores? As long as they can execute by keeping shipping low, fulfillment fast, visuals crisp—all the essentials of online efficiency—then the answer is yes. And for areas without access to an H&M store the online channel will be a big hit.
H&M’s loyal (and large) customer base couldn’t care less about making ground on its rivals or any potential hiccups. Loyal customers will shop online and I would venture to say it will not not steal from other sites, rather it will bring new customers to online shopping.
The biggest challenges will be long term, when customers start migrating to other sites looking for better quality goods.