H&M 2014 Predictions

Here are our top predictions for H&M’s progression in 2014:

Sustainability

2013 saw H&M making a marked effort to repackage itself into a sustainable, quality-focused enterprise. From launching its new brand & Other Stories, an ode to slow fashion and investment pieces, to seizing control of two factories in Bangladesh and Cambodia and pledging fair wages, it is evident that the company is evolving away from its ‘disposable fashion’ persona.

The commitment to sustainability will continue to be a core aspect of H&M’s strategy in 2014, both in terms of supply chain and branding. We expect price increases are on the cards; both on account of ongoing commitments on the sustainability front, and the desire to extract sales from higher price tiers as competition at the economy end of the market intensifies.

Design Credentials

In terms of designer collaborations, the H&M brand’s pièce de résistance, 2013 saw a sure hit in the form of the Isabel Marant partnership. But with such collaborations becoming a dime a dozen in the global marketplace, we expect H&M to shift attention towards emphasizing its own design expertise.

Case in point: the brand’s “Paris Fashion Week” collection, which was launched a whole season after it was shown during Paris Fashion Week. This was an interesting retrograde from the fast fashion business model, mimicking the traditional cycles of luxury fashion brands. Additionally, there was the Mauritz Archive collection, which could also pave way for further development in the menswear category.

We also expect further segmentation under the H&M label. The launch of the sportswear range in 2014 presents a compelling future growth story. There is potential for further expansion of H&M Kids and H&M Home (whose standalone presence both lag behind Zara’s Kids and Home fascia).

International Expansion

While H&M’s target of increasing sales in comparable units proved tough in 2013, it was successful with its international expansion strategy, with 365 new stores. China and the US were the hotspots for store openings.

China was home to H&M’s 3000th store. The forecast China slowdown has not curbed the company’s appetite for store expansion in the region. In the US, H&M has been a key beneficiary of the ongoing woes of the teenage retailers like Aéropostale, Abercrombie & Fitch and American Eagle Outfitters. The brand is cheap but fashion-forward, providing the perfect personal style fodder for cash-strapped teens and young adults.

2014 is set to see H&M expand into new territories, including the Philippines and Australia. Having finally received the go ahead from the Indian government in late 2013, India is likely to be next on the cards.

Online Presence

Online will be an essential piece of the puzzle for H&M in 2014. The H&M brand’s online presence remains underdeveloped compared to key rivals, operating in only 9 European markets and the US. With online sales soaring in both mature and developing markets (especially Asia), developing e-commerce alongside its rapid store expansion would be an optimal strategy for H&M.

H&M needs to strengthen its online presence to capitalise on the growing presence of the omni-channel customer who uses a combination of online, in-store, and mobile devices to make purchases. These discerning consumers will expect to find a consistent brand message, pricing and product offering across all platforms, and failing to deliver could see H&M lose share to more agile rivals.