Retail Strategy ProjectMark 997

Faris Al Hammadi 3965296Hala El Jboor 4471702Karim El Marmari 4471490Nehl Abbasi 4031301Yasser Kayali 4031301

H&M background

• H&M is one of the most famous retail clothing in the world:- its originally from Sweden.

• It exists in 48 countries. - 104000 employees -The total stores ( 2776 ).

• The first store opened in "Vasteras" Sweden in 1947.

• The first store in Asia was in Dubai in 2006.

• H&M got the 2nd ranking as the largest global clothing retailer in the world.

Business description

- The main business concept is ( Fashion & quality at best prices )

- H&M doesn’t own any factories or stores ( Dealing with 700 independent suppliers & leasing instead of owning ).

- The growth target is to increase the number of stores by (10 to 15%) per year with increasing the sales in comparable units.

H&M core values :

- Simplicity & open minded.- Cost conscious.- Innovation & team work.

H&M financial performance 2011 2012 Year

109,999 120,799 Net sales

-43,852

-48,928 Cost of goods sold

66,147 71,871 Gross profit

60.1 59.5 Gross margin%

20,379 21,754 Operating profit

-5,121 -5,418 Tax

15,821 16,867 Profit for the period

9.56 10.19 Earnings per share

60,188 60,173 Total assets

1.8 2 Asset turnover

14.3% 14% Net profit margin

26% 28% ROI

The net sales increases around 11% between 2011 and 2012 due to:1. business strategy ( Fashion & Quality at best prices ).2. The expanding strategy by adding new stores.

The cost of goods sold increase & Gross margin decrease :• The cotton high prices & cost inflation. -Giving best

offering.

The asset turnover increase : • Leasing instead of owning.

The net profit margin slightly decrease as result of:• discounting. • higher COGS

The ROI increases also to 28% in 2012 & The earning per share increase to 10.19 ( shows Improvements )

PEST Analysis - H&M

• Political– Swedish based company

• Economic– Offers customers the best prices

• Social– Attracts demographic changes in market

• Technological– Increases exposure of brand to community

H&M’s main competitors

Competitor’s Marketing Mix - Zara

• Product– “Sense of fashion” designs

• Price– Reasonable pricing ranges

• Place– High street areas / big shopping malls

• Promotion– Does not follow a marketing plan

Competitor’s Strengths & Weaknesses - Zara

Strengths Weaknesses

- Exclusive designs - No advertising plan

- New collections - Don’t use celebrities

- Customer loyalty - Similar products ‘H&M’

- Sell at own stores - Weak online strategy

- Reasonable prices - Minimal spacious atmosphere

H&M vs. Zara

Retail Strategy

Our business concept is to give the customer unbeatable value by offering fashion and quality at the best price….

We ensure the best price by:

• having few middlemen• having a broad, in-depth knowledge of design, fashion and textiles• buying the right products from the right markets• being cost-conscious at every stage• Keep it simple• Straight forward and open-minded• Constant improvement• Entrepreneurial spirit• Cost conscious• Team work• Belief in people

Segmentation

Geographic: Tell us about H&M’s Aim

Psychographic:• Life style: Dependent (e.g., children still living at home with parents). Pre-Family

( with their own households but with no children).• Opinions, Interests and Hobbies.

Behavioral: Loyalty -> Yes! H&M has Loyal Consumers

Demographic.

Demographic Segmentation:

Women 8-25 years Men 18-45 yearsTeenagers 15-17 yearsYoungsters 9-14 yearsChildren 18months-8 yearsBabies 0-18 months

Target MarketWho is the H&M’s real Target Market..??

The Target market for H&M stores is for young-minded, fashion conscious groups. Hip styles and designs create an evolving and growing collection each season.An emphasis on [budget minded] shoppers!

PositioningTo Fashionable and trendy consumers who enjoy shopping, H&M is the fast-fashion clothing that offers fashion and quality at the best price.

More for More More for the Same More for less

The Same for Less

Less for Much Less

Location and Formatting

• H&M’s chain stores are all located in Planned Shopping Centers

• Functional Product Groupings:– Men’s Apparel – Women’s Apparel– Kid’s Apparel

Supply Chain and Logistics

Suppliers

Once suppliers have signed the code of conduct, prodcution starts. Suppliers may own differnet factories, so they may have subcontracts to finish production.

Auditos based in the production offices; its the auditors responsibility to monito suppliers compliance with H&M's code of conduct.

MerchandisersBased in Asia and Europe, the merchandiser after purchasing the collection from the designers, sends the order to their offices in

Asia and Europe to identify suppliers for production.

Buyers / Design Located in Stockholm; the designers create the fashion collection and presents it to the merchandisers; who purchases the

collection.

Merchandising and Sourcing

Regional Distribution

Centre

Retail Shops

Retail Shops

Retail Shops

Retail Shops

• H&M distribution is centralized in each region, so retail shops do not keep stock.

• Once a product is sold the retailer sends a request for replenishment; so everyday H&M stores receive goods.

SWOT Analysis

Strengths • Industry Knowledge and a strong

Brand name• Best value for money • Smart and Successful Partnerships• Working with world-class designers• Vast collection of fashion products

(Product assortment)• International presence

Weaknesses• Over dependency on Suppliers• Market and Economy changes• Lack of exclusivity• Lack of personalization• Product differentiation

Opportunities• Adapting locally• Expand target market and customer

base• E-commerce (Online Retailing)• Partnerships and Collaborations• Environmentally aware Stakeholders

Threats• Customers' purchasing power• Competition• Rising costs

Effectiveness of their strategy

• Low-cost & Differentiation.

• The right target market.

• Perfect blend of prices and quality.

• In 2013 a total of 350 new stores will be opened.

• Highest rate of expansion in both the U.S. and China.

Recommendations and suggested activities

• Be more adaptive to their customers' cultures depending on the geographical area they are serving.

• Advertise their CSR initiatives and Sustainable processes more.

• Reduce unnecessary or slow moving inventory.

• Increase customer loyalty.

• Expand their online retailing operations.

Thank you…