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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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1. Introduction

Operating in 69 countries, Hennes and Mauritz AB, more commonly known as H&M, is a Swedish MNC retailing clothes for women, children and men, founded in 1947.  The company's focus is affordable, sustainable fashion for all, and envisions to be the brand leading the movement towards renewable fashion, with high standards of fairness and equality. While the H&M group has 9 other brands under its belt, we take a look at the H&M brand specifically, and discuss their marketing strategies.

With 4,328 physical stores globally, and 47 online markets, H&M is a leading fast fashion brand, second only to Zara in size and influence. Product lines include casual and formal attire for all ages, including denim, dress shirts, vests, cardigans, dresses, undergarments, coats, accessories and t-shirts. Occasional collaborations with luxury fashion designers like Karl Lagerfeld, Stella McCartney and Versace also allow them to expand their product line and fuse high end fashion labels with affordable price tags.

2. Target market

Table 1: Summary of H&M's target market in Malaysia

Bases

Segment 1

Segment 2

Segment 3

Geographic

Urban, suburban

Demographic

Women

20-30 years old

Middle class, income

High buying power

Students

13-19 years old

Financially-dependent

Families with young children

Middle income

From middle to upper class families

Psychographic

Fashion-conscious

Budget-conscious

Prefer bold and trendy apparels

May also purchase formal-looking clothes (due to job requirements)

Generally purchase casual-looking clothes

Behavioral

Low brand loyalty

Enthusiastic about new trends in garments

Increasingly receptive of online shopping

High buyer-readiness

Frequent shoppers

Make purchases for others, such as husband, boyfriend, children

Support sustainable products

Low buyer-readiness

Infrequent/seasonal shoppers

Shop during sales

High buyer-readiness

Infrequent/seasonal shoppers

Fashion-coordinate with other family members

Segment 1

In Malaysia, H&M's primary target market is working women aged between 21 to 30 years old (SIMCOM, 2015), as shown in Figures 1 and 2. While generally from middle income groups, these shoppers have high buying power and shop frequently. This is because they often shop for clothes on behalf of others, such as their significant others or children (SIMCON, 2015). They have low brand loyalty, favour online shopping, and sustainably-made clothing (Figures 3 to 5).

Segment 2

This demographic consists of financially-dependent teenage students from middle to upper class families. They demand trendy garments that offer value-for-money. Teenagers have low buyer-readiness, and are especially price-conscious, with preferences to shop only during sales (Figures 6 and 7).

This segment consists of families with young children belonging to the middle class. Although being infrequent or seasonal shoppers, these families have high buyer-readiness whenever they shop. These families, together with Segment 2, generally only shop for casual wear at H&M (Figures 8 to 10).

Segments 1, 2 and 3

All three segments targeted are from urban or suburban areas and are increasingly engaged in online shopping. They are fashion and budget-conscious, and are bold and enthusiastic about owning the latest clothing trends (Figure 11). They also have low brand loyalty, as buyers of such clothes tend to shop between four to six brands on average (SIMCON, 2015).

3. Values demanded by target market

Value demanded is the organisation delivers exactly what the customers wanted or needed, on the other hand, failure demand is the organisation unable to reach the customers wanted or needed because of failures somewhere in the process.

Women who like to buy clothes determine value (benefits and costs) of a product from fast fashion shop (H&M) as follows:

High quality of product (Quality is worth the price and their status)

Affordable price

Have good service (When customers shop give them a satisfying service)

Design that accord with customers wanted

Variety design

High Speed (The speed of new product come in the market)

Sensitive to fashion

Well advertisement to achieve more attention

4. Positioning

To determine where H&M stands with respect to its competitors in the same market, a perceptual map is created with Sustainability and Trendiness on the horizontal and vertical axes respectively. H&M primarily envisions itself to ‘offer fashion and quality at the best price in a sustainable way', highlighting the importance attributed by the brand to creating ethical vogue, catering to both environmentally-conscious and fashion-conscious consumers. We therefore find ‘trend' and ‘sustainability' appropriate dimensions to represent consumer perceptions.

We create the Trend Index based on a visual analysis of the advertisement campaigns and season look-books of H&M and its competitors, over the last 8 years [see Appendix for details]. To standardise this analysis, we only consider Spring-Summer collections. We define the index on a scale of 1-10, with 1 being ‘Timeless' and 10 being ‘Trendy'. Brands with few variations in design over time, maintaining one classic look over time were considered timeless. Brands with more dynamic and distinctly atypical collections were considered trendy.  The Sustainability Index was created based on evaluations from the Good On You Ratings on Ethical fashion. Scores from the two indexes were plotted to give the perceptual map displayed in Figure {}.

Because the fast fashion model is inherently built upon short lived, dynamic trends and generally disposable clothing, no brand in this market can be entirely sustainable. However, of all the brands analysed, H&M is most active in achieving a certain level of sustainability. Offering consumers a recycling program for old clothes, having initiated water reduction schemes, raised targets for the use of renewable energy, is gradually eliminating use of hazardous chemicals, and has increased the amount of sustainable materials used, H&M ranks high on sustainability, and therefore positioned further right on the perceptual map. Zara has implemented similar measures, with their repair and reuse program called ‘Closing the Loop'; has begun to use eco-friendly fabrics; and set similar water reduction and emission targets as H&M. In line with Zara and H&M, Topshop has made public commitments to reduction in carbon emissions, but does not offer consumers a program allowing them to recycle or fix old clothing, as H&M and Zara do. Topshop therefore features lower on the scale. Uniqlo and Gap report compliance to similar sustainability policies, but do not provide information on sources of materials like wool, leather and feathers used in collections. In addition, Gap does not use eco-friendly fabrics, and has not taken action against reducing hazardous chemical emissions from leather tanning. While complying with basic environmental regulations in the mass production process, Mango, Miss Selfridge and Forever 21 do not provide evidence of water, emission, and hazardous chemical reduction programs, and do not disclose other information on sustainable production mechanisms or fabrics used. We therefore position them on the lower end of the sustainable scale.

On the other hand, Topshop, H&M and Zara all feature collections with bright colors, an array of distinct designs, ranging casual, formal, and work outfits over the years. Unlike Zara and Topshop, however, H&M also features repeated styles, bringing back certain prints, colours and fabrics every now and then, as seen with burgundy in 2012 and 2014, floral print trousers in 2015 and 2017, etc. H&M therefore is positioned lower than Zara and Topshop with respect to trendiness, but remains of the trendiest in the market. Forever21, Mango and Miss Selfridge feature outfits catering more to women, with distinct characteristics in each collection. Forever21 and Mango both feature new styles every year, but retain certain prints and colours, as seen from similarities in the prints in the 2012, 2014, 2016; and colors in the 2011, 2014, 2018 campaigns, respectively. Miss Selfridge, Gap and Uniqlo maintain a classic look throughout the years studied. Gap and Uniqlo both feature bright casuals, balanced with white and pastel colors, plain and striped tops. However, Uniqlo also features repeated plaid prints over the years, and also offers formal and workwear to consumers. Uniqlo is therefore positioned to be more trendy than Gap, but still relatively timeless compared to H&M. Miss Selfridge offers greater variety across casuals and formals, but retains colour schemes, styles, and prints, as evidenced by the focus on dresses, floral prints and nude colours across years. It is therefore positioned closer to Gap and Uniqlo, both distinct contrasts to the dynamic world of H&M trends.

5. Differentiation

This section deals with how H&M distinguishes itself from the competitors mentioned above, with respect to the offerings detailed in its vision statement, ‘Fashion and quality at the best price' (H&M, 2018). Primarily, this distinction is made in its production and supply model, reflecting use of channel differentiation. While competitors like Zara and Uniqlo differentiate themselves based on a purpose built supply chain bringing trends from the runway to the rack in real-time, and lengthy product development, respectively, H&M stands out by emulating both these models (Petro, G., 2012) . For a detailed focus on product development, H&M invests heavily in research to predict trends, consumer behaviour, and identify the highest quality, and sustainable materials and fabrics (“The H&M Way”, 2018). To respond to and mirror the latest trends, H&M maintains a vast network of production offices across the globe, within close distance of suppliers.

Unlike Zara, H&M does not own its own production facilities, and instead relies on outsourcing to over 800 suppliers across the globe, to create large amounts of products, at lower costs, reflecting a ‘more for less' positioning model (Radeef, A., 2017). This allows them to replenish collections in greater numbers than other brands, ensuring primary collections are available to greater number of consumers, and for longer. For instance, while it takes Zara only 26 days for products to be sold out, it takes H&M 112 days (Smith, K., 2015). In fact, the decreasing gap between Zara and H&M sales has been attributed to this replenishing aspect of its supply chain, implying increases in profitability for H&M (Smith, K., 2015). Producing items with short-lead times in Europe, and longer-lead times in Asia, H&M can update its primary collections, with more seasonal pieces, less frequently, and update its trendier, sub-seasonal products from Europe more often (Petro, G., 2012). This allows H&M to offer its consumers more of the brand's timeless pieces for longer, and sub-collections reflecting the latest trends. This form of supply and distribution also caters to both Segment 1 and Segment 2 of the target market, as older women prefer more classic pieces, and younger women prefer the trendier ranges. Therefore, not only does H&M's differentiated production model incorporate the best of fast changing trends, but also offer consumers low and affordable prices.

6. Marketing mix

Product

As fast fashion items are only bought occasionally, and often involve effort in planning, decision-making and shopping, we consider H&M clothing to be consumer products classified under shopping products (Claessens, 2017).

When shopping for clothes, customers make comparisons of H&M's products with other brands, with respect to the values demanded, such as affordability, reasonable quality, trendiness and environmental-friendliness. We identify H&M products at three levels. The first is the core product - what consumers really buy when purchasing items. H&M's core product is clothes - one of the basic human necessities (“Needs and Wants”, n.d.).

The second level is H&M's actual products, consisting of a combination of product parts, styling, brand name, labelling and packaging to deliver the core benefits. H&M garments are renowned for their trendiness and reasonable quality at affordable prices. This is possible because H&M has a large, well-organised team of designers tasked to analyse emerging fashion trends on catwalks and incorporating these styles into their product offerings (Peterson, 2014). The brand H&M is also synonymous with its ability to translate catwalk fashion into product offerings in just weeks, thus making it appear in women's evoked set when seeking affordable high fashion (Peterson, 2014; Kotler and Armstrong, 2018, p. 245-246). H&M's clothings normally do not come with any packaging, rather the products are labelled, which are tagged and sewn onto the apparels (see Figures ).

At the third level, H&M creates augmented products, which are additional customer services and benefits built around its core values and actual products and support these offerings. For example, H&M's website offers its customers the convenience of online shopping. Delivery of the purchased goods costs only RM24.90 per transaction, and have a 30-day refund policy attached (H&M, 2018).

Price

H&M's pricing strategy is devised based on its customers' needs of high fashion at low prices, while also taking into account its competitors such as Zara. This means that H&M practises customer value-based pricing and competition-based pricing.

Several factors contribute to the ability of H&M to price its products so competitively. FIrstly, H&M outsources the production of its garments to factories in countries where labour costs are low (Bhasin, 2017). Additionally, H&M does not distribute its products through intermediaries such as departmental stores

has been able to supply quality items at lower price ranges because of their strategy of reducing the part of intermediary in all transactions. Earlier this intermediary used to purchase and sell the raw materials for the company at high margins. With their exit, the company has started buying directly from the supplier in bulk amount. This has helped in reduction of cost prices and thus in lower selling prices.

is

In addition, H&M also practises price-adjustment strategies. This is evident as H&M Malaysia is observed to regularly implement psychological pricing and promotional pricing in its physical and online stores. Psychological pricing is evident in H&M as its product prices always end in either RM0.95, RM0.90 or RM9.00 as these specific prices signal a bargain, thus increasing the attractiveness of H&M's products.  Another evidence of psychological pricing by H&M is reference price, whereby H&M's online store features its cheaper patterned dresses (RM229.95 and RM139.95) alongside its more expensive Conscious dresses (RM649.95), thus giving the effect that its patterned dress are relatively cheaper. its limited edition (Figure) (Kotler and Armstrong, 2018, p. 337-338).

H&M has adopted a pricing strategy that has broader pricing range to suit every sphere of buyer and merchandiser. In order to maintain a median pricing strategy they have kept a lot of their stock in discounted section. Under this scheme, the volume of their sales will keep on increasing resulting in larger revenues.

The company also offers various discounts and schemes on their core and fresh stocks. It is an obvious fact that the costing for these articles was economical and hence the company was able to afford the discounted price. This also allows the company to keep on restocking their products to current and latest fashions.

The company has proved relentless in its zeal of cutting costs at every possible corner and so their average selling prices are much lower than their competitors are. The executives in the company are also directed to make purchases at the lowest possible rates to maintain low overheads.

Promotion

Promotion refers to any type of marketing communication that used to promote its product to their target market, the aim of promotion is to increase awareness, create interest, generate sales or create brand loyalty ("Promotion (marketing)", 2018). In H&M, in order to promote its product the company is using 3 tools which are advertising, sales promotion and direct marketing.

In terms of advertising tools, H&M publishes video advertisements in social media, for example the H&M company have been uploaded their spring collection on Youtube before it come out in the market.("H&M Spring Collection 2018", 2018), print advertisement, for example the advertisement post outside the store (Appendix 7), it also have magazines (Appendix 9) as well as H&M have a official online shop website, the company use catalog marketing in their website ("Fashion and quality clothing at the best price - H&M | H&M", 2018).

H&M also use sale promotion tool (Appendix 8) that they often has discounts when the new product come out and some of major festival. In direct marketing that they have face-to-face selling which means they have direct store,  direct-mail marketing have been used by H&M, the company has been utilizing the services of ad companies called Mobiento and its sister company Adiento to achieve this purpose (Bhasin, 2017).

In addition, H&M invites top fashion designer to join them and design cloth for them as well as some companies that their are launch new product together, for example, Alexander Wang (Appendix ) and Kenzo (Appendix ) to attract their target market eyes. This kind of corporation make the brand become more upper-class and attract more public awareness.

Place

H&M boasts a wide physical presence globally, with 4353 stores in 70 countries as of 31 August 2018, With its subsidiary companies H&M have 4841 stories. Additionally, it has 47 online market around world. In Malaysia alone, H&M has 46 stores and the first store was opened in 2012 as well as a online store.

H&M owns many outlets but none of a factory that they are product are basically produce in Asia and Turkey. To reduce cost H&M company translate most of their goods by ocean in Asia, and more than 90% of their goods are translated by ocean, rail and road. Air are only used when faster deliveries are needed.

Distribution strategy is a strategy to make a product or a service available to the target market through its supply chain ("Distribution Strategy Definition | Marketing Dictionary | MBA Skool-Study.Learn.Share.", 2018). Direct distribution, from producer to customers is one of the strategy and most important strategy that H&M company have used. Its reduce cost as well as speed by cutting middle transaction.

One of H&M's marketing strategy is to build its brand reputation by opening its physical stores at strategic locations of cities, towns and streets. For example, in Malaysia's capital city of Kuala Lumpur and neighbouring state of Selangor, H&M has a total of 21 outlets, all of which are located in shopping malls (Figure ). Most of of these outlets

Most of H&M stories are located in shopping centre and mall.

7. Recommended marketing strategies

Based on our findings above, the authors would like make recommendations to the H&M management regarding new marketing strategies which it can adopt and existing strategies which can be further improved.

Firstly, H&M as a fast fashion brand, their target market are those middle income customers. Compara to Zara, H&M promoting harder than zara in a year expect June and December, if the company can have more discount during this two month, they may attract more customers buy their product and their customers will be more loyalty to the brand.

Secondly, with respect to its production and supply model, we recommend H&M to decrease dependence on third party factories, and move towards ownership of factories. With the current arrangement, H&M is unable to maintain control over manufacturing, and thereby open to issues with quality control, hostile worker conditions, and cannot be guaranteed consistent supply. As disruptions in service could arise between these suppliers and the brand, it is imperative that H&M is in control for the majority of its production, lest it loses customers to competitors with better guarantees of worker safety, quality assurance, and  stock.

Thirdly, while the brand maintains an online presence, competition with purely e-commerce brands has contributed to a drastic drop in profits for H&M (Robert, D., 2018). With its customers either shopping online, or in-store, operating both online and brick-and-mortar stores has led to double the costs, and the number of stores H&M has had to close down this year is the largest in two decades (Magnussen, 2018). Therefore, we recommend H&M to invest in and expand their online presence, by advertising aggressively on various social media platforms, offering customers ‘online-only' discounts, developing more user-friendly websites and apps, increase the number of countries with online stores, and offer competitive ‘free delivery over $XXX' ranges.

Lastly, we also recommend improving its gender segmentation. Currently, 56% of H&M products are targeted towards women, and only 16% towards men (Smith, K., 2015). More balanced offerings would allow H&M to expand its customer base, and give competitors like Uniqlo and Zara, with double the amount of products offered to men, a run for their money.

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