Marketing Research Final
Marketing Research Final
Marketing Research Final
UGFLBM level 1
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TABLE OF CONTENTS:
1. General Introduction. 3
2. Executive Summary. 4
3. Introduction to H&M. 6
4. Marketing strategy Adopted 8
by H&M.
5. Industry problems being 10
faced by H&M.
6. SWOT Analysis. 11
7. Competitors. 13
8. Research objective. 14
9. Hypothesis. 14
10. Target group. 14
11, Research design. 14
12. Questionnaire. 15
13. Analysis. 18
14. Reflections. 25
15. Referencing. 27
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GENERAL INTRODUCTION:
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EXECUTIVE SUMMARY:
In March of 2018, H&M was left with $4.3 billion in unsold clothes and accessories.
Signs of its expanding unsold inventory began emerging last year, when it reported an
unexpected quarterly drop in sales. The decline was the first in two decades, a period in
which H&M expanded from a lone women’s wear store west of Stockholm to a
gargantuan network of 4,700 stores around the world.
Investors blamed lower profits on aggressive sales but said they had helped to clear
inventory and put the store in a good position for the next quarter. That did not happen -
clearance sales continued throughout the final quarter of the year and into 2018.
The company is now focusing on improving its supply chain to make it faster and more
flexible, which could be an effective way to fight back against competing brands and on-
line stores. H&M has decided on a new marketing plan for their latest collection through
the mobile phones. Under this distinctive strategy, the clients receive SMS that are
treated as coupons and which they can cash at any H&M retail outlet. Specialized ads
have been posted on various portals and major media sites.The company also has
announced plans to use data culled from algorithms that analyze store receipts, returns
and loyalty card information to decide what to stock in each of the brand’s more than
4,200 individual stores, with hopes that a better match will lead to fewer markdowns.
As students stepping into the world of retail in the fashion and lifestyle sector, we wanted
to understand the reason for the shifting of customer preferences from H&M to other
competitors in Mumbai, thus, we circulated a questionnaire we made for this purpose.
We suspected the reason for the shift in customer preferences was due to:
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H1:The brand lags in quality and keeping up with the pace of other fast fashion brand
On analyzing the responses we found our hypothesis to be correct. H&M does meet the
needs of their customers, but the other brands are faster. It does not have a lot of loyal
customers because of which the competitors are good equally good or better that H&M.
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INTRODUCTION TO H&M:
The two-letter domain was registered in the early 1990s, but data on the first registration
is lost. The first H&M store to open in the US was in New York, on Fifth Avenue on the
1st of March 2000. The opening of this store marked the start of expansion of the
company outside of Europe.
In 2008, the company announced in a press release that it would begin selling home
furnishings. Initially the home furnishings were exclusively distributed through the
company's online catalogue, however, now there are H&M Home stores located
internationally.
Following expansion in Asia and the Middle East and the launch of concept stores
including COS, Weekday, Monki, and Cheap Monday, in 2009 and 2010, branding
consultancy “Interbrand” ranked the company as the twenty-first most-valuable global
brand, making it the highest-ranked retailer in the survey. It’s worth was estimated to be
at $12–16 billion.
By the end of 2011, H&M operated 2,325 stores. It then opened 367 more stores by the
end of August 2012. The 3000th store was opened in September 2013 in Chengdu,
China. As of August 2017, there are 4553 stores.
The current chairman of H&M is Stefan Persson and Karl Johan Perssonis the president
and CEO.
The brand grew rapidly and had booming sales from the early to mid 2000s, but the tide
began to turn for the world's second-largest clothing retailer.
Over the last two years, it has increasingly lost out to more fashionable rivals like Zara at
the same time it has been outsmarted by online-centric stores, such as ASOS, that have
cut down supply chains to as little as a week.
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These pressures started showing up in the company's earnings. Sales growth at H&M
started to falter in the year 2016, culminating in its biggest sales slump on record in the
last quarter of 2017. Its share price slumped, and key investors began selling off stock.
Analysts claim that H&M has a brand issue. It's not the cheapest, it's not the best quality,
nor is it the most fashionable store, and it's increasingly being left behind because of
these reasons.
Erik Sjostrom, a fund manager at H&M shareholder Skandia, which has sold off
considerable amounts of its stake in the company, told Bloomberg, “The offering is the
core problem. The fashion, the price, the distribution.” He believes that they are off in
terms as fashion, as well as price. Many other seem to agree to the same.
Trendy online stores such as ASOS and Sheinare beating H&M both on price and
speed. They've cut down their supply chain times to between one and eight weeks,
allowing them to stay right on top of trends.
Brick-and-mortar rival Zara has a similarly speedy five-week turnaround and is known for
its fashionable offerings. Meanwhile, H&M lags behind with a six-month turnaround time.
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MARKETING STRATEGY ADOPTED BY H&M
Product:
H&M is one of the most trusted apparel brands and has a minimum of approximately two
thousand, seven hundred and eighty six merchandises under its portfolio. The core
range of products under this fashion brand includes accessories and clothing like
sleeved jersey dresses, basic jumpers, vests, cardigans, pants, jeans, fashion shirts,
undergarments, jackets, jewelry, shoes, purses and T-shirts.
The focus of the brand has been on quality as well as latest fashion and that too at
reasonable prices and hence they are able to launch newer product lines at regular
intervals. At least twenty five percent of the company’s stock includes fast-fashion
products and the newer generation of teens find them to be reasonably priced as well as
trendy and chic.
Hence, they appeal to the young segment and result in higher sales of products. A
special team of designers designs all the products of the company. Some of their
famous designers are Isabel Marant, Mathew Williamson and Jimmy Choo.
Pricing:
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. One of the most important facts is that H&M 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.
Place:
The consumers find the H&M retail outlets very convenient, as they are able to shop for
different products at one store. The company has expanded at quite a faster rate on
locations that are easily accessible as well as which are reasonably priced. They have
also taken the advantage of slower economy to secure some high profile and
advantageous locations at very realistic prices.
Promotion:
H&M has always realized the potential of promotion and marketing and hence has taken
special care of all its promotional activities. Their advertisements focus on the apparel
image that is qualitative as well as reasonably priced. They have utilized the electronic
media of television beautifully by sponsoring many hit and trendy shows like MTV. Many
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high profile celebrities like Robert Cavalli and Jimmy Choo have been associated with
this brand taking it to its present position. Internet has also played a crucial role in the
international expansion plans of this highly sought-out brand. Their ads have appeared
on famous magazines like Vogue Netherlands, British Vogue and British GQ.
H&M have been using some exceptional strategies for the marketing of its products.
They have been associating with a wide range of exclusive designers who in themselves
are a unique marketing brand. This Swedish and global brand have had alliances with
the likes of Karl Lagerfeld, David Beckham and recently Alexander Wang. In another
amazing marketing strategy, they decided to tweet about their collection in parts along
with Instagram pictures. They also sent some of their clothes to celebrities and at
one event, the famous singer Rihanna decided to wear this outfit.
Current Strategy:
Currently, the company has decided on a new marketing plan for their latest collection
through the mobile phones. Under this distinctive strategy, the clients receive SMS that
are treated as coupons and which they can cash at any H&M retail outlet.
Specialized ads have been posted on various portals and major media sites. In a recent
show models like Edie Campbell, Gigi Hadid and Kendal Jenner have represented the
company H&M.
H&M is also trying some new strategies to reverse a sales slump, including launching a
couture collection based on celebrity dresses and using consumer data to customize
what it sells in individual stores.
H&M is known more for fast fashion than high fashion, but the company dressed stars
including Riverdale actress Lili Reinhart at the Met Gala and afterwards announced an
H&M Gala collection of gowns priced between $100 and $500, per Business of Fashion.
H&M dressed six celebrities for the Met Gala, including Reinhart, influencer Jasmine
Sanders and actress Olivia Munn, creating social media buzz that included 9 percent of
the 1.5 million mentions of the Gala Monday night.
The company also has announced plans to use data culled from algorithms that analyze
store receipts, returns and loyalty card information to decide what to stock in each of the
brand’s more than 4,200 individual stores, with hopes that a better match will lead to
fewer markdowns.
Business Insider reports that H&M will be customizing its stores to ensure that they are
stocking exactly what customers want. It will do that by tracking what's bought and
returned to each store to determine what resonates well with customers.
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INDUSTRY PROBLEMS BEING FACED BY H&M:
In the world of fashion retailing, where shopping is fast moving online and stores try to
keep inventories closely matched to sales, even a small stack of unsold clothes can be a
bad sign.
In March of 2018, H&M was left with $4.3 billion in unsold clothes and accessories.Signs
of its expanding unsold inventory began emerging last year, when it reported an
unexpected quarterly drop in sales. The decline was the first in two decades, a period in
which H&M expanded from a lone women’s wear store west of Stockholm to a
gargantuan network of 4,700 stores around the world.
As fashion-conscious customers have headed elsewhere for the latest designs,
discounted clearance sections have become a common feature of H&M stores.
In the third quarter of 2017, Persson blamed lower profits on aggressive sales but said
they had helped to clear inventory and put the store in a good position for the next
quarter. That did not happen - clearance sales continued throughout the final quarter of
the year and into 2018.
In March, RBC’s Chamberlain wrote a note to the investors expressing his concern for
the future of the brand. The note read, "H&M continues to be aggressive in clearing
stock and we think there is a risk that constant promotions are losing their power to drive
sales and also question whether the main H&M brand will be tarnished going forward."
The company is now focusing on improving its supply chain to make it faster and more
flexible, which could be an effective way to fight back against competing brands and on-
line stores.
The biggest issue for the company is clearing the unwanted stock.
In February, the company announced it would launch a new concept in Sweden, called
the Afound store, which would sell its products at a discount.
Presently, two Afound stores have been opened in Sweden in addition to an online
store.
According to the first quarter report of H&M for the year 2018, online sales for the H&M
group increased by approximately 20 percent compared to the first quarter the previous
year.
Total sales for the new brands (new business) increased by 15 percent in the quarter
compared to the corresponding period the previous year.
According to the second quarter report, the group’s sales including VAT increased by 2
percent. Online sales increased by approximately 17 percent compared with the second
quarter last year.
Total sales for the new brands (new business) increased by approximately 14 percent in
the quarter compared to the corresponding period the previous year.
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SWOT ANALYSIS
SRENGTHS:
A wide range of Products: H&M has a wide range of product offerings including
apparels, cosmetics, shoes and accessories for a wide range of customers. H&M group
also have products such as blankets, the collection of vases and pots; candle and
candleholders etc.
Unique Identity for all brands: H&M sells its product portfolio through many different
brands such as H&M, COS, Weekday, Monki etc. All its brands have a unique identity
depending on customer target group.
Diversified global presence: H&M has a strong and diversified presence geographically
across the globe. H&M has stores in over 60 countries across 6 continents. H&M has
expanded in the recent years in potential markets such as Asia and Africa. Strong global
presence enables the company to minimise business risks.
Strong financial performance: H&M has reflected strong financial performance in the
previous financial years. In FY 2015, H&M showed a growth in revenue of 19.4% over
the FY 2014. A strong financial performance increases investor’s confidence and
provides financial flexibility to the company.
WEAKNESSES:
Dependence on third party suppliers: H&M is excessively dependent on third party
suppliers for its merchandises. H&M outsources product manufacturing to about 800
independent suppliers and hence it has lower control over production. Over dependence
on the third party, vendors can affect company’s order commitments and any bad
customer experience can affect the brand image.
Following after trends: H&M produces affordable clothing and is dependent on many
independent suppliers and pick up after trends from luxury brands.
Affordable pricing affects quality: H&M is popular for making affordable clothing, but
that sometimes affects the quality of the clothes and other products of H&M.
OPPURTUNITIES:
Focus on expansion to improve profitability: H&M has been focusing constantly on
expanding its store base across the globe. The company added 400 new stores in FY
2016. Such expansion plans can help H&M improve its bottom-line as well as the top-line.
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potential as far as the apparel industry is concerned. H&M needs to explore the emerging
markets like Asia and Africa in order to capitalize on the new demand created.
Improving Lifestyle: The purchasing power and the lifestyle of people are improving
across the globe. People are more brand-conscious and thus it provides an opportunity
for brands like H&M to capitalize on the need generated.
THREATS:
Evolving fashion trends: Apparel industry is subject to quick changes as trends keep
changing quickly. Social media has also played a part in quickening the process of
changing trends. H&M has to deliver according to the new trends in the market or else it
can lag behind in the industry.
Intense competition: The apparel industry is subject to intense competition from local as
well as global brands. Each company has to be aware of the competition in order to be on
par with the new trends and fashion.
Rising labour costs in developed countries: Rising labour costs affect the cost of
production for the industry. Such increasing costs affect profitability for the company.
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COMPETITORS
FOREVER 21
Forever 21, stylized as FOREVER 21, is an American fast fashion retailer headquartered
in Los Angeles, California. Forever 21 began as the store called Fashion 21 in Highland
Park, Los Angeles, California in 1984, and has grown into the clothing lines Forever 21,
XXI Forever, Love 21, and Heritage throughout over 600 stores in the Americas, Asia,
the Middle East, and the UK.
Forever 21 is known for its trendy offerings and low pricing. More than 60% of its apparel
is made in China and the average store size is 38,000 square feet (3,500 m2). The
company sells accessories, beauty products, home goods, and clothing for women,
men, and girls. The company has been involved in various controversies, ranging from
labor practice issues to copyright infringement accusations to religion. The clothing is
sold to all ages, ranging from toddler to adult.
ZARA
Zara is a Spanish clothes and accessories brand, it is the flagship brand of the Inditex
group. Few clothing brands keep up with the latest fashion, are of high quality and yet,
affordable. It is probably the amalgamation of all these qualities that made Zara, the
Spanish clothing brand become the go-to fashion brand for all. Today, Zara has close to
6500 stores across 88 countries around the world.
GAP
Donald Fisher and his wife Doris Fisher started the first Gap store in 1969. Donald was a
real estate developer who was fascinated by the idea of selling apparel in chain stores.
He was mainly looking to attract the young generation of buyers who were looking to buy
cheap, comfortable and durable clothes like jeans. It has continued its success march
ever since to become one of the most profitable retailers in the world. In 2008 Gap Inc.
had 130,000 employees and more than 3050 stores. Today gap stores can be found in
more than 50 countries.
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RESEARCH OBJECTIVE:
To figure out the reason behind the shifting of customer preferences from H&M to
other competitors in Mumbai.
HYPOTHESIS:
1. The brand lags in quality and keeping up with the pace of other fast
fashion brands
2. As compared to competition, they are late in introducing new
trends.
TARGET GROUP:
People between 15-40 years of age with an average per month household
income of rupees 50,000- 75,000.
RESEARCH DESIGN:
Type of research: Descriptive research
Data sources: Primary and Secondary sources
Research techniques: Questionnaire
Type of questionnaire: Structured
Type of questions: Close ended questions.
Sample size: 100
Contact method: Personal, Internet
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QUESTIONNAIRE:
Hello! We are students from Pearl Academy (Mumbai) pursuing a degree in fashion and
lifestyle business management. As per our academic requirement; we want to
understand the reason behind the changing of customer preferences. We are circulating
this questionnaire among consumers like you across Mumbai and taking valuable
feedback for the betterment of product offering and services.
There is no right or wrong answer and your information is safe with us and will be used
purely for academic research purpose only. Thank you for taking out the time from you
busy schedule!
*- Mandatory
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Which of the following products do you own? *
-Smart phone
-Fitness band
-E-reader
-Laptop/desktop/tablet
-Gaming console
-LED/LCD television
-Vehicle (2 wheeler/4 wheeler)
Please recall you last shopping trip at H&M. Can you tell us approximately how
much you spent? *
-1000-2000
-2000-3000
-3000-4000
-5000+
For you, which factors play an important role when choosing a brand to shop
from? *
Quality
Variety
Affordab
ility
Store
ambienc
e
Service
provided
in the
store
Exchang
e policy
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What motivated you to shop at H&M? *
-You like their products
-The store is conveniently located
-The store was running an offer
-Your friends/relatives praised the brand
-H&M is your preferred brand
-You were unable to find what you were looking for in other stores
-No such reason
If you don't find what you're looking for in a store, you are most likely to: *
-Leave the store
-Delay the Purchase
-Substitute the product
-Look for the product online
-Write to the company
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ANALYSIS
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Based on the survey, most of H&M’s customers are either teenagers or young adults.
And the crowd that H&M gets is well to do, that spends a decent amount of money there.
But hardly any of the customers are loyal as the competitors are doing well, not just
offline, but online as well. Even though more than half of the people prefer buying
clothes offline, interest are rapidly shifting.
We don’t think that H&M has a lot of problems in holding their customers, they have a
problem in giving a variety to them. Quality plays an important role for each and every
buyer, that’s why H&M should focus more on the quality they offer as that could help in
gaining customers. And as most of their customers buy tops from H&M, they should give
a better variety in the tops that they offer. H&M has a good amount of customers but it
needs to keep up with fast fashion because more than 50% of the people will leave he
store if they don’t find what they want which can affect H&M in a really bad way.
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REFLECTIONS
GAURIE KUMAR:
In conclusion, it is my opinion that H&M should have studied the market, trends and
consumer behavior well in advance and provided the customers with the variety, price
range and accessibility that they wanted so that they could prove to be a stronger
competitor against their competing brands. The brand should have also focused on
cutting down their supply chain.
While doing this assignment, I learned a lot about fast fashion and H&M as a brand. I
have gained more knowledge about the kinds of problems a brand could face and now
have a deeper understanding of how those problems could be solved. I also came
across many other brands that were facing similar problems and was able to recognize
where the brand faltered.
In addition to this, I have also understood how brands can use certain marketing
strategies to avoid or solve various problems and how various brands have used
different strategies to solve the same problem. While researching, I also came across
companies outside of the fashion and lifestyle realm that faced similar problems due to
competition, quality price, etc. It was very interesting to learn how every company must
assess their competitors and understand how they can improve themselves to outshine
the competitors.
Research for this assignment led me to realize how vital conducting market research
and applying the right marketing strategies is for each and every company.
Working with Khushi for this assignment helped us both to learn from each other.
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KHUSHI GALA:
According to me, the reason why H&M went through this problem is that they kept up
with the trends, but the competitors came up with something better. They should’ve also
considered the fact that online markets are taking over and based on that, they
should’ve improved their online market. H&M is a well known brand which has helped it
survive through all of these problems. H&M is suffering a great loss at the moment, but
based on the current marketing strategy, I think that H&M can overcome this provided
they consider the wants of their loyal customers.
I got to learn a lot from this project. Even while searching for the problem, I came to
know about many other problems in the fashion industry that I didn’t know even existed.
I learned about the different marketing strategies different companies use, the different
beliefs all the companies have and how all of them are doing their best to survive in the
industry. I also learned a lot more about ‘fast fashion’ and how it’s taking over the entire
industry, and how all the brands are facing problems because of this.
This project also helped me understand how important is it to keep up with the trends in
the fashion industry, because if you miss out a single thing, the entire company can go
through a huge loss. Also, how important it is to keep up with your competitors.
I had a lot of fun doing this project, especially with Gaurie. Our thoughts didn’t match
always, but that’s how we got to learn more and consider other perspectives.
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REFERENCES:
http://about.hm.com/en/about-us.html#cm-menu
Bloomberg News, March 30, 2018. (H&M is looking to get rid of excess inventory)
https://www.digitalcommerce360.com/2017/03/30/hm-looking-get-rid-excess-
inventory/
Bloomberg News, April 13, 2018. (H&M struggles with slow delivery of online god)
https://www.digitalcommerce360.com/2018/04/13/hm-struggles-with-slow-delivery-of-
online-goods/
Bhasin H., December 31, 2017. (Marketing mix of H&M – H&M Marketing mix)
https://www.marketing91.com/marketing-mix-hm/
Grill-Goodman J., APRIL 4, 2018.(How H&M is Trying to Right its $4.3 Billion
Inventory Problem)
https://risnews.com/how-hm-trying-right-its-43-billion-inventory-problem
Hanbury M.- April 3, 2018. (H&M is caught in a 'vicious cycle' of discounting, and
now it's found itself with a mountain of unsold clothes - here's how it got there)
https://www.businessinsider.in/HM-is-caught-in-a-vicious-cycle-of-discounting-and-
now-its-found-itself-with-a-mountain-of-unsold-clothes-heres-how-it-got-
there/articleshow/63586939.cms
Kondracki C., April 5, 2018. (NextGen Supply Chain: H&M’s low tech approach to
inventory management)
https://www.mmh.com/article/nextgen_supply_chain_hms_low_tech_approach_to_in
ventory_management
Paton E., March 27, 2018. (H&M, a Fashion Giant, Has a Problem: $4.3 Billion in
Unsold Clothes)
https://www.nytimes.com/2018/03/27/business/hm-clothes-stock-sales.html
Tyler J., May 11, 2018 (We visited H&M and Zara to see which was a better fast-
fashion store - and the winner was clear for a key reason)
https://www.businessinsider.in/We-visited-HM-and-Zara-to-see-which-was-a-better-
fast-fashion-store-and-the-winner-was-clear-for-a-key-
reason/articleshow/64125413.cms
https://en.wikipedia.org/wiki/H%26M
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