Challenges Faced by H&M in the Retail Industry

H&M is facing challenges due to unsold clothes worth $4.3 billion, increased competition from other fast fashion retailers and e-commerce websites, and changing customer preferences. The company needs to improve its business strategy by focusing on online services, inventory management, and product quality.

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Marketing Skills
H&M

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H&M or Hennes & Mauritz AB is a Swedish multinational clothing enterprise which operates
in the retail industry. It offers its fast-fashion clothing for men, women, teenagers, and
children and it has established more than 4,700 stores across the globe (Milne, 2018). The
key issue faced by H&M is that unsold clothes worth $4.3 billion which the company was not
able to sell (Paton, 2018). This is the first time the company is facing this issue since it
started its global expansion. The sales of the corporation have dropped along with its profits
due to increased competition from other fast fashion retailers and e-commerce websites.
Customer preference throughout the world is changing as well, and they prefer to purchase
high-quality designer products directly through their smartphones. The management of
H&M has failed to implement appropriate policies to manage their inventory by considering
these changes effectively. They have also failed to quickly act upon the opportunity to
expand its online operations due to which the company is facing competition from its
retailing competitors which include Zara and ASOS (Lieber, 2018).
The corporation has failed to predict the demand of its customers which is changing quickly.
H&M is known for providing low priced products which are decent in quality; however,
customers prefer to purchase expensive designer clothes from manufacturers which include
Supreme, Gucci, Armani, Tommy Hilfiger, and others. Another key issue faced by H&M is
that it did not consider the fact that demand of each country is different from one another.
The company continued to expand its operations by opening 220 new offline stores and
providing online facilities to customers in new markets (Paton, 2018). However, the
company did not evaluate the demand of customers and changes in their purchasing
behaviour which resulted in unsold clothes. The company is falling behind to a large extent
when it comes to its competitors. For instance, Zara reported a growth of 7 percent in its
profit in 2017, whereas, the operating profit of H&M dropped 62 percent in the first quarter
of 2018 (Tyler, 2018). Similarly, Amazon is giving significant competition to H&M in terms of
online shopping along with ASOS due to which H&M is falling to a large extent.
In order to address these issues, H&M should improve its business strategy. The company
should focus more on providing online services to its customers across the globe so that
customers who are living in places where H&M store is not available are able to purchase its
products. The online strategy will assist the company in reducing the competition from
major and new online players which include Amazon, Zara, and ASOS. The corporation

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should also focus on improving the management of its inventory by correctly predicting the
demand of customers. Rather than making more clothes while expanding operations in new
markets, the company should clearly evaluate the demand of its customers to avoid
producing extra clothes. The corporation should focus on improving the quality of its
products along with increasing their prices as well to appeal to a wider audience in western
countries. However, in developing nations, the company should offer affordable and quality
clothes to increase its loyal customers because the demand for affordable clothes is high in
developing nations (The Fashion Law, 2016). By complying with these strategies, H&M will
be able to address the issue of unsold clothes while giving strong competition to its
competitors.

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References
Lieber, C. (2018) H&M Is Leaning Into Discounts. [Online] Available from:
https://www.racked.com/2018/6/29/17514086/h-m-fast-fashion-struggling [Accessed on
13th November 2018].
Milne, R. (2018) H&M faces up to a new reality. [Online] Available from:
https://www.ft.com/content/9a942bc0-0cd5-11e8-8eb7-42f857ea9f09 [Accessed on 13th
November 2018].
Paton, E. (2018) H&M, a Fashion Giant, Has a Problem: $4.3 Billion in Unsold Clothes.
[Online] Available from: https://www.nytimes.com/2018/03/27/business/hm-clothes-stock-
sales.html [Accessed on 13th November 2018].
The Fashion Law. (2016) Fast Fashion. [Online] Available from:
http://www.thefashionlaw.com/learn/fast-fashions-green-initiatives-dont-believe-the-hype
[Accessed on 13th November 2018].
Tyler, J. (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. [Online] Available from:
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
[Accessed on 13th November 2018].