Impact of Fast-Fashion, Buy Now Pay Later, and COVID-19 on H&M Operations in UK

INVESTIGATING THE IMPACT OF FAST-FASHION, BUY NOW PAY LATER, AND
COVID-19 ON H&M OPERATIONS IN UK
In the UK, the retail sector is made up of a vast network of over 300,000 distinct
businesses. This industry serves as a significant source of employment, with more than 3 million
people working in various roles, accounting for more than 8% of the country's total labor
market. Moreover, it plays a crucial role in providing essential products and services to
consumers, fulfilling their needs and wants. As a testament to its economic importance, UK
retail sales reached an impressive £439 billion in 2019.
The focus of this project is on H&M, a prominent player in the fast fashion industry and
a major presence in the UK retail sector. H&M faced challenges arising from environmental
factors, which prompted a comprehensive examination of three key trends: fast fashion, BUY
NOW PAY LATE and the impact of COVID-19 on H&M's UK operations. To gain insight into the
company's internal and external environment, this study will use PESTLE and SWOT analysis.
Extensive research will be conducted using reputable sources such as books, articles and
online websites to ensure a thorough understanding of the company. Finally, this essay will
provide recommendations to improve H&M's UK operations based on the findings of the
analysis.
The H&M Group was founded in 1947 as a small women's clothing store and has since
grown into a global fashion and design group. The company owns several brands, including
H&M, Monki, Weekday, Cheap Monday, COS, & Other Stories, ARKET, H&M HOME and
AFOUND. The group offers new trends in fashion, beauty, homeware and food. They worked on
integrating their physical stores with online platforms like Facebook, Instagram and Google
advertising to make a strong presence with their eight brands.
The term "fast fashion" refers to the rapid movement of clothing designs from the catwalk to
retail stores, capitalizing on current trends.
PRO CON
Manufacturers and retailers alike find
it advantageous and profitable.
The delivery service is fast and
efficient.
Affordable clothing.
The democratization of style and
fashion is evident.
Using cheap materials and displaying
poor craftsmanship
The consumer is encouraged to adopt
a mindset of throwing items away
without considering their long-term
value.
Harmful to the ecological balance
Related to labor practices that are
exploitative and abusive in nature.

With a long history in the fast fashion industry, H&M Group is one of the oldest
companies of its kind. Currently, in the year 2022, the H&M Group has an extensive presence in
74 countries with over 4,000 stores across its diverse range of brands.
Operating as a department store, the H&M Group offers a wide range of products,
including men's, women's and children's clothing, as well as cosmetics and home furnishings. As
a retailer, H&M does not own its own production facilities; instead, it works with about 600
independent suppliers for its garments. To ensure quality control and efficient operations, H&M
maintains 16 production offices that use advanced IT systems to monitor stock and facilitate
communication with company headquarters. These production offices oversee factories in
Europe, Asia and Africa.
As part of its strategic approach, H&M has not only focused on replicating designs, but
also introducing unique creations through partnerships with acclaimed fashion houses such as
Alexander Wang and Giambattista Vali. An illustration of this is the recent debut of a collection
curated by Simone Rocha in early 2021.
BNPL, commonly known as Buy Now Pay Later, is a form of short-term financing that allows
consumers to conveniently purchase items and repay them gradually over a period, usually without
incurring any interest charges.
PRO CON
A convenient payment method that
allows you to gradually purchase
items.
Often, interest rates on credit cards
are either non-existent or lower.
You don't have to have good credit or
a high credit score to qualify.
Fast authorization
Tracking payments can be challenging.
Late or missing payments can result in
late fees and have a negative impact
on your credit score.
Purchases do not accrue rewards or
cash back.
Even in case of return, the payments
can be supported.
H&M provides its customers with a shopping experience that is modern, convenient and
adaptable to their preferences. To achieve this, H&M has partnered with Klarna to introduce an
innovative payment solution to the UK. This new payment option, called Pay Later, allows H&M
loyalty program members (or those who sign up) to shop at their convenience and defer
payment until a later date. Whether shopping online or in store, customers can use the H&M
app to manage their purchases and choose the payment method that suits them best. With this
flexible and seamless payment solution, H&M is revolutionizing the way fashion enthusiasts can
enjoy their shopping experience.

Stefan Vos, H&M's Chief Financial Officer, expressed his excitement to offer UK
fashionistas a fresh and innovative payment option for their H&M purchases. The collaboration
with Klarna has resulted in the creation of a distinctive payment solution that ensures a
contemporary shopping experience, regardless of the customer's preferred shopping method or
location.
Sebastian Siemiatkowski, CEO at Klarna, expressed his enthusiasm for the collaboration
between Klarna and H&M, highlighting their shared dedication to improving shopping
experiences. Their goal is to constantly evolve and create smarter, simpler and more engaging
shopping experiences. Siemiatkowski further revealed Klarna's excitement to introduce their
flagship Pay Later offer to the UK, which will provide consumers with a distinctive shopping
experience both in physical stores and online.
To increase convenience and flexibility for customers, H&M and Klarna will continue
their collaboration by developing innovative payment solutions with the aim of making the
shopping experience at H&M, whether in-store or online, even simpler and more effortless.
The global economy has been severely affected by the COVID-19 pandemic, causing
widespread disruption to supply chains, international trade and the vulnerability of nations due
to increased susceptibility and disruption of key traders.
In December 2020, H&M reported a 10% drop in net sales for the fourth quarter and
18% for the full year due to the impact of the Covid-19 pandemic and subsequent shutdowns.
However, there is a positive trend in Q4 results as they show a rebound from Q3, which saw
sales decline by 16% year-on-year.
At the start of the year, the fashion retailer got off to a robust start, characterized by a
favorable trajectory. However, the onset of the initial wave of Covid-19 precipitated a drop in
sales in the second quarter. This decrease can be attributed to the closure of many stores due to
lockdown measures, as well as a decrease in foot traffic to the stores that remained open.
The purpose of the research
This study aims to examine the influence of Fast-Fashion, Buy now Pay later and the COVID-19
pandemic on H&M's UK operations.
Research objectives
To fulfill the purpose of this study, the following research objectives are designed:
1. Analysis of the Fast-Fashion effect within the H&M company in the UK
2. Analysis of the Buy now Pay later payment method within the H&M company in the UK
3. Analyzing the consequences of the COVID-19 pandemic that affected H&M operations in the
UK

Research questions
1. How does Fast Fashion affect the H&M company?
2. How does the Buy now Pay later payment service affect H&M operations in the UK?
3. What impact has the Covid-19 pandemic had on H&M's operations in the UK?
H&M - SWOT ANALYSIS
Strengths:
Extensive worldwide coverage
Success strategy.
Well organized and efficient supply
chain.
Online presence
Weaknesses:
The company relies on external
service providers for support and
resources.
It has no original models.
There is an ongoing dispute
surrounding their ethical principles.
Opportunities:
The potential of e-commerce in
shaping the future.
The market is experiencing significant
growth.
Efforts focused on promoting
sustainability.
Threats:
A pandemic that affected the entire
globe.
The level of competition is huge.
Changing consumer preferences
The state of the economy is full of
uncertainties.
H&M- PESTLE ANALYSIS
1. POLITICAL