Challenges and Solutions for H&M in the Fashion Retail Industry

This report discusses the challenges faced by H&M in the fashion retail industry and provides solutions to overcome them. It covers issues like climate change, fair wages, and competition.

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CONTENTS
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
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INTRODUCTION
The fashion retail industry is that section of a business which act as a intermediary
between the manufacturer of textile and the consumers. The supply chain of fashion or apparel
industry lies in several different areas that are very much prone to get affected through the
external environment changes (Ho, 2014). To determine this the report is prepared which is
based on H&M a multinational fashion retailer deals in offering range of apparels, shoes and
other accessories related to fashion to women, men, children and teenage group to cater their
different taste as per the age group. This report includes challenges and issues faced by brand
along with solutions to solve them. At last it also includes a practical implication of a solution to
resolve the biggest issues among the rest.
MAIN BODY
The Fashion retail industry is considered to be one of the most complex sectors to operate
business or achieving sustainability at market place this is so because there are number of
challenges that are present for the fashion retailer within marketplace. This mainly includes
changes in social factor like change in trend, expectation, demand etc., environmental factors,
cultural believe and values. All these have a huge influence over the execution of retail business
as it brings changes. The H&M is a larger multinational clothing retailer that cater the fashion
need pf men, women, teenager and children’s by offering highly fashionable and trendy clothes.
It severs in around 74 countries and consider to be the second largest global clothing retailer. The
company provide high quality products with latest trends prevailing in market which is a main
factor that make it successful and develop its brand image. But other than all of these there are
certain strategic issues faced by H&M which are mentioned below,
Climate change is considered to be a key challenge for all the industry including fashion as it
directly influences the operational process followed by an organisation. The H&M follows a
comprehensive approach to environmental sustainability as a main pillar over which business
operates. But the appeal sector maintains a complex supply and production chin which involve
several types of environmental touch points which remains at a risk and bring meaningful
influence by climate change (Piercy, 2016). The major issues that get arises or may threaten
H&M being a fashion retailer is that climate change may results into scarcity of resources. This
is so because the greenhouse emission is expected to increase or get almost double within
upcoming 50 years, along with this the average temperature of earth also get increased which
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directly affect the cotton farming which is base of textile industry. This is so because cotton
farming as well as core elements of textile is considered to be a water intensive process. As per
this it can be said that a pair of jeans require at least 3000 litter of water for being produced.
Hence, this climate change affects the textile business badly if resources are continuing to being
used in such manner as it results into scarcity of resources which make it difficult to perform
more production as per demand. H&M also started experience a significant impact of climate
change over its business as its raw material cost is increasing which so gradually increasing the
cost of its clothes in market. Hence, these climate changes are making it difficult for H&M to
mitigate from such climate change.
Another major startgic issues that H&M facing is Wage strategy which is called fair living. It is
refers to earning that is expected by a worker which can satisfy their and family’s basic need, as
well as provide some flexible income as per the work performed by employees. But H&M is
accused regarding not paying the garment workers with fair living wages who supplies their high
street store. In addition to this many of the worker are being forced by the company to work for
extra hours for survive which is being argued by the Clean clothing campaign (Strand, 2014).
After investigating information about it from six H&M suppliers factory throughout several
countries like Turkey, Bulgaria, Cambodia and India it has been found that the worker are not
even getting their earning close to living wage that is necessary for fulfilling the basic need of
their family. The CCC said that H&M failed to meet the commitment which it made in year 2013
to ensure its suppliers would pay a living wages of approx. 850000 textile workers by 2018. This
is the major issues which H&M must be try to remove by being fair to the wokers who are
working for the brand. But over this H&M stated that the there is not any agreed level for living
wages and wage level is mainly defined by the parties on labour market through fair negotiation
among the employer and worker representative.
Another strategic issue that H&M faced is competition, which is one of the biggest
issues that company is facing from other big fashion brand such as Boohoo, Zara, Next, Bershka
and many more. As H&M is dealing within the fashion industry it required to bring best possible
trend in the market in order to keep the customer bring with the brand, but increasing number of
option and variety in market the customers get end up with the brand switch which creates a cut
throat competition in the marketplace (Soares Oliveira, 2018). The main competitor of H&M is
Zara which also maintain a same market performance as H&M. But the things aren’t looking
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good for the company as in first quarter of year 2018 it has been found that the profit of H&M
get decreased up to 62% which is being followed by the sales drop of year 2017 last quarter.
From the report it has been found that the H&M has a brand issues. This is so because it is not
the cheapest store but its clothing are also not best at the quality and not much fashionable. This
is the main factor behind increasing competition in front of H&M as it current have $4 billion
worth of unsold cloths and it is also seeking for a big technological change in order to stream
better its supply chain. But on the other side ZARA try to be focused toward reducing its
inventory issue by limiting the production of its clothes, controlling inventory and creating the
artificial scarcity in order to drive up sale (Pedersen and Gwozdz, 2014). Hence, it has been
found that the major factor lies in failing to maintain market share bas sales by H&M is due to
ineffective management, like the floor remains full of clothing that are not sold from huge time
but still hanging on the floor which make customers get dissatisfied. They don’t prefer to
purchase from a floor that is messy and not cluster the products in more clear manner and
updated designs.
These are certain strategic issues that H&M is facing which is making the execution of
business operation quite difficult that are required to be overcome by bringing changes in
internal systems so that threats present in external environment can be managed. Other than this
there are certain challenges that H&M is facing in order to deal with the above-mentioned issues.
These are mentioned below:
The climate change is a major issue not only for H&M but for whole apparel and textile
industry which is re quired to be managed in order to maintain the successful future of the
industry. But the biggest challenges lies for H&M is that implementation of planet friendly
actions are not much easier task to implement within the working practices in order to perform
sustainable practices. This is so because the climate change is a major issue that lies for the
whole industry and stakeholder connected to it. So it can not be changed or managed by a single
entity rather it required a collaborative support from all the stakeholder to minimise the impact of
such issue. Therefore, in order to work toward implementing a planet friendly action in fashion
industry, the H&M requires the support of government in order to bring changes such as
installing the solar panels on their factories to use sunlight for creating energy required for
production.
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Another challenge in front of H&M is that it has been accused with not fulfilling of the
promises made regarding fair wages to employees which is creating dissatisfaction among the
employees and also affecting the perception of customers toward it. The major challenge lies
here is that it may affect the market share and sustainability of business as it is an ethical and
human right case. The challenges get shaped as after the report present by CCC the H&M instead
of dealing with the issue, tried to cover it by presenting more and more report toward covering
up the commitment statements (Zirpolo, 2019). But H&M must try to take these calls seriously
as around 150000 people already signed in the petition for demanding the living wages without
any delay or some joined the turnaround HM campaign in order to voice against this act of H&M
and make them remind to work in this regard to provide fair wages. This is one of the serious
case over which H&M must focus as it not only affecting the loyalty or trust of workers toward
the company but it may also results into increase in turnover ration of the company. This is so
because there are number players already present in market that are working in same field and
required skilled and competent employees to work for them. So, this can be a major issue in near
future that may increase the risk of job switch which may also affect the growth and market
performance of company.
Despite of this, another challenges in front of H&M is the competition present in market
is harder to resist. This is so because it is increasing at rapid pace and company is required to
improve its internal practices in order to perform well. The main reason behind increasing
intensity of competition is that H&M is neither working over improving the quality of product
nor it is focusing toward reducing the price of its offering which is a major concern or can say a
major factor behind this unbeatable competition from Zara (Mensah and Osman, 2018). In report
presented over the comparison among H&M and ZARA over business insider is that the ZARA
has a better way of managing its inventory issue which keep it safe from the risk of competition
and changing trend in industry as it produce a limited stock only and work further as per the
market demand. But on the others side, H&M is lack in managing inventory as a result fo which
stick remains in store for longer and when the customers visits stores they found all the stuff
despite of season all together which make it more messy and less managed. This is the reason
sometime people avoided visiting its stores which in turn increase its inventory issues by
reducing the chance of getting stuff passed to market.
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These challenges are very intense and affecting eth performance of the company to a
larger extend and hence it requires to take corrective actions in this regard so that these
challenges can be avoided which si affecting the performance of company. The solution to these
challenges are mentioned below,
In order to deal with climate change issues there are certain solution that are planned by
H&M for the next years and this planet friendly action plan will be based on three pillars such as
energy efficiency, recycling practices and reducing CO2 emission. In this regard the H&M has
decided to provide appropriate training to its stakeholder in order to implement operational
practices that are more energy efficient (Naidoo and Gasparatos, 2018). This will be done by
implementing solar panel and using renewable energy to perform its operations effectively this
help in avoiding the risk of scarcity of resources. Other than this it also focus toward improving
the working process in such a manner that the carbon emission can be reduced that affect and
pollute the environment in order to operate business over sustainable goals. Despite of this H&M
has also planned to bring recycling practices at its core and it already implement recycling
practices in year 2018 where around 20.649 tonnes of textile was reused with eth help of garment
collection initiative which is almost equivalent to 103 million T-shirts.
Other than this for dealing with the fair wage issues raised by the workers, H&M decided
to listen to the complaints that workers are having toward the company. It also taken initiative
toward improving the wage management system for all of its strategic suppliers where around
factories of H&M are being either provided with a facility to improve their wage management
system for all; its worker to pay off them fair wages or instead implement democratic elected
worker representative which support in around 930000 clothing workers.
At last, for dealing with the challenges of competition, H&M must focuses toward its
inventory management practices where it must arrange the merchandise in well managed
manner. Despite of this in order to deal with ZARA competition it must focuses toward
presenting the clothes in more managed and attractive manner while on the other side must also
focuses toward regular shuffle the clothes so that customer experience a regular change in store
which attract them to visit again and again (Winston, 2014). Despite of this it must also focuses
toward reducing its production clothing and try to firstly manage with already produce clothes so
that profit of company can be managed. This is so because over production is increasing the cost
of company by making its store unorganised where clothes of all season are displayed. Hence it
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must reduce the production of cloth and try to organise the store in more effective manner so that
customers get easily found the things for which they are looking.
These all are the solutions that can be implemented by H&M in order to recover from the
issues that it is currently facing. But among all them the major issue which is required to be
firstly address is to deal with the competition present in market as it is affecting its market share.
So in order to practically implementing the strategy to deal with the competition in marketplace
it must be implemented within three stages which is as followed,
For dealing with the competition present in market the H&M must require to change its
strategy by either providing more clothes at relatively lower price for ensuring that the stock get
sale out in timely manner so that inventory can be managed effectively, or it may focuses toward
offering high quality clothes by keeping the price at high to maintain its profit margin. In order to
implement this, at first stage, its is required to plan the set of action that it must undertake in
order to deal with the competition in market as company still maintain a stock of around $4
billion that are unsold clothes (Yang, Qi and Li, 2015). So, it must focus toward analysing the
market situation and by taking advantage of market it must try to sold those product at discount
price so that it get affordable to the customers of other group too, and then after reducing the
stock it can improve the quality of new produced clothes. In stage 2, for implementing this plan
the H&M must focuses toward improving its store maintained. For this first of all it must focuses
toward separating the clothes on the basis of season so that store will only display the clothes
that are currently in demand which help in removing the messy arrangement of clothes. After
that the clothes must be displayed in more organised manner which each of different designed
get hanged and presented in such a manner that it remains visible to customer so that they get
attracted toward it. This support in starting pushing the product to the customer in market so that
its stock can be able to bring profit within company (Zirpolo, 2019).. In stage 3, after organising
all the activities that are planed the next is to delivery the actions over that plan and evaluating its
effectiveness. For this firstly the sales person must arrange the clothes in well mannered in
display portion of the store and get a thorough understanding about which dress is placed where
so that customer queries can be easily solved. At last after delivering this action, the H&M must
focuses toward comparing the sale before implementation of this plan and after implementing it
so that gap can be determined and if this plan is providing positive results then it must focuses
toward implementing all over the stores present at different locations.
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CONCLUSION
From the above mentioned report, it can be summarised that fashion industry is very
intensive to risk as there are major changes that goes hand on hand in this sector. There are
number of factors present in retail industry have a direct influence over the growth, profitability
and even functioning of the retailers. The major issues that are facing by H&M found as climate
changes which affect the production as well as customers demand, competition is the another
factor which is affecting the market performance and the fair wages issues. So, to determine
solution to these issues the report is conduct from this it has been found that increasing
competition in market remain major issue to brand for which it required to improve its inventor
and store management to keep stock as per the customer demand only.
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REFERENCES
Books & Journals
Ho, D.C., 2014. A case study of H&M’s strategy and practices of corporate environmental
sustainability. In Logistics Operations, Supply Chain Management and
Sustainability (pp. 241-254). Springer, Cham.
Mensah, F. and Osman, T., 2018. Communicating through social media to regain stakeholders
trust during crises: A case study about H&M.
Naidoo, M. and Gasparatos, A., 2018. Corporate Environmental Sustainability in the retail
sector: Drivers, strategies and performance measurement. Journal of Cleaner
Production, 203, pp.125-142.
Pedersen, E.R.G. and Gwozdz, W., 2014. From resistance to opportunity-seeking: Strategic
responses to institutional pressures for corporate social responsibility in the Nordic
fashion industry. Journal of business ethics, 119(2), pp.245-264.
Piercy, N.F., 2016. Market-led strategic change: Transforming the process of going to market.
Taylor & Francis.
Soares Oliveira, T., 2018. Businesses, the UN and decent work promotion: a case study of H&M,
ILO and Sida’s engagement in Cambodia.
Strand, R., 2014. Strategic leadership of corporate sustainability. Journal of Business
Ethics, 123(4), pp.687-706.
Winston, A., 2014. The big pivot: Radically practical strategies for a hotter, scarcer, and more
open world. Harvard Business Review Press.
Yang, D., Qi, E. and Li, Y., 2015. Quick response and supply chain structure with strategic
consumers. Omega, 52, pp.1-14.
Zirpolo, S., 2019. AN ANALYSIS OF CORPORATE IMAGE REPAIR STRATEGIES IN
2018.
Online
Climate Change and H&M: Is Sustainability the Answer? 2017. [Online] Available through:
<https://digital.hbs.edu/platform-rctom/submission/climate-change-and-hm-is-
sustainability-the-answer/>.
Circular and Climate Positive. 2020. x[Online] Available through:
<https://hmgroup.com/sustainability/circular-and-climate-positive.html>.
Not a single worker is making a living wage yet H&M claims to have done an amazing job.
2019. [Online] Available through: <https://cleanclothes.org/news/2019/not-a-single-
worker-is-making-a-living-wage-yet-hm-claims-to-have-done-an-amazing-job>.
H&M accused of failing to ensure fair wages for global factory workers. 2018. [Online]
Available through: <https://www.independent.co.uk/news/business/news/h-and-m-fair-
wages-global-factory-workers-living-wage-employees-pay-bulgaria-turkey-india-
cambodia-a8553041.html>.
We visited H&M and Zara to see which was a better fast-fashion store, and the winner was clear
for a key reason. 2018. [Online] Available through:
<https://www.businessinsider.com/hm-zara-compared-photos-details-2018-5?
r=US&IR=T>.
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