Fast Fashion, BNPL & COVID-19: Impact on H&M UK Operations

This report investigates the impact of fast fashion, Buy Now Pay Later (BNPL), and the COVID-19 pandemic on H&M's operations in the UK. It uses PESTLE and SWOT analysis to assess H&M's internal and external environment. The report highlights the pros and cons of fast fashion and BNPL, detailing H&M's partnership with Klarna for its 'Pay Later' option. It also addresses the pandemic's effects, including a drop in sales and supply chain disruptions. The study aims to analyze the effects of fast fashion and BNPL within H&M UK and the impact of the pandemic on H&M's UK operations. The report concludes with recommendations focused on improving customer service, targeting specific demographics, and collaborating with media platforms to enhance brand perception. Ultimately, H&M's strategic use of fast fashion principles and innovative payment solutions in the UK market are examined.

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

H&M's presence on a global scale has sparked political conflict in various countries, including
Turkey, Egypt and Lebanon, where the company has established franchises. To effectively
manage regulatory disputes and comply with the various regulations and requirements of
different countries, H&M has implemented franchising as a means of expansion. This strategic
shift has allowed the brand to maintain its relevance, especially in volatile political
environments. However, as long as global politics remains uncertain, H&M will continue to face
obstacles.
2. ECONOMIC
H&M experienced a notable impact from the Covid-19 pandemic, resulting in a substantial 18%
drop in net sales throughout 2020. The brand's supply chains were severely disrupted, resulting
in the closure of 80% of its stores. However, H&M has remained resilient, prioritizing online
sales despite setbacks. In addition, the brand experienced difficulties due to fluctuations in US
dollar rates, Brexit implications and currency fluctuations in different countries. In order to
remain competitive, H&M must exercise caution when implementing pricing strategies in each
respective market.
3. SOCIO-CULTURAL
H&M has donated $500,000 to the World Health Organization to help victims of COVID-19 and
women in Bangladesh. The fashion brand is known for its focus on sustainability and corporate
social responsibility, which includes fair wages for workers and promoting women to leadership
positions. H&M collaborates with notable figures and engages with its audience on social
media. Despite being affordable, the brand offers stylish fashion options and has earned
recognition for its commitment to sustainability and CSR.
4. TECHNOLOGICAL
H&M has invested in technology to improve its supply chain and customer satisfaction. The
company opened a logistics center in the UK to optimize efficiency and implemented a WeChat
feature for Chinese users, which was later expanded to 12 additional countries. H&M also
introduced a customer rewards program and prioritizes prompt deliveries, offering instant
delivery options and eco-friendly delivery methods. Some stores even offer bike-sharing
services.
5. LEGAL
H&M has been fined €35,258,707.95 ($42.2) by the Hamburg Commissioner for Data Protection
and Freedom of Information for mishandling sensitive employee data. The company has
previously faced allegations of discriminatory practices against ethnic minorities in its Swedish
stores. Despite these challenges, H&M remains committed to complying with global regulations
and promoting equality and transparency. The company consistently provides the public with
comprehensive financial and performance reports.

6. ENVIRONMENT
Climate change is a significant obstacle for H&M, a prominent fashion brand, when it comes to
accurately predicting weather patterns. The fashion industry is notorious for its impact on the
environment, but H&M has committed to achieving full sustainability by 2030. Their
commitment to sustainability earned them the title of Sweden's most sustainable FMCG
company in 2020 and third place in cotton sustainability in the same year. In addition, in 2019,
they were among the 16 pioneering companies that made the transition to the use of greener
raw materials.
RECCOMENDATIONS
The main objective should be to improve customer service by leveraging warehouse networks
and optimizing the online shopping experience.
Instead of trying to cater to a wide range of people, it would be more effective for them to focus
their efforts on a specific demographic. By gaining a deeper understanding of their target
audience, they can create personalized products that drive stronger customer loyalty and
ultimately drive higher profits.
H&M can collaborate with various fashion-focused media platforms to showcase its latest
collection, which is presented in a fashion similar to luxury items but offered at a more
affordable price.
CONCLUSION
In conclusion, H&M uses the fast fashion approach through various methods: rapid prototyping,
small batch production with a wide range of styles, and improved shipping and delivery
processes. This constant evolution of trends gives rise to a unique phenomenon known as
exclusivity at the table. In addition, reduced labor costs help lower production costs, ultimately
leading to an increased volume of goods at a more affordable price.
In the UK, H&M has partnered with Klarna to launch a new payment solution called Pay Later.
This innovative feature allows H&M loyalty program members to shop and defer payment for a
later date, regardless of whether they shop online or in physical stores. By using the H&M app,
customers have full control over their payment options, allowing them to choose when and how
they want to pay their dues. The primary objective of this partnership is to improve the overall
shopping experience for consumers by making it more convenient, user-friendly and enjoyable,
whether they shop in-store or online.
International trade networks and vital business operations have been disrupted as a result of
the COVID-19 pandemic, resulting in significant economic impacts. H&M posted a 10% drop in
net sales in the fourth quarter and 18% for the full year, directly attributable to the effects of
the pandemic and subsequent containment measures. Despite this continued decline, the retail

sector initially showed promising growth before the outbreak.

REFERENCES
(PDF) Sustainable fast fashion - case study of H&M (researchgate.net)
Fast Fashion Explained and How It Impacts Retail Manufacturing (investopedia.com)
9279-shop-now-pay-later (hm.com)
H&M Launches Pay Later in U.K. Market with Klarna.
Coronavirus: H&M to close 250 shops as Covid drives sales online - BBC News
H&M shows the effect of Covid-19 on its sales over the course of its latest financial year - Internet
Retailing
H&M PESTLE Analysis 2021: Success is a Few Tweaks Away
H&M is one of fashion’s biggest polluters. Now it's on a $100 million (fastcompany.com)
H&M SWOT Analysis 2023: A Detailed Report! | (swothub.com)

APPENDIX
H&M Customer Satisfaction Survey
1. What's your nationality?
o Romanian
o British
o Slovak
o Other
2. What’s you gender?
o Woman
o Man
3. How old are you?
o 18-24
o 25-34
o 35-44
o 45-54
4. What’s your profession?
o Student
o Employe
o Self-Employe
o Manager/Director
o Other
5. Why do you think about H&M quality?
o Very satisfied
o Satisfied
o Not so satisfied
o Unsatisfied
6. What’s your opinion about H&M prices?
o Cheap
o Moderate
o Expensive

7. What style do you prefer from H&M?
o Simple
o Neutral
o Fashion
o Delicate
o Casual
8. What’s your opinion about H&M service?
o Satisfied
o Unsatisfied
9. Why you buy H&M products?
o Brand
o Style
o Price
o Promotions
o Quality
o Other
10. How often do you buy from H&M stores?
o Daily
o Weekly
o Monthly
o Yearly
11. What aspects need to be improved within H&M company?
o Design
o Promotions
o Prices
o Quality
o Service
o Store environment

GANTT CHART