In the world of fashion, where trends change faster than Australia’s attitude towards its cricket team, even a small pile of leftover stock is a cardinal sin. Sure, you can have a sale, but what do you do with what’s left after that?
This is the question Swedish retailer H&M must now face, as its most recent quarterly report revealed on Tuesday that it has $4.3 billion worth of unsold clothes and accessories. Karl-Johan Persson, the company’s CEO, said that this had happened because, “H&M was opening 220 new stores and expanding its e-commerce operations, and so needed to fill the racks” (reported by the New York Times).
“Critics, however, blamed poor inventory management and underwhelming product offerings, prompting once-loyal shoppers to take their wallets elsewhere”
Over the last 20 years H&M have come a long way; from one women’s retailer near Stockholm to a multinational company of 4, 700 stores. But this latest news, along with last year’s unanticipated quarterly drop in sales—the first in two decades—has raised questions over the company’s ability to navigate changing consumer demands.
The globalisation that enabled H&M to grow so rapidly, is now posing a challenge: as online shopping (and the start-up industry) grows, foot-traffic drops. Generational change also plays a role, with many younger customers choosing to avoid legacy brands, opting for smaller, more underground labels: for whom the barrier to entry (think: building a website, reaching audiences on social media etc.) has been significantly reduced.
Upstart clothing-brands like Showpo (a $30 million dollar empire built off of cheap frocks) have taken advantage of this. In response H&M must explore its options—because the strategy of burning products it cannot sell to create energy is hardly efficient. It could look to Billabong who, upon encountering a massive decline in sales (once its target audience had grown up, back in the early 2000’s), created RVCA, a ‘brand within a brand’, which is popular with younger customers—many of whom have no idea their snapbacks were made by the same company who ‘fashioned’ their dad’s daggy t-shirts and sandals.
Another reason for H&M’s decline in profit could be this: although they paint themselves socially progressive, customers have criticised the company for paying lip-service to the feminist ideals it uses to promote its products (see: Global Hobo’s, “Don’t Fall For The New H&M Campaign”).
At the moment though, as reported by Business Insider, H&M are planning to deal with the stockpile by launching a unique off-price store: instead of offering discounted designer products (like most off-price retailers), H&M will be offering its own products at a discount.