The H&M effect
Fashion big data firm,Editd, has tracked the rapid influx of a host of international brands, including on Zara, Topshop, Hollister, Miss Selfridge and Victoria’s Secret as they have made their debut on Australian shores.
The Editd Australian Market Report for April 2014, pays special attention to H&M, breaking down H&M’s strengths and weaknesses in comparison to local competitors.
Product and pricing
According to Editd, H&M’s offering skews heavily towards womenswear, which occupies 51 per cent of the store. The balance is made up of childrenswear at 33 per cent, and menswear, 16 per cent.
Focusing on womenswear, Editd research has shown that Australian players have a lower average price on bottoms, dresses, footwear, and hosiery, with tops the most competitive fashion sector.
Women’s tops is expected to be the area where local players will most feel the pinch. H&M offers similar pricepoint to locals, but with a broader range, and a higher replenishment rate – 18 per cent, compared to three per cent locally.
Accessories is another category expected to feel the pressure as a result of the same factors, while footwear and bottoms have a chance of competing, given broader local ranges and competitive pricing.
On the subject of pricing, in the women’s bottoms category, analysis by Editd shows H&M has very similar pricing architecture to that of Sportsgirl, Cotton On, and Target. In terms of women’s dresses, Supre’s pricing comes closest to H&M.
H&M’s breadth of range means it has appeal across the entire consumer market, however, by not specialising on a specific consumer, the shopping experience can be haphazard.
Replenishment and discounting
A high frequency of drops of one of H&M’s key points, with its closest Australian competitor emerging as Cotton On. H&M also manages a more even ratio of new in the last three months stock to new in the last month stock compared to Australian retailers.
For example, of 50 womenswear products which sold out in the last three months, H&M has already restocked 21.
H&M’s rate of discounting is of little concern, but what does stand out more in the Australian market is the brand’s high rate of discounting by 50 per cent or more.
H&M moves sales stock fast, so as to be able to make room for new stock to prevent dead stock occupying valuable floor space.
Generally, rates of replenishment and discounting are even for H&M, which means the brand is able to select trends and merchandise according to its shoppers very accurately.
The only category in which discounting outweighs replenishment, according to Editd findings, is underwear, while accessories are replenished significantly more than discounting takes place.
At H&M’s core is its ability to predict trends and stock these at a time when consumers are most hungry for them.
A majority of H&M ranges are influenced by its successful celebrity and designer collaborations, with Alexander Wang the latest designer to team up with the retailer.
For example, in line with the Isabel Marant collection in late 2013, product across the stores took on a luxe boho feel.
Editd notes that H&M customers are not early adopters of tends, instead, mostly arriving late to big commercial trends. H&M’s strategy is to wait until a trend has been tried and tested before making an investment.
Locally, retailers need to increase performance in their activewear, plus size and maternity offering to compete effectively against H&M and other new players, with Uniqlo and potentially M&S to add further pressure to these categories.
Australian retailers should prepare to increase frequency of new drops and newness throughout the season.
Existing Australian retailers should also be careful not to alienate their existing customer base in a bid to mirror H&M and other new international retailer.
For more information on H&M or to view the full report, click here.
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