Over the past couple of years, fashion retailer H&M has been slowing down its physical store expansion strategy.
H&M is still continuing to expand its physical presence but has begun to move away from more than a decade of rapid expansion.
The threat from rival retailers, both online and offline is partly responsible for H&M’s change of strategy. Inditex, the owner of rival fast-fashion retailer Zara has enjoyed some good sales, and H&M faces stiff competition from online-only rivals like ASOS and Boohoo.
The reasons for H&M’s slowdown are varied, but here I’ll look at H&M’s digital marketing strategy.
Over the last ten to fifteen years H&M and other fast-fashion brands like Zara have enjoyed great success in the fashion sector thanks to trend-led products, a speedy production process and large store networks. Now, the disruption is happening online, and H&M has been relatively slow to adapt to it.
For now, and for some time to come, physical retail will remain the largest market, but more and more sales are going online, and the trend towards online is unstoppable. Brands like H&M have to improve their online performance to maintain or improve their market share.
Indeed, H&M blamed online retail for reduced footfall in stores in its 2017 annual report:
“Profit during the year was negatively affected by a weak sales development in the physical stores of the H&M brand. This is mainly due to the ongoing shift in the industry, in which sales are increasingly taking place online but where the group’s online share does not yet compensate for the reduced footfall to stores.“
In 2018, the online apparel market in the UK accounted for 24% of all clothing sales. What’s more, £11.6 billion out of £48.1 billion retail sales came directly from digital purchases.
Although H&M has been making real effort to expand online, there’s work to do. H&M has a physical store presence in 71 markets worldwide, but it only sells online in 47 of those, four of which were added in 2018:
“We are expanding online, through physical stores and digital marketplaces. The global roll-out of online continues, with the ambition to offer online in all our 71 markets and in other markets too.”
And it could be working, with reports that H&M’s online sales increased by 30% in 2019 thanks to a strategy of integrating online and in-store experiences.
This suggests that improving its online presence has been a real focus for H&M. But, where has it gone wrong in the past and are there still more improvements to be made?
H&M was slow to sell online
H&M’s strategy has been heavily focused on its store outlets, and this is understandable given the success the brand has enjoyed. However, it’s arguable that this focus meant that H&M was too slow to see the potential of e-commerce.
H&M only started selling online in 2010, a decade after ASOS appeared. It seems that the retailer was slow to see the opportunity that e-commerce presented, or else thought that its store network was enough to see off online competition.
The sites were poorly designed too, with many usability flaws which made it harder to drive sales from the site. It has improved since, but the H&M site was deeply flawed in the first years after launch.
In addition, this delayed launch online means that, while rivals like ASOS have gained their online offering, H&M has had less time to learn and improve online.
User experience needs some improvement
Fashion sites have worked hard on usability over the past few years, and many sites offer an excellent user experience, on mobile and desktop.
To be competitive online, H&M needs to match and even beat its rivals for user experience. Mobile is especially important, as H&M’s target market of under 25s are heavy mobile users.
H&M’s mobile site is usable, but there are a few areas for improvement. For example, the navigation is sometimes confusing.
An example of this is one of H&M’s previous landing pages, here I selected ‘men’ from the home page, and would expect to see some other navigational options for product categories – shirts, jeans etc. Instead, I found this page with no obvious way to find products.
There are other issues too. For example, information on product pages can be relatively sparse. Previously, clicking on the delivery and payment link brought up this message.
People will be expecting some detail on delivery costs and timescales, as this impacts on their decision to buy or not. This doesn’t help at all, and customers have to add items to their basket before finding out costs and options.
Recently, it looks as though H&M has made some positive changes to their mobile site, including more links on home pages and delivery FAQs. However, after navigating to ‘Ladies’ I’m now presented with an extensive list of different products laid out in one long list. And although there are some good FAQs for delivery, finding them can be tricky as you have to navigate to the ‘Customer Service’ area which is a much smaller option in the main menu.
A look at Google’s PageSpeed Insights tool shows that the retailer needs to work on the mobile experience.
The H&M UK mobile site scores just 20% for mobile load speed. Page speed affects both user experience and search rankings, so this is an area H&M needs to address.
Fashion shoppers, more than any other retail sector, tend to shop via smartphones, so H&M really needs to ensure its target audience can browse and buy easily on mobile.
Lack of SEO strategy in the past
H&M’s SEO strategy seems to have been non-existent at times, and it had made some serious errors which have impacted its performance in the search engines.
No online retailer can afford to ignore search traffic. Good search ranking drives cheap traffic to the site, and it’s a valuable customer acquisition channel.
The first site it launched used Flash, which meant huge parts of the site couldn’t be indexed by Google.
It improved its search performance with a redesigned site after that, but then experienced a huge drop in search rankings in 2015 thanks to changing its site architecture and moving to a new hostname.
The result was that the number of its pages ranking on the first page of Google fell from 829 to 181, which represents a huge loss of search visibility.
On the chart above, you can see that H&M had recovered from early SEO errors, only to undo much of the hard work by not thinking about SEO when making major changes to the site.
It has picked up since, but this lack of SEO thinking has cost H&M in terms of lost traffic and potential sales over the last eight years.
Social media presence
As you’d expect for a fashion brand with customers around the world, H&M has large social media audiences.
It has 37m likes on Facebook, more than 33m followers on Instagram and 8.4m on Twitter. In the case of Twitter, it has plenty of country-specific accounts, which allows the brand to produce content specific to its different audiences.
The content is broadly similar across its social channels, mainly promotion of its clothes and upcoming collections, driving awareness of new products.
Its YouTube channel is also very product-driven, though this is combined with some useful ‘how-to’ content, such as makeup tips on the H&M Beauty channel.
Generally speaking, H&M does seem to be using social more as a broadcast than an engagement channel. This is not necessarily a problem for it, though some brands prefer to present a lighter more playful side on social channels.
There are exceptions. Its Twitter customer service channel has been proactive in responding to customer questions and helping them solve any issues, though it seems to have been silent since mid 2019.
The challenges of online for low-margin retailers
It’s no surprise that some of the biggest high street names that still aren’t selling online are low-margin retailers.
For example, Poundland started selling online in 2015, but since abandoned the idea. Primark is another obvious example, as it clearly feels the costs of online may not allow it to make a profit. It has dipped its toes in the water by selling through ASOS but seems reluctant to sell its entire range online.
The problem in both cases is that they are selling low margin items, and once the costs of delivery and returns are factored in, it can be hard to make a profit. Returns rates in fashion are often the highest of any online retail sector, and the cost of processing these is also a potential problem.
While it’s not impossible, much is about reducing returns costs where possible and encouraging online shoppers to increase basket values, there are challenges.
This follows on from the previous point, and it’s a real conundrum for fashion retailers like H&M. Free delivery helps to drive sales, but impacts on profit margins mean retailers need to decide which tactics to adopt here.
H&M has clearly decided that covering costs is more important, and its delivery costs may deter some customers.
It charges £3.99 for standard delivery, which is more than some competitors. ASOS, for example, will deliver free of charge when shoppers spend more than £25, a good way to drive up basket values.
Charging for click and collect from stores may also deter some shoppers, as the vast majority of retailers offer this service free of charge.
When rival fast-fashion retailers like Zalando are offering free delivery and returns, H&M’s delivery offering will lack appeal for many price-conscious shoppers.
In terms of delivery, H&M has massively improved its offering over the past year, with the addition of next day delivery, nominated slots and various pickup options enabling it to appeal to shoppers.
However, the fact that it’s been slow to do this means it’s lost ground on some online rivals over the last few years.
In theory, with a store network, multichannel retailers like H&M should be able to use this to their advantage. Appealing to customers using their mobiles in-store, offering convenient store collection and returns are some of the ways to join up channels.
Like online, H&M has been slow to adopt a multichannel strategy, and this means it’s now playing catch up with other fashion retailers in this area.
In its 2018 annual report, H&M talks of its plans in this area:
“The H&M group is taking advantage of the opportunities created by the digitalisation of our industry to meet customers’ new expectations. We are integrating the physical stores with online stores, and we are exploring the strength of our global brand in combination with local relevance and more personalised communication.”
This is an area where H&M is improving, having added click and collect over the past year, albeit with a charge, as well as in-store returns. It seems to be heading in the right direction, but the delay in adopting features which some rivals have offered for years means it may have lost some potential online sales over the years.
Apps can be a key part of marketing for brands like H&M. It’s most recent app, launched last year, does have an ‘in-store mode’ which allows shoppers to find available sizes and colours, and to see if items added to the favourites list are available in-store.
It has also introduced new visual search features which help shoppers to find items using their own photos. Users can upload a photo and H&M will find ‘lookalikes’ from its product range.
In addition, the scan and find feature allows shoppers to scan items in-store to see if the size or colour they need is in stock, or else order for collection or home delivery later.
These are useful improvements which actually help to enhance the in-store experience for mobile shoppers, and should help to drive additional sales from mobile users.
However, despite these useful features, the app doesn’t offer the best user experience. It’s broadly the same as the mobile version of the site and suffers from the same issues.
Little details matter, such as adapting to the way customers use phones. For example, the text and target ‘click’ area for selecting sizes is too small, making it harder for users to select the desired size without tapping in the wrong area.
Details like this can matter when rival fashion retailers are offering exceptional mobile experiences. H&M’s mobile site and apps aren’t impossible to use, but they could be improved.
In response to increased awareness around sourcing of products, and perhaps the fact customers are increasingly looking at social responsibility when choosing brands, H&M’s marketing has played up its sustainability in recent years.
It aims to use only recycled or other sustainability sourced materials and wants to be 100% climate positive by 2040. Indeed, it’s 2018 annual report claimed that H&M sourced 95% of its cotton from sustainable sources.
Such initiatives deserve applause, but H&M still has work to do to overcome previous bad publicity around its impact on the environment, such as burning unsold clothing.
H&M has managed to grow its online sales over the past few years, but so have many online retailers, as more and more people shop online.
The question for H&M is has it done enough to ensure that its online (and multichannel) performance is as good as it could be?
H&M does seem to have recognised this now and has taken steps to improve its online performance. Time will tell if this is enough to grow its share of online sales.