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! As one of the most successful global apparel companies striving towards
continued brand recognition, market share and revenue growth, H&M must
strengthen its online presence and create a virtual marketplace in the U.S..
While H&M is a strong and steadily growing company, the development of
online shopping will create greater value within the company, strengthen
customer relationships and capture a! larger return.
This report will outline the rationale behind these assumptions, including the
company’s current situation within the apparel industry and current trends
within the global economy. It will then outline a detailed marketing strategy
and integrated promotional mix to successfully transform the company’s
existing production and distribution model into a multi-channel distribution
system of “bricks” and “clicks.”

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!H&M Hennes & Mauritz AB
Headquarters: Stockholm, Sweden
Chairman of the Board: Stefan Persson
CEO: Karl-Johan Persson

H&M History:
In 1947, the first store that would eventually become H&M opened its’ doors in
Vasteras, Sweden. It’s founder Erling Person created his store, “Hennes” with a product
line solely focused on women’s clothing, soon expanding into a new market, Stockholm,
Sweden, with much success in 1952. It was not until 1968, that “Hennes” finally became
H&M, Hennes & Mauritz, when Persson acquired a hunting and fishing equipment store
called Mauritz Widforss. At this point he expanded the store’s product portfolio, offering
men’s and children’s clothing in addition to women’s. From 1968 to the 1990s, H&M
continued its expansion throughout Europe and in 2000 entered the US market. Today
H&M is present in 49 world markets and continues to grow despite economic
misfortunes. [1] Hennes &Mauritz Group owns six independent brands; H&M, COS,
Monki, Weekday, Cheap Monday and & Other Stories, [2] the first of which we will be
focusing on.

Mission Statement:
“H&M is a design-driven, innovative responsible fashion company. Guided by strong
values, H&M is growing with quality, sustainability and high profitability all over the
world.” [3]

H&M is guided by the following goals, principles and values that are integrated in each
and every one of their marketing objectives:
• Fashion and Quality at the Best Price. H&M’s business concept is to offer fashion
and quality at the best price.
• A Global Trademark. “As a global trademark, H&M builds their customer relationship
through the company’s flexibility in rapidly changing environments and trends while
satisfying their customer’s demands.”
• Design with Sustainability. “Working with designers and buyers to create a plethora
of styles, H&M works to develop a more sustainable chain of design, manufacturing
and product handling for both people and the environment.”
• Efficiency at Every Step. “The best price is achieved by avoiding middlemen, buying
the right product from the right market, efficient distribution and cost-consciousness
at every step of the process.”
• Focus, Cooperation and Flexibility.
• Growth Target. “H&M’s aspires to increase the number of stores by 10-15 percent
annually while still increasing sales.”
• Financial Position. “A strong financial standing without dependency on loans
ensures readiness and freedom to act when presented with new business
opportunities.” [3]

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Trading Area:
As a well-known international company, H&M has markets in Europe, Asia, North Africa,
North and South America and the Middle East. H&M’s largest market is located in
Germany followed by the United States, currently with 238 stores nation-wide. The
United Kingdom and France are the company’s third and fourth largest markets
respectively. [3] We identified the U.S. market to be the most lucrative globally with the
highest growth opportunity in the apparel industry. [4]

!Industry Overview
The apparel retail industry consists of the sale of all menswear, womenswear and
childrenswear.[4] In the United States, apparel retail accounts for 64.9% of the consumer
market’s total value, having a current total of $521.7 billion dollars in revenues. “The
United States apparel, accessories and luxury goods market grew by 4.2% in 2012 to
reach a value of $521,699.3 million.” Researchers expect the market to continue to
accelerate, with a projected 28.8% increase with a market value of $671,776 million by
2017. [5]

Competitive Summary
The major players in the United States apparel industry in order of size of sales and
revenues: [7]

Company Recorded Sales, 2012
Revenues, 2012

H&M Hennes &

140,948 million 18,621 million[6]
Mauritz AB

The Gap, Inc. 15,651 million 14,549 million[7]

Nordstrom, Inc. 11,762 million 735 million[8]

11,792 million 10,877 million[9]
Companies, Inc.*

*The TJX Companies, Inc. is the parent company of TJ Maxx

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SWOT Analysis
Strengths Weaknesses
Continuous Growth in Sales [10] Economic Challenges Like many other
Established International Presence businesses, H&M was greatly affected by
Efficient Company Processes Instead the economic hardships of Europe. Due to
of owning its own factories, H&M consumers drastic decrease in income,
purchases its clothes directly from H&M’s sales in several countries has
suppliers and eliminates the middleman significantly decreased. H&M continues to
entirely. Each country has 20 offices that struggle in increasing sales in Greece,
supervise these transactions in the sales Spain, Portugal and Italy.
and distribution ensuring efficiency, volume Poor In-Store Customer Service
purchases and monitoring prices.
Powerful Celebrity Endorsements
Quick product turnover

Opportunities Threats
Changing Seasonal Trends Rising Competition in Apparel
Growing Online Retail Sector Market
Social Media Prevalence Competition with Discount Stores
Movement toward Sustainability In After the recession, consumers reduced
an industry that requires a lot of waste in their spending in apparel and became
production and distribution, more and more more budget conscious causing many to
companies are “going green” to adhere to turn to mass merchandisers like Wal-Mart,
the more eco-friendly mindset that is K-Mart, and Target for their clothing needs.
widespread amongst consumers. Continuous Fluctuations in Fashion
Trends The apparel industry is very fluid,
wherein changes in style, season and
weather are a constant threat to
companies trying keeping up.
Lower Competitor Prices [10]

SWOT Implications:
! Growing Online Retail. The rise in the online market provides a great opportunity
for H&M, which has yet to launch an online shopping market to customers in the
United States. This past year, Cyber Monday generated 30% more sales than the
previous year[11] and current trends show that more customers prefer to shop online
and avoid the hassles of shopping in stores and billing queues. The annual user
growth rate of online shopping is 297.8% and is expected to continue to grow.
Previously tested in 2010, H&M made online shopping available to several of its
European “virtual” markets and the average sales made online per year per person
was €952 and are expected to grow. In addition, it is estimated that “online and
Web-influenced offline sales combined accounted for 42 percent of total retail sales
and that percentage will grow to 53 percent by 2014.” [12]
! New Design Launches. Because fashion is constantly changing, H&M has the
opportunity to revamp its styles each season. With new apparel that fits the ever-
changing trends and fads, H&M can redesign their seasonal lines and give them a
new edge, tagline, or marketing strategy.

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! Expansion. One of H&M’s goals is to expand by 10 to 15% each year while
increasing sales; there are many new markets that H&M can enter including Chile,
Estonia, Lithuania, Serbia, and Indonesia.
! Better Customer Service. If H&M incorporated more comprehensive training
programs for customer service representatives, customers would be more likely to
have a better experience at the store. This could include investing in technology that
heightens and helps each consumer when they enter the store as well as requiring
all employees to complete a training program.

Statement of opportunity:
As a global retail company, H&M strives to continue revenue growth and expand
within the U.S. market by implementing a new distribution service via an online

After evaluating our SWOT implications, we noted the importance to strengthen our
online presence and develop a virtual marketplace in the United States. This opportunity
is a natural progression of the existing production and distribution model that H&M
currently uses. By introducing an online market, offering our entire product portfolio, we
are furthering our objective to deliver high fashion at an everyday low price and
practicality, while encompassing better customer service.

SMART Goals:
1) To generate awareness of our new online service amongst 50% of our target
market by February 2014
2) Generate 10% of 2013 total sales in online sales alone by end of July 2014

Target Definition
As we open our new online store in the United States, our target market will remain
focused on young fashion-forward men and women looking for inexpensive clothes.
With our new technological service, however, we are inevitably focusing on a busier and
more tech-savvy clientele.
! Geographically, we are first and foremost focusing our efforts in the US market,
with more concentrated efforts on those in greater metropolitan areas. Consumers
living in cities with existing stores, which are located in the most populous counties,
will be our initial target because they are already familiar with the brand as well as
more apt to current trends.
! Using demographic segmentation, our target is between the ages of eighteen and
twenty-nine with a low to medium income, as explained in the target equation. We
understand that they have some expendable income, and work hard to maintain
their budgets. With such hectic schedules, online shopping will greatly benefit our
target giving them the option to quickly shop online for the newest trends.
! Psychographically, our target customers are fashionable or hip men and women
who care about looking presentable and dress with the current trends. These men
and women are technologically savvy and are always searching for the hottest looks
at the lowest prices.

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! By utilizing behavioral segmentation, we focused further on those who use social
media and/or have made purchases online from a fashion-clothing retailer.

Target Equation:
For our target equation, we started with the population in the top 100 most populous
counties, which contain the most metropolitan areas in which H&M has existing stores.
We next narrowed by income bracket taken from the second and third quintiles of mean
household income, and narrowed by age to 18 to 29 year olds. Next we conducted a
primary research survey via Survey Monkey to gauge psychographic and behavioral

Population in top 100 most populous counties: 130 M [13]

2nd & 3rd income quintilesi * 22.7% [14] = 29.51 M
Age of 18-29: * 16.9% [15]= 5.0 M
Interested in being fashion forward: * 62% [16]= 3.1 M
Internet Access/Online Shoppers: * 81% [16]= 2.5 M

To young, fashion-forward men and women who shop online, H&M is a brand
within the vast retail industry that conveniently and quickly delivers cutting edge
style because they offer inexpensive clothing inspired by current runway looks,
now without brick-and-mortar constraints.

Based on these characteristics of our target customers and our opportunity statement,
our new positioning on the brand pyramid does not lie within product attributes, but
somewhere in between product and emotional benefits. By allowing H&M customers to
purchase all products online, we are centralizing our focuses in one place, giving our
brand’s message more exposure while offering a more convenient and all
encompassing way to shop, look good and feel good. We hope that this will show
customers the emotional benefit of shopping with H&M. In accordance with this goal, we
developed a new tagline that promotes both our product benefit, current fashion, as well
as how it fits into our customers’ lives. We changed our existing “Fashion and Quality at
the Best Price” to…

household!mean!annual!income!of!$29,204,!and!third!quintile!having!a!mean!of!$49,842. [14]!

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H&M’s departments are made up of the following products, which follow a traditional
retail department distribution[4] broken down as such:
New Service:

Newborn Size 0-6m,
Baby Girl & Boy Size
4-24m, Girl & Boy
Size 1 ½ -8 y, Boys,
& Boys Size Womenswear:
8y - 14+, Tops, Shirts &
Blouses, Cardigans &
Sweaters, Pants,
Jeans, Shorts,
32.5% Dresses, Skirts,
Jackets & Coats,
T-shirts & vests, Shirts, Blazers & Waistcoats,
Sweaters & Cardigans, Sportswear,
Hoodies & Sweatshirts, Swimwear, Lingerie,
Jackets & Suits, Pants, Sleepwear, Socks &
Jeans, Shorts, Jackets & Tights, Accessories,
Coats, Sportswear, Shoes, Cosmetics,
Swimwear, Underwear H7M + 14-24,
& Socks, Accessories, Maternity Wear

By going online, we are not changing our product

mix, but are eliminating space constraints
present in brick and mortar establishments. Style
We will now be able to offer each and every ! Online Low
Shopping Prices
item produced through our new online
service that is a virtual marketplace and
Fast/ !
creating an entire new array of core, actual Delivery ! H&M
Quality Virtual
and augmented products. This will also Closet
allow us to better control our product line ACTUAL
life cycle by highlighting features of specific
items, informing about current styles and Great
continuously offering new additions, all in one Relations

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Our primary promotional mix is predominantly addressing our first Marketing Objective
to gain awareness in our target market of our new online service. To achieve this goal
we plan to launch our integrated promotional mix starting first with PR control and then
launching a multi-touch point advertising campaign along with direct and online

PR control: In recent years H&M has gone under fire for models and ads depicting too
slim, too tan and too inhuman of women. European segments of the company are
moving towardmore realistic models for their ads, while the US refuses to change their
ways. In correspondence with our focus on the emotional benefits of our products and
services, as well as our tagline component of “Made for everyday,” we must support
these promises with actions. These actions will start with a press release, apologizing to
women, as objectified unrealistically in our ads, and promising to move towards a more
healthy and sustainable model image.

Advertising campaign: Our primary goal is to create a buildup for the launch of our
online store first, through as many touch points with consumers as possible, with the
help of our new, realistic endorsers:
! In store fliers, banners and signage with countdown to online store launch date
! Direct & Online Marketing via email and social media network ads
! Superbowl commercial: Our online launch is strategically placed after Superbowl
XLVIII so that we can properly launch our marketing campaign with our new celebrity
endorsers, Jay-Z and Beyonce who were both featured in Life Magazine’s “100 Most
Influential People of the World” 2013 edition. Because they both started their
famously successful careers as normal, everyday individuals, while growing to huge
fashion and style icons, we believe that these endorsers are important players in the
reference groups of our target market. Their baby, Blue Ivy, will also figurehead our
childrenswear product mix, to target customers who are starting to have kids.
Our secondary promotional mix is geared to focus on raising revenue, our second
Marketing Objective, to continue to expand our brand presence, and bring in
promotional elements to support those objectives.
! Personal selling: We are approaching this element a unique way by getting virtually
personal. We hope to do this with an online personal shopping tool that allows
customers to have a more hands on experience than the standard online shopping
routine. We hope that this will be an exciting feature to facilitate our revenue growths
as well as strengthen our brand image in the eyes of our customers.
! Virtual Personal Shopper details: This technology, in short, is a virtual dressing
room equipped with suggestions based on customer input. When using this service,
customers have the option to first fill out a questionnaire addressing customer age,
style, lifestyle, profession, leisure activities and body type. After gaining this data, the
shopper will give suggestions for items and full outfits, and continually collecting
information as the customer shops around the virtual store. The products can be
viewed many different ways including on a virtual human form. For further
assistance, a live customer service representative is available to “chat.” Below is an
example of what this feature might look like.

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Sales promotions: Throughout specified stages of our service launches, we will offer
exclusive deals on purchases made online to attract customers to our new service.
Viral Marketing/Contest: To add a WOM and viral aspect to our campaign, we plan on
having a contest associated with our virtual personal shopper technology. For more
details visit

In order to create integrated marketing communications we are centering each touch

point on one message, as relayed by our tag line “Haute off the runway & Made for
everyday.” In addition, all of our media forms will meet in the same place, our website,
which allows us to fully control the way our brand is portrayed and centralizing the entire
buyer decision process:!

Need Information Evaluation of Purchase Decision: Post-purchase

Recognition: Search: By Alternatives: It is Strong celebrity Behavior: It is
Customers need a! launching H&M ! extremely important ! icons, product ! important to further
more convenient online, customers that H&M counters all attributes and develop H&M customer
way to shop now have the other competitors sale customer support, as service with our online
without having to option to look at all techniques., in this well as portrayed shopping center so that
go and search in H&M products case in the uniqueness emotional and buyers are satisfied
stores. while comparing and efficiency of our product benefits help with their purchases
other brands’ online store. secure our buyer’s and remain loyal
products. purchase decision. customers.

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For our existing inventory, we employ a cost-based pricing strategy with a standard
markup across the board. To make this work, we strive to design a relevant and
fashionable product with the lowest manufacturing and overhead costs by seeking out
the cheapest and most efficient factories. By controlling our cost of goods sold, we are
able to keep our final prices lower than our competitors’, therefore allowing us to have
everyday low pricing. From here, we use 4% of revenues on marketing, [17] explained
further in our “Promotional Mix,” to convince customers of the product value.

Because we are not changing the price structure of the products we sell, and our new
service is free in and of itself, the only cost we can strategically control is distribution to
customers in the form of shipping and handling. Our objective here is to employ a
market penetration pricing strategy, keeping shipping low to gain market share and
maintaining lower shipping costs than competitors. This EDLP will be congruent with our
existing strengths and better achieve our quick distribution. In addition, we will offer
optional product (read service) pricing in the form of express shipping, and
exclusive online promotions. Because we pride ourselves in our fast turnaround and
cheap products, the goals of our new online service continue to follow our mission

In our current structure, H&M operates similarly to a vertically integrated company.
While we don’t completely control production because we don’t own the factories that
produce our goods, we do control all design aspects, as well as the complete
distribution channel. Our in house designers working out of 21 local production
offices[18] quickly send designs to manufacturers from whom we buy our products.
Because we operate from so many vendors in low labor cost regions around the world,
we are able to control the prices at which we purchase our products. [17] Products are
then immediately sent to distribution centers, strategically positioned with convenient
proximity to stores. These centers collect garments and distribute to retail stores that do
not have extensive backstock inventory. Stores may receive shipments as often as once
a day, which prevents inventory buildup and stagnant product in stores. This value
delivery network can design, produce, distribute and arrive at the end consumer in as
little as 3 weeks, just second to Zara. [18]

Our online store strives to meet the same goals of delivering the hottest trends in the
quickest time, and by eliminating retail stores, this output time can be cut nearly in half.
We will maintain our current supply chain, producing the same product in the same
fashion, while slightly altering our distribution channel by eliminating retailers.
Essentially, this is a direct channel from production to consumer.

! !

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By having a multi-channel distribution system, including brick and mortar and “clicks-
and-mortar,” we hope to expand our brand and increase revenues. Because we can
reach more of our target audience through our online marketplace, this unique blend of
selective and intensive distribution will have the potential to reach unprecedented
revenues, while cutting costs of the once necessary retailers.

! August ‘13 September ‘13 October ‘13
We will be focusing on PR, Launch rudimentary online Along with our first launch,
controlling our brand image store for women by we will initiate our
as detailed in our September 1, 2013 advertising campaign for
promotional mix. We will including at least one third the online shopper service.
launch our advertising of our product line.
campaign for online store This is our test run for This will also mark the
focusing on online and online shopping in the US beginning of our extensive
mobile promotion through as detailed in Measurement test group for the personal
social media ads and & Control. shopping technology.
mobile app banners.
November ‘13 December ‘13 January ‘14
First online sales Just before the holidays we Shortly before our
promotion: On top of in will launch our first survey “personal shopper”
store sales, we will offer an concerning our online store unveiling, we will announce
additional discount on all usability to maximize our celebrity endorsers,
online purchases made on efficiency through the Beyonce and Jay-Z. This
Black Friday and Cyber holidays. will be an interactive
Monday. campaign, beginning
before Super Bowl XLVIII,
and evolving into a contest.
February ‘14 March ‘14 April ‘14
Directly following Begin accepting “Personal shopper” contest
Superbowl XLVIII, we will submissions for the ends, resulting in a new
have launched the H&M “personal shopper” contest brand ambassador to
virtual personal shopping via Facebook as outlined in further our campaign. The
technology for men and our Promotional Mix. chosen outfit will be posted
women with our entire We will also offer free on the H&M homepage as
product portfolio available shipping to patrons of H&M well as various print and
online. personal shopper during online ads.
the contest.
May ‘14 June ‘14 July ‘14
We will have worked out all If not, we will simply scale it To commemorate our one-
kinks in our online system back. If it is, we will year anniversary of virtual
and identify whether the implement a plan to expand selling, we will hold a
online shopping concept is the technology into brick- runway show, wrapping up
profitable and popular. and-mortar stores across our campaign endorsed by
America. Beyonce and Jay-Z and
introduce a new campaign.

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Measurement & Control
1) We will track our brand recognition of our online service through direct traffic
tracking, measuring the number of visitors that visit our site and the amount of time
they stay on our website, to see if we achieve 50% awareness among our target
market by February 2014.
o We will also, during the Month of January 2014 add a step on all registers to
ask whether a customer has heard about, visited, and or shopped our online
o If we note that we have not reached our goal, we will add another touch point
to our ad campaign, posting billboard ads in metropolitan cities both with and
without existing H&M stores.
2) To track if we have generated 10% of 2013 sales in online sales by June 2014, we
will look at our financials from August to May 30.
o If we have not attained our goal, we will know that the online shopper is not
sustainable and will scale back marketing efforts and most of our promotional
mix, keeping the basic store in place.
3) Our last measurement is of efficiency of online operations as well as customer
o We will look at the rate of refunds, order mistakes and shipping mistakes, and
if they are higher than acceptable, we will add an additional Quality Control
o We will conduct research on customer satisfaction by providing customers
incentive in the form of discounts to fill out surveys regarding our online
store’s usability, convenience and customer service. We strive to 85%
satisfied customers.
! If we are under this target, we will implement a rigorous customer
service training program for our service representatives.

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1. Virtual Fitting Room! N.d. Photograph. Virtual Fitting Room!
Whereisksenia. Web. 18 Apr. 2013.
2. N.d. Photograph. EStudentInsurance. EStudent Insurance. Web. 20 Apr.
3. N.d. Photograph. Lawson Family Detistry. Web. 21 Apr. 2013.
4. N.d. Photograph. Dreamstime. Web. 21 Apr. 2013.
5. N.d. Photograph. Kepler Group. Web. 21 Apr. 2013.
6. N.d. Photograph. Layla Grayce. Web. 21 Apr. 2013.

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