Recovery of H&M Sales

Post Pandemic
Strategic and Innovation Management

Submitted to – Dr. Divya Vyas

Submitted by – Dhruvi Kota, Dhwani Doshi, Harshmeet

Rao, Shambhavi Kapoor, Priyanshi Jagtap

Semester - 3
Table of Contents

1. Abstract ........................................................................................................................................... 3
2. Introduction ..................................................................................................................................... 3
3. SWOT Analysis of H&M ............................................................................................................... 4
4. Problem Statement .............................................................................................................................. 6
5. Literature Review................................................................................................................................ 6
6. Strategic Decisions.............................................................................................................................. 8
6.1 Expansion through Concentration ................................................................................................. 8
6.1.1 Digital Sprints ......................................................................... Error! Bookmark not defined.
6.1.2 Technological Advancements ................................................................................................ 8
6.1.3 Visual Search ......................................................................................................................... 8
6.1.4 RFID (Radio Frequency Identification) ................................................................................. 9
6.1.5 In-Store Mode ........................................................................................................................ 9
6.1.6 Customer Loyalty Programme ............................................................................................... 9
6.1.7 Express Delivery .................................................................................................................... 9
6.1.8 Garment Rental ...................................................................................................................... 9
6.1.9 Scan & Buy ............................................................................................................................ 9
6.1.10 Garment Collecting .............................................................................................................. 9
6.1.11 Reusable, plastic-free packaging.......................................................................................... 9
6.2. Strategic Alliance ......................................................................................................................... 9
6.3 Production Adaption Strategy ..................................................................................................... 10
6.3.1 Sustainability........................................................................................................................ 10
6.3.2 Supporting Customer Adoption ........................................................................................... 12
7. Outcome ........................................................................................................................................ 12
7.1 Post Covid Consumer Experience............................................................................................... 12
7.2 Sales Analysis ............................................................................................................................. 12
8. Conclusion ........................................................................................................................................ 13
9. References ......................................................................................................................................... 15
1. Abstract
The world's second biggest fashion retailer, Sweden’s H&M, cut 250 of its stores globally.
Covid-19 pandemic had moved a lot of H&M shoppers online. H&M, which began a gradual
reopening of stores in late April 2021 after most of the stores had been shut by the pandemic.
This paper talks about the RECOVERY OF H&M SALES POST PANDEMIC, H&M offered a range
of services based on circular business models such as resell, remake, repair and garment
rental, as well as the garment collecting in stores globally for textiles recycling. The H&M’s
innovation hub ‘The Laboratory’ runs a range of projects focusing on digital services
connected to sustainability. How H&M has been able to meet the consumer expectations by
incorporating all the sustainable fashion measures. They could also able to incorporate a lot
of innovative ideas which include fashion & technology to cater younger segments mainly,
these innovative ideas help the brand to increase its demand thus causing a shift in the
demand curve.

2. Introduction
For the fashion industry, 2020 was the year in which everything changed. As the coronavirus
pandemic sent shockwaves around the world, the industry suffered its worst year on record
with almost three-quarters of listed companies losing money. Consumer behaviour shifted,
supply chains were disrupted and the year approached its end with many regions in the grip
of the second wave of infections. The pandemic has compounded the demand for all things
digital, which in turn has enabled innovation, efficiency, and new ways for businesses to scale
up. The shift is permanent and will continue to create opportunities to build slicker, smarter
operating models and differentiated customer propositions that are more personalized to
each customer. Equally, the crisis has emphasized the need to move to more sustainable and
responsible ways of working in all areas of the value chain. As the number of fashion players
responding to this need continues to grow, it will prove to be a long-term boon to companies,
workers, customers, and the planet. The primary driver of growth in the coming year will
continue to be digital channels, reflecting the fact that people in many countries remain
reluctant to gather in crowded environments. The Earlier Recovery scenario anticipates
dynamic digital growth across geographies in 2021 compared to 2019, with more than 30
percent online growth in Europe and the US and over 20 percent growth in the already highly
digitized Chinese market. In a disrupted environment, decision-makers must be bold. This
research paper puts light on novel strategies developed by brands like H&M for their
assortments or product offering, focusing on sustainability, value, simplicity, and downsized
collections, rather than volumes. It also talks about creating a more nuanced assessment of
store ROI to manage the crisis in physical retail while implementing a truly Omni channel
perspective on store operations (Fashion, 2021).
3. SWOT Analysis of H&M
Strength
1. Strong Global Reach: In recent years, H&M has moved into new continents like Asia and Africa.
The company’s worldwide solid presence allows them to reduce business risks. H&M is well-
represented in more than 70 countries, with over 5000 shops across six continents, and the firm
anticipates annual growth of 10% to 15%.

2. Successful Strategy: H&M follows a fast fashion model, which provides designer tables with the
most up-to-date fashion trends. This technique enables items to be delivered quickly from the
designer’s table to the store, in contrast to the traditional approach of seasonal manufacturing,
which requires a four- to six-month wait before a new collection is released. However, the
corporation must convey the goods rapidly from the manufacturing site to the retail outlet.

3. Systematic Supply Chain: H&M makes effective use of supply chain management, ensuring that
customers get their items on time. One of the benefits of working with several suppliers is that
there’s a far lower likelihood of running out of stock. H&M keeps all of its locations well-stocked
with current merchandise, and any supply concerns that arise are immediately rectified.

4. Powerful Online Presence: H&M has an effective E-Commerce strategy that adequately serves
the online market. Companies that effectively use the internet can gain a significant competitive
edge. It uses third-party platforms and its main website to reach more online customers and
increase E-Commerce sales.

Weakness
1. Dependence on Third Party Suppliers: H&M outsources product manufacture to over 800
separate vendors, resulting in a reduced production control level. Vendor overdependence can
impair the company’s order obligations, and any negative customer experience can harm the
brand’s reputation. While this approach has helped the company succeed, it also can be risky
because the suppliers can take all the credits.

2. Ingenuine Designs: The problem with H&M’s designs is its reliance on large designer companies
to create fashion trends. H&M creates inexpensive apparel, relies on many independent suppliers,
and follows the trends set by luxury companies. This is a significant flaw since fashionistas are
driven to new designs rather than current fashion trends. They don’t have any unique designs that
are identifiable as H&M.

3. Controversy on their Ethical Values: Many fashion critics argue that the brand copies the work of
other designers and enterprises. In 2018, the brand sparked controversy when it sold a hoodie
with a black kid model wearing it with the phrase “Coolest Monkey in the Jungle.” Customers
worldwide were outraged, and they decided to boycott its products for encouraging racism.

Opportunities
1. Future in E-Commerce: The online marketplace had been steadily expanding, but as the pandemic
spread, more people became aware of the advantages of online shopping. H&M has a solid web
presence, but there is always the potential for development, especially given that the internet
industry is developing quicker than ever before. To service a bigger market, they must also grow
 their E-commerce platform. E-commerce has the potential to be the future of the garment
business, and H&M must maximize its usage of the platform.

2. Growing Market: Because H&M sells items at a low cost, the Asian and African markets would be
ideal for the brand. There is a rising market of middle-income households in emerging nations that
like fashion and flair and can afford it. There are various developing areas with high sales potential,
and the corporation would be good to explore these opportunities.

Threats
1. Worldwide Pandemic: The continuous flow of raw materials and completed goods is critical to
multinational corporations like H&M’s success. In the case of another worldwide pandemic in the
future, lockdowns and quarantine might disrupt the supply chain, reducing H&M’s sales and
profitability. Because H&M is shutting physical locations and shifting its retail operation to internet
platforms, its previous growth model cannot be employed as an immediate approach.

2. Huge Competition: H&M must find tactics to keep ahead of the fast fashion market competition,
which has been highly cutthroat in recent years. Uniqlo, Zara, Gap, and Macy’s are some of the
most competitive brands. H&M’s competitors attempt to gain market share and lower demand
for their items.
4. Problem Statement
The world's second biggest fashion retailer, Sweden’s H&M, cut 250 of its stores globally. According
to McKinsey's Fashion Scenarios, a full recovery of global fashion sales to pre-crisis levels will not come
until the third quarter of 2022. There was a major shift in the consumer buying and shopping
behaviour, with huge amount of population globally shifting towards online shopping. We’ll look into
how H&M coped up with new challenges and what strategies were used to adapt to the new world.

5. Literature Review
Living with the virus
The Covid-19 crisis has impacted the lives and livelihoods of millions of people while disrupting
international trade, travel, the economy, and consumer behaviour. To continue to manage
unprecedented levels of uncertainty in the year ahead, companies should rewire their operating
models to enable flexibility and faster decision-making, and balance speed against discipline in the
pursuit of innovation. As the crisis continues to unfold, brands must shape their strategies by quickly
grasping which trends will remain after recovery and which will dissipate. In any event, investment in
data and analytics is likely to reap benefits. Armed with customer insights, companies can reset their
long-term strategies and redirect investment into opportunities that will outlast the pandemic. The
emphasis on sustainability is also reflected in consumer sentiment. More than three in five consumers
in a McKinsey survey ran in May 2020 said brands’ promotion of sustainability was an important factor
in their purchasing decisions. In response, numerous companies are stepping up their sustainability
efforts. In 2021, consumers expect winning brands to be those that can define clear, long-term
ambitions, while demonstrating enough flexibility, speed, and agility to navigate an uncertain short-
term future. Brands should reshape their operating models to adapt to the faster pace of change and
sustain those effective new working practices that have emerged from the crisis. Since adaptability
will be key to all of this, brands should identify the threats to their businesses and prepare strategic
responses across multiple scenarios to counter uncertainty and facilitate fast decision-making.
Building cross-functional teams that are informed by strategic priorities will give brands the necessary
agility to respond quickly and capture market opportunities (Fashion, 2021).

Diminished Demand

Following the deepest recession in decades, the global economy is expected to partially recover next
year but economic growth will remain diminished relative to pre-pandemic levels. Since demand for
fashion is also unlikely to bounce back due to restrained spending power amid unemployment and
rising inequality, companies should seize new opportunities and double down on outperforming
categories, channels, and territories. The challenging environment born out of the unprecedented
events of 2020 will linger into 2021, with global fashion sales projected to be below 2019 levels by as
much as 15 percent in the Later Recovery scenario. According to McKinsey's Fashion Scenarios, a full
recovery of global fashion sales to pre-crisis levels will not come until the third quarter of 2022. Indeed,
fashion is expected to be among the slowest-recovering discretionary spend categories. Lockdowns
and restrictions on movement have strongly influenced consumer choices around what to wear, too.
The formalwear category, which was slowing down before the crisis, has been on a steeper downward
slope since the pandemic started. An increase in consumer interest in health and wellness to persist
beyond the pandemic, meaning demand for athleisure and activewear will likely continue to be strong
in 2021. Athleisure and activewear brands have not been immune to declining sales. One driver for
the category is an uptick in cycling as an alternative mode of transport. The casualization trend that
was already in motion before the pandemic and that accelerated throughout 2020 is likely to emerge
as a dominant force across many fashion categories in 2021. Looking forward, as demand remains
subdued in 2021, fashion companies should aim to mirror shifts in consumer behaviour across their
product offering and double down on growth hotspots. Product marketing campaigns should focus on
in-demand categories such as athleisure and loungewear and be given a spotlight in prime locations
like online landing pages. (Fashion, 2021)

Figure 1- Graph on H&M’s 2020 Weekly Sales (Source- https://www.statista.com/statistics/1133661/h-and-m sales-growth-

coronavirus-crisis/)

Consumer Shifts
Consumer behaviour has undoubtedly shifted over the past year, as people sheltered from the virus
in their homes, travel was restricted and stores were closed around the world. However, as digital
consumption continues its dominance and growth in 2021, companies must develop more engaging
and social experiences to encourage consumers to connect (H&M, H&M Group Annual and
Sustainability Report 2021, 2021)

Retail ROI: H&M Group

H&M Group sank to a loss in the second quarter of 2020 as the pandemic caused sales to
plummet 50 percent year-on-year, but it has since recovered faster than expected. The fast-
fashion giant’s chief is focusing on more sustainable business models to drive growth in the
coming years. When Helena Helmersson stepped into the top job at H&M Group in January
2020, fast fashion was already under pressure, facing disruption from ultra-fast digital native
competitors and growing scrutiny for chasing unbridled growth amid a climate crisis. The
pandemic forced leaders like Helmersson to find ways to adjust to the many disruptions and
constraints that came with the crisis. Some retailers were forced into bankruptcy; others
cancelled next season’s orders, leaving their suppliers in the lurch, even as pressure to answer
for the social and environmental impact of business decisions continued to mount. H&M was
one of a few major retailers to pay garment suppliers for orders already produced or in
progress. While Helmersson managed to return the group to profitability faster than
expected, H&M’s future success will hinge on whether the company can finally crack
omnichannel retail and scale-up sustainable business models while still generating growth
and profit. (H&M, Transperancy, 2022)
Digital Sprints

Digital adoption has soared during the pandemic, with many brands finally going online and
enthusiasts embracing digital innovations like live streaming, customer service video chat, and social
shopping. As online penetration accelerates and shoppers demand ever-more sophisticated digital
interactions, fashion players must optimize the online experience and channel mix while finding
persuasive ways to integrate the human touch. With the global pandemic keeping people at home,
2020 may be remembered as the year in which fashion retail made a definitive shift online. Over just
eight months, e-commerce’s share of fashion sales nearly doubled from 16 percent to 29 percent
globally, jumping forward six years’ worth of growth.

6. Strategic Decisions
6.1 Expansion through Concentration

6.1.1 Technological Advancements

Innovations such as Livestream commerce have captured the imagination and helped to
bridge the gap between physical and digital by bringing human interaction to the digital
shopping experience. Virtual fashion is likely to emerge as a not insignificant opportunity for
brands both as a revenue stream and as a channel for product discovery. (H&M, Innovation,
2022)

• H&M Foundation’s Global Change Awards funds early-stage innovations that have the
potential to build a planet-positive fashion industry.
• Our Circular Innovation Lab supports innovators and start-ups in joint development projects
around circularity, from early-stage proof of concepts to capsule collections.
• H&M CO: LAB is our venture capital arm that invests in new and developing technologies.
• The Laboratory is our wider internal innovation hub that supports our brands and business
with research and idea exploration.

6.1.2 Visual Search

Image recognition helps customers find the right product by making relevant
recommendations based on pictures that the customer has taken or been inspired by.
6.1.3 RFID (Radio Frequency Identification)
It means items with a digital price tag can be located quickly, to get precise information on an
item’s availability.

6.1.4 In-Store Mode

In-store mode allows customers to see on their mobile which items are in the store they are
currently in and purchase them online.

6.1.5 Customer Loyalty Programme

Members of H&M’s customer loyalty program can choose to pay now or later through the
H&M app, whether shopping in-store or online.

6.1.6 Express Delivery

Next-day delivery and express delivery continue to be rolled out in more markets.
#HMxME invites customers to share their fashion stories on Instagram while also providing
an easy way to buy the items in the images.

6.1.7 Garment Rental

The brands of the H&M group are testing and offering innovative new services such as
garment rental, second hand, made-to-measure jeans, repairs, alterations, and climate-smart
deliveries, all to help customers live a more sustainable lifestyle.

6.1.8 Scan & Buy

The customer scans the QR code on a product in-store to find and buy the item online in the
size and color they want.

6.1.9 Garment Collecting

The H&M group collects used clothes and home textiles, from any brand and in any condition,
for reuse and recycling in exchange for discount vouchers up to 20% off. (H&M, Reuse and
recycling, 2022)

6.1.10 Reusable, plastic-free packaging

From 2021 H&M’s goal is to make all their packaging material to be recyclable, reusable, or
compostable. (H&M, Packaging, 2022)

6.2. Strategic Alliance

As online channels continue to prosper, physical retail’s struggles will likely persist, and we expect to
see fashion companies continuing to close stores in 2021. One example among many so far was H&M’s
announcement that it would close up to 750 stores worldwide and focus on digital growth. H&M has
expanded its online presence by tying up with Flipkart’s multi-brand e-commerce fashion platform
Myntra.
H&M has also unveiled its first Indian celebrity campaign to celebrate the tie-up. The campaign
features Bollywood names including Harshvardhan Kapoor, Aditi Rao Hydari, Diana Penty, Amyra
Dastur, and Aditya Seal wearing H&M’s latest collection. Over the next year, momentum in e-
commerce will only accelerate. Fashion executives see digital as the biggest opportunity by far for
2021, with 70 percent of executives expecting growth of more than 20 percent in their ecommerce
channels. New digital opportunities are leading to creative solutions for marketing, design, and new
revenue streams across the fashion industry. A partnership between H&M and Myntra, for example,
will create a wider reach of audience, while other collaborations exist between fashion companies and
designers. H&M already runs its e-commerce store in India but the tie-up with Myntra, one of India’s
largest online fashion retailers, will bring the brand to a large demographic of new customers.
(Fashion, 2021)'

6.3 Production Adaption Strategy

6.3.1 Sustainability
As consumers become more engaged with sustainability issues, circularity will be the key that unlocks
the door to a more sustainable future. However, it is not the kind of revolution that can be led by a
few leaders, while others wait and see. Rather, a collective effort is required, in which fashion
companies, customers, and all participants in the value chain collaborate.
 Figure 2- Swedish fashion retailer H&M Group's net sales increased by 12% in the first half of
2021 compared with the same period in 2020, while net sales in the second quarter of 2021
increased 75% yearon-year. Source: https://hmgroup.com/wp-
content/uploads/2021/07/The-full-report-PDF.pd

To date, players that feature sustainability at the centre of their branding have been at the forefront
of circular practices, as well as some established fast fashion brands owing more so, perhaps, to the
resale value of their stock rather than their eco aspirations. However, looking forward, we expect
mass-market brands to scale their efforts. In addition, aggregators are well-placed to launch resale
and repair programs, combined with an enhanced in-store experience. Marketplaces can build on their
size and logistical capabilities. As consumers become more engaged with sustainability issues,
circularity will be the key that unlocks the door to a more sustainable future.

As circularity grows, digital enablement will be critical. As the traditional linear fashion value
chain transitions into a circular system, consumers will be incentivized to engage beyond an
initial purchase to engage in circular business models, which in turn will support data
collection that can shape a brand’s business going forward as shown in Figure 2. (H&M,
Circular & climate positive, 2022)
H&M Offers to:
• Offer rental options such as subscription services and the option to buy rented products at
a discount
• Borrow online marketplace techniques to filter, sort, and group assortments, or leverage
retailer-curated collections
• Enable peer-to-peer business, including resale and rental, and sweeten the deal with
logistics and digital solutions
• Create timeless collections, reflecting the declining prominence of seasonality
• Offer tips for care and repair
• Enable returns and recycling
• Develop data strategies to inform business decisions.
• Leverage store networks to create in-store circularity hubs
• Build out non-store collection points and home pick-ups to improve accessibility
• Optimize sorting facilities and recycling technology, either in-house or with partners
• Eliminate single-use packaging
H&M’s innovation hub ‘The Laboratory’ runs a range of projects focusing on digital services
connected to sustainability. The group also includes investment arm CO: LAB, which is
focusing on entrepreneurs that are exploring the future of fashion. Through CO: LAB the H&M
group has invested in businesses such as Renewcell, a Swedish textile recycling company that
has developed a unique method of recycling textiles on an industrial scale, creating natural
biodegradable fibers. H&M group’s goal is to use only recycled or sustainably sourced
materials in their collections by 2030. (H&M, Annual Report 2020, 2020)
6.3.2 Supporting Customer Adoption
For younger consumers born into the sharing economy, adopting circularity is a natural step.
However, older consumers may require education and encouragement. Some consumers
believe there is a hygiene issue with second-hand clothes, and others struggle to translate
their sustainable values into actions for a wide range of reasons. (H&M, H&M Group Annual
and Sustainability Report 2021, 2021)
H&M is responding by marketing circular items alongside conventional ranges, for example
offering a range of circular services in their core businesses, such as resell, remake, repair,
and garment rental, as well as the H&M group’s garment collecting and proving discounts in
exchange of old garments in stores globally for textiles recycling. All these practices aim in
helping to normalize circularity in the minds of shoppers. (H&M, Circular & Climate positive,
2022)

7. Outcome
7.1 Post Covid Consumer Experience
Initiatives are underway throughout the supply chain to meet customers’ expectations of a
smooth and inspiring experience wherever, whenever, and however they choose to meet us
on our websites, in digital marketplaces, and on social media. H&M has been able to
incorporate a lot of innovative ideas which include fashion & technology. Since H&M caters
to younger segments mainly, these innovative ideas help the brand to meet consumer
expectations by incorporating all the sustainable fashion measures. (H&M, H&M Group
Annual and Sustainability Report 2021, 2021)

7.2 Sales Analysis

Between 2019 and 2021, the online share in global retail sales increased by more than four percentage
points to 17% in 2021. A company which clearly reflects this trend is Swedish fast-fashion giant H&M.

Although H&M registered sharp overall sales losses of -20% in the first corona year 2020, the fall was
cushioned by a surge in eCommerce sales. In 2020, H&M registered total eCommerce net sales of
SEK53 billion, which corresponds to a year-on-year growth of 39% in online sales or a share of
eCommerce in overall sales of 28%. In 2021, H&M was able to continue this track by increasing online
net sales by another 21% year-on-year to a total of SEK64 billion, while overall H&M sales increased
by only 6%. As a result, eCommerce net sales contributed a share of 32% to overall H&M sales in 2021.
H&M’s strongest URL is hm.com, which generates the bulk of its net sales in Germany. Between 2019
and 2021, hm.com grew its net sales from SEK33 billion to SEK54 billion and currently contributes
around 85% to H&M’s eCommerce sales. According to the company, there is no end to this
development in sight. H&M has thus set itself ambitious goals: By 2030, the fashion retailer plans to
double overall sales compared to 2021, counting more than ever on a strong eCommerce business.
(ecommercedb, 2022)

8. Conclusion
There is no question that 2020 has brought unprecedented challenges to consumers and
companies around the world. As the pandemic has called into question the role of the physical
workplace, fashion companies must balance business efficiency with employees’ needs and
preferences, creating a new hybrid work model that supports organizational priorities.
Another major challenge is the need for reskilling, as the pandemic has highlighted the
importance of certain roles over others and certain areas of responsibility within roles. As
entirely new skill needs continue to emerge next year, fashion companies will either have to
develop them in-house or acquire them by recruiting. Fashion schools expect the weight of
digital and analytics skills, for example, to increase significantly in their curricula due to higher
demand from fashion employers.
Regardless of the recovery timeline, the new operations of the fashion industry emerging
from the crisis will be radically more digital than in the past and will require new pools of
skills. In response to these and other shifts, retailers are adapting their store strategy and re-
thinking the role of the store in an Omni channel environment.
Today’s consumer is more ethically minded, demanding that brands and retailers build their
businesses with a conscience. 2020 has seen a continued focus on sustainability, with fast-
fashion brands facing pressure from both consumers and shareholders to take action. Fast-
fashion brands are recognizing that being ethical and inclusive as organizations are both
important and good for business but that the industry has a long way left to go.
While 2021 is likely to be challenging for almost all fashion companies, there will be
opportunities for some. Those that find success is likely to continue to pivot to digital,
understand where the demand lies, and target betterperforming geographies, segments, or
product categories. In challenging times, bold decisions often reap the richest rewards.
However, decision-makers must also show they can respond quickly to a dynamic situation
while managing risk effectively because the decisions they make over the coming months will
be critical to the future of their business.
9. References
ecommercedb. (2022, 02). H&M doubles eCommerce sales share. Retrieved from
www.ecommercedb.com: https://ecommercedb.com/en/blogPost/3506/hm-doubles-
ecommerce-sales-share

Fashion. (2021). The State of Fashion 2021. Retrieved from McKinsey Company:
https://www.mckinsey.com/industries/retail/our-insights/less-is-the-new-more-the-state-
of-fashion-in-2021

H&M. (2020). Annual Report 2020. Retrieved from H&M Group.

H&M. (2021). H&M Group Annual and Sustainability Report 2021.

H&M. (2021). H&M Group Annual and Sustainability Report 2021. Retrieved from H&M .

H&M. (2022). Circular & climate positive. Retrieved from H&M Group:
https://hmgroup.com/sustainability/circular-and-climate-positive/

H&M. (2022). Circular & Climate positive. Retrieved from H&M Group:
https://hmgroup.com/sustainability/circular-and-climate-positive/

H&M. (2022). Innovation. Retrieved from H&M Group.

H&M. (2022). Packaging. Retrieved from H&M Group.

H&M. (2022). Reuse and recycling. Retrieved from H&M Group:

https://hmgroup.com/sustainability/circular-and-climate-positive/recycling/

H&M. (2022). Transperancy. Retrieved from H&M Group:

https://hmgroup.com/sustainability/leading-the-change/transparency/