H&M: Can Afound Replace Ecommerce Losts?

H&M was founded in 1947 inthe Swedish town of Vasteras. They grew quickly and aggressively and have since launched a number of successful brands. H&M is regarded as a forward-thinking business. In 1998, H&M launched the first online marketplace in Sweden. H&M may seem to have lost their forward-thinking spirit lately, according to the fast-fashion giant.

The company recently announced the closing of close to 200 stores in mature markets. It pointed out an unexpected surprise: slower than expected sales in the 4Q17, and a decrease in in-store customers. The double-whammy resulted in the stock's drop to a nine-year low for the company's publicly traded stock in January 2018. The company's sales decline was attributed to ecommerce trends, according to CEO Karl-Johan Persson to Reuters. "In comparable H&M shops, performance was poor in many of our large mature market markets. This was a reflection of the shift from offline to online in the market. We also have to admit that we have not improved the shopping experience to meet rapidly growing customer expectations.

The launch of Afound by the global fashion and design firm has been announced in response to the disappointing fourth th quarter. Afound will sell discounted fashion and lifestyle products from both its own brands and those from recognized brands. The key feature of this new launch is its price point. Every item will be sold at a lower price than their already low-priced stores.

H&M corporate hopes that the new launch will boost sales. The Swedish giant, which has a lot of stock, is now jumping in to the off-price market, which is already populated with other retailers like Nordstrom and Macy's. Frederik Svartling, Afound's managing director, said that the company is a "style and deal-hunting paradise." Afound offers a unique off-price experience by providing personal style inspiration, quality labels and the feeling that you are getting a great deal.

H&M Group will launch an online store in Sweden and a brick and mortar shop in Sweden in 2018. This will increase their existing retail footprint, which includes a number of well-known fashion brands, 44 online markets, and more than 4,700 stores in over 65 countries. The main question is: Will this new venture address the root causes of H&M's problems, such as the tougher brick-and-mortar competition and the growing presence of ecommerce?

Retailwire Braintrust members and industry experts contributed their opinions. Mark Ryski from Headcount Corporation commented, "It is ironic that the brand which invented fast fashion is now suffering from the effects of a weekly fashion cycle." H&M isn't immune to fashion's fickle nature. Given the number of unworn apparel they produce, opening a deep discount brand seems prudent. It's not a game changer, but a reasonable strategy." Brandon Rael, BR Advisory, says that while retail has seen a resurgence in recent quarters, fast fashion was growing at such a rapid pace that a drop or correction was inevitable. Over-expansion in retail has been a problem in recent years. H&M and other fast fashion leaders might look at assortment curation and adopt a less is more approach to their go-to market strategies.

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Art Suriano, The TSi Company, agrees. He says, "I think H&M could streamline their business, focusing their core products, what sets them apart from their competitors, and why customers should buy them. If you want to be successful in the long-term, opening another brand with deep discounts won't work. Customers have too many options. H&M should be different. Be a leader, stand out and be the brand customers want to shop. Independent Retailer Meaghan Brophy shared her thoughts about the topic. She stated, "Opening an off-price branch to sell overstock will bring in more revenue, but it doesn't solve the core problem. A better solution is accurate trendcasting and quality manufacturing. The real problem can be solved by streamlining their business and identifying their true identity.

H & M has always been quick to capitalize on changing retail preferences and fashion modes. However, this business model is based on the economic basics, supply and demand. H&M has been able to dominate the fashion industry by ensuring that customer demand has always outpaced supply in the brick-and-mortar world. The 21 st century has seen a dramatic shift in the balance of supply and demand. Will fashion retailer Sweden's darling be able reverse this trend? Keep watching.