H&M Case Study

Since 2000 Swedish retailer’s H&M growth rate is high. Its motto is to offer fashion and quality at the best price. Nowadays H&M’s growth target is to increase the number of stores by 10 – 15 percent per year, while increasing sales in comparable units. The growth will proceed with an emphasis on and continued high profitability. While entering the U.S. market in 2000, they face several problems.
The primary problem of H&M is that it tries to expand around the world too fast without spending enough time to research and analyze the market it enters. In the United States they have chosen incorrect marketing mix strategy; consequently the company has low sales and low profits. Their lack of marketing mix strategy results in the following secondary problems:
H&M has not taken into account the competition of inexpensive chains such as Express, Old Navy and Wet Seal. The U.S. customers are not aware of the higher quality of H&M products. So Swedish retailer is not able to compete with U.S. rivals effectively.
Another problem H&M encounters in the U.S. market is its inefficient distribution network. Company has chosen too big outlets at poor locations in the suburbs, where they have a lot of direct competitors and few customers, who look for fashion and quality products.
The company has suppliers in Europe and Asia, but not in America. It probably increases the turnaround period because of the long distance between suppliers and retailers and results in higher costs of transportation. As a result H&M’s sales go down and retailer’s key measure of profitability (gross margin) decreases.
Low sales in the U.S. are also the result of the following problem: Unlike in Europe, in the U.S. H&M offers merchandises only for young fashion-conscious females. By doing this it sets limits to its market share while it could