Introduction
Retailers across the globe and in the UK, in particular, are searching for strategies that will help them achieve a competitive advantage and attract a more significant number of customers interested in their products. A new marketing strategy can help H&M achieve this goal despite the challenges of the current retailer environment in the country. This paper aims to examine the retail industry in the UK and Huddersfield and present a marketing plan for H&M.
Analysis of Retailer
The retail industry in the UK is affected by a variety of social, economic and political factors that determine its development. In general, this sector was able to generate £92.8 billion in 2017 (Rhodes, 2018). The number of businesses operating in this industry in the UK is approximately 319,000. The total amount of money spent in retail within the UK is estimated at £395 billion (Rhode, 2017). Thus, the industry appears to be earning a sufficient amount of money. Table 1 presents an assessment of the external components that affect H&M using a PESTEL model.
Table 1. PESTEL analysis of H&M (created by the author).
Huddersfield
It can be argued that retail in Huddersfield is experiencing similar issues that were described above. For instance, Wood (2019) states that a large retailer M&S plans to close its Huddersfield locations together with other stores in different cities. This decision was made based on declining sales over the last several years and a choice to focus on online shops. Therefore, Huddersfield’s retailers may have a reduction in sales and revenue due to a shift in consumer preferences. One of the most significant shopping spaces in the area is the Kingsgate Shopping Centre.
The plans that will affect the retail environment in the next 2-5 years are connected to digitalisation. It is anticipated that many physical locations of stores will be closed down (Lavigueur, 2018). Additionally, some changes may affect the Kingsgate shopping centre where an H&M store is located. Lavigueur (2018) states that the executives plan to expand the mall, thus providing more space to retailers. This will affect the competition in the area as new clothing companies will start selling their items in this location. However, Lavigueur (2018) adds that part of the development will include a cinema theatre, ice rinks and other leisure opportunities. Therefore, more potential customers will visit this location, which increases the chance to improve sales.
H&M
The retailer chosen for this strategic marketing plan is H&M. The brand is a large multinational corporation that operates in different countries and incorporates several companies, such as “H&M, COS, Monki, Weekday, & Other Stories, Cheap Monday, H&M Home, ARKET and Afound” (“About the H&M group,” n.d.). The products of H&M mainly consist of clothes, shoes and accessories for women, men and children. The business model is fast fashion due to the company’s low prices and collections of clothing.
The main office is positioned in Stockholm, however, there are stores in different parts of the world, including one in Huddersfield’s shopping centre. In general, the number of physical locations is estimated at 4,433 stores around the world (“About the H&M group,” n.d.). H&M was chosen for this paper because the organisation is a well-established retailer that tailors its products to a variety of markets. The fast-fashion model that it uses is a simplified approach for mass-market retailers and therefore, it is interesting to review the operations of H&M. In addition, the marketing approach that the company employs is closely connected to its operational activity. Thus, H&M creates a cohesive strategy for development, which provides implications for further examination.
Reasonability and Security
Despite H&M being a well-established company, it is also subjected to the pressure of the industry and its external environment. Shively (2019) states that approximately 160 physical stores will be closed in 2019. This is part of the optimisation strategy that will affect branches in the US and Europe. However, H&M does plan on opening stores in markets where it experiences growth in sales, such as China, India and Russia (Shively, 2019). Based on this information one can conclude that this retailer is reasonably secure despite having to close some of its shops because this decision allows H&M to focus on more attractive markets.
Objectives of H&M
The primary objective that H&M has is to change its production and selling model to be more environmentally friendly. According to Hendriksz (2018), H&M cites sustainability as its main target for manufacturing and selling clothing. This aim involves a circular model that implies using recycled materials to create new products. Heuvel (2015) states that within this approach organisations can prolong the lifecycle of their developments. Additionally, H&M aims to become a reliable employer by offering fair salaries to all its employees.
Evaluation of H&M’s Objectives
Considering the overall retail environment in the UK and worldwide it can be argued that H&M chose an appropriate model as its strategy, which allows offering sustainably manufactured closing to consumers. According to Braham (2017), the low price of closing items is no longer a competitive advantage for retailers. This change in attitude is partially connected to the reveal of the exploitative work conditions in factories located in developing countries. H&M targets this issue in the following manner – “in 2016, Swedish clothing giant H&M collected around 16,000 tons of discarded clothing” (Braham, 2017). Thus, the consumers are more aware of the factors that enable retailers to sell low-priced clothes and are willing to pay more for better quality and social responsibility of the brands.
Another factor is the increasing environmental awareness of customers. Braham (2017) argues that widely accepted approaches in clothing manufacturing result in land waste and pollution. As with the previous component, this element of H&M’s work is contributing to the purchasing decision of individuals. Thus, when evaluating the marketing strategy that H&M declares it can be argued that it corresponds to the requirements of the retail industry and existing consumer preferences. Additionally, H&M has already made a lot of progress in its move towards sustainable fashion, thus, this plan is achievable. Once the company can manufacture 100% of its clothing using the new model, which will help save costs and attract a new market, H&M will use these strategic objectives to continue and apply sustainable practices in its manufacturing. Thus, the analysis presented above provides insight into the fact that these plans are relevant to the retail industry.
One issue that may be connected to the strategic direction of H&M is its fast-fashion history. Since its establishment, the retailer offered clothes that looked trendy and cost less than those that could be purchased in luxury brands for a reasonable price. The significant change of its marketing mix can affect the perception of the brand while some customers may choose to shop in other stores. Hyatt and Spicer (2018) provide an example of an American supermarket brand Walmart, which also sells clothes and its efforts to implement sustainability into operations. The organisation started selling products that were manufactured by the sustainable model.
Strategy/Tactics
The application of the SMART framework will allow H&M to set clear objectives for its operations. In regards to this strategy, the plan is to increase online sales and sell 50% of goods through H&M stores via the internet in the next five years. The specific aim is to ensure that the company can respond to the alterations of its external environment, which requires a significant change in the existing sales channel. The measures for this plan are the percentage of sales online and optimisation of current locations that can serve as pick up points for customers and be designed more creatively to attract more attention. This strategy is actionable because it can be applied immediately using the information from the analysis presented above that can help improve performance, which is relevant to the specific market. Finally, the time-bound component of SMART is expressed through the ability to change adjust the existing timeline for this project, depending on H&M’s performance.
While H&M has a good marketing and operational strategy for its future, several changes can be made to enhance those. Firstly, more attention should be dedicated to the online shopping experience. It is because the number of shoppers that choose goods online has increased and will continue to grow, based on the statistics presented by Verma, Sharma, and Sheth (2015). The revenue that comes from this source is also increasing by several percents each year. This data indicates a significant shift in the preferences of shoppers because more people choose to purchase goods online. Therefore, the physical locations that the store has will not have as much impact on the revenue. Instead, they can be used as concept locations or places where customers can pick up goods they ordered online, try them on and return those easily. This strategic objective is appropriate for the retailer because it allows allocating resources into sales channels that are becoming popular with shoppers. H&M can become a well-established online retailer with a new strategy, which will help it achieve a significant competitive advantage.
Another critical component that H&M should consider is the changes in consumer behaviour. While the company recognises sustainability, other factors impact the decision-making process as well. Verma et al. (2015) point out that “the consumers of today are increasingly sophisticated—they look up, analyse and compare product features, prices, payment options, shipping information and return policies before making an online purchase” (p. 206). In this regard, access to information about products from mobile devices is essential as well. It can be argued that retailers that are unable to recognise this trend will lose a significant number of customers.
Apart from being able to purchase clothes online, H&M’s customers can read about the brand, find reviews and form an opinion regarding the company that will affect their purchasing patterns. Verma et al. (2015) argue that a relationship marketing strategy, which focuses on building a long-term relationship with clients shopping online is a valid approach for modern retailers. This model allows establishing trust and having a loyal customer base and high levels of customer satisfaction. The factors that will impact the success of this strategy are “commitment, trust, relationship satisfaction and relationship quality” (Verma et al., 2015, p. 206). The approach is based on the theory that describes the exchange between a retailer and a customer, in which the latter receives a benefit from saving time or costs.
One can conclude that the strategic objective appropriate for H&M is an emphasis on developing its online stores and mobile applications. The primary aims are to ensure that the perceived benefits of this shopping experience, such as saved time due to lack of need to visit a physical location or convenience because of easy access to product information, is not mitigated. The issues here may include shipping costs, problems with returns, taxes applied by individual countries and improper logistics strategy that results in delays.
Thus, the primary idea is to create an environment that would offer a better experience to the visitors. Van Elven (2018) states that clothing retailers can be inspired by art galleries or museums when designing their properties. This includes a specific method of displaying products that would be more engaging for customers when compared to traditional mannequins. The idea behind this model is in increasing the perceived value of the clothing by offering a different experience.
Additionally, physical locations can enhance their sales by using user data to tailor their stocks to the preferences of consumers that live in the area. Gibson (2018) describes an example of Nike and their store in Los Angeles that applies a similar model. The company collects information from clients based on their purchases in their online shop and application and utilises it to create a prognosis of items that will be popular in a specific city.
Why Choose This Objective
The objective proposed above offers H&M to use the trends of the current retail industry for achieving competitive advantage. The recommendations were made based on the peer-reviewed literature as well as online marketing magazines that describe novel approaches of other brands in the same industry. Therefore, H&M will be able to use the experience of similar companies and conclusions about the current market made by scholars, which should enable the efficiency of this approach.
Theory and Industry Examples
When evaluating a particular marketing strategy, it is necessary to clearly state the concepts and theoretical knowledge that the plan is based on because it will help define the viability of it. Rathnayaka (2018) indicates that based on the reviewed literature, marketers should adjust their strategy and consider the specifics of online retail. The most important component here is the fact that communication with fashion brands such as H&M is more easily accessible. Moreover, companies can interact with a large number of users and gather data about specific marketing approaches and their efficiency.
Next, it is necessary to consider the specifics of the theory that H&M can base its strategy on, including pricing and positioning of the new model. Pogorelova, Yakhneeva, Agafonova, and Prokubovskaya (2016) provide details of the marketing mix applicable to online retail companies. Firstly, it should be noted that standard marketing tools cannot be applied to online retail because the environment and consumer behaviour differs. The 7P model can be used because it accounts for the people, process and physical evidence that supplement the 4P concept. Pogorelove et al. (2016) classify H&M’s products as final consumption goods, meaning that the price has a significant role in the outcomes of a purchasing decision. This component connects to the evaluation of the sustainable fashion model, within which the company currently offers clothing items at a higher price when compared to similar products.
One approach to combining H&M’s sustainability strategy and online shopping model is to use innovation for reducing costs. Additionally, Pogorelove et al. (2016) argue that the concept of price is more volatile in online environments when compared to traditional retail. In this regard, social media has a significant role because Instagram recently introduced an in-app shopping that will help the brand expand its reach to the customers (Juhasz, 2019). Thus, in regards to the online shopping objective, H&M should apply the adjusted theoretical model that considers the specifics of online purchasing.
Some of the industry examples were discussed above, including the Nike application of user data for the enhancement of physical store’s stock and Walmart’s sustainability issues. Other examples include research by Klein, Falk, Esch, and Gloukhovtsev (2016) who argue that concept shops and pop up locations enhance “stores’ hedonic shopping value, store uniqueness and store atmosphere increase consumers’ word of mouth intentions” (p. 5761). Thus, H&M can use this strategy for its Huddersfield subsidiary to improve the perceived value of the purchases. The study by Gao and Su (2017) provides support to a need for shifting both marketing and strategic efforts towards the online model. The authors argue that novel approaches enabled by the Internet can help brands reach a different market segment and reduce costs.
Marketing Mix
Pricing strategy is connected to the positioning of H&M in the mass retailer market and can be considered a premium when compared to other companies. The main competitors are brands such as Zara and GAP. The average price per item at the retailer’s store is $25 (Hendriksz, 2018). Product strategy involves selling clothing using the model of fast fashion that targets a swift change of items in the store and allows H&M to offer the most recent trends to its customers. In addition, this retailer sells accessories and shoes for both men and women.
However, it should be noted that recently the brand decided to adhere to a more sustainable model, which will allow it to manufacture and sell clothes that are produced by ethical and environmental standards. Place and distribution strategy are facilitated through two main channels – online offline. The physical location is either owned by H&M or is franchised by partners. Promotion strategy involves the use of both traditional and Internet media resources. Thus, the commercials of H&M can be seen on TV and platforms such as YouTube.
Resources
H&M is a well-known brand with a long history of existence. Thus, the company has access to a large number of resources, including personnel, financials, capital, a variety of suppliers and physical sources. As was mentioned in the first section of this paper, the company operates 4,433 stores and has 148,000 employees (“About the H&M retail group,” n.d.). Therefore, no issue with the allocation of resources that will enable the implementation of the new strategy should be present.
Feasibility
The issues with the implementation of the proposed strategic objective may arise because H&M is a large international company with many subsidiaries and locations. Therefore, the process should be gradual and may take several years to implement. The anticipated outcome of this plan is an increase in the percentage of online sales in the overall revenue and improvement of the quality of interactions with customers through enhanced loyalty, which will be achieved by applying relationship marketing.
Delivery
The objectives proposed in this paper have several deliverables that consider different aspects of H&M’s operations. For instance, the online retail strategy involves collaborating with different platforms, setting up sales through social media and collecting data about user experience and preferences. The time of delivery for this project will consist of several crucial milestones that will ensure adequate implementation. However, the company will have to dedicate a lot of time and effort to ensure that the goals outlined in this strategy are achieved.
Implementation and Control
In order to implement the strategies described above, H&M should have a clear strategic vision regarding the use of its human capital and financial resources in the process. It is anticipated that the organisational structure of H&M will have to be reorganised to account for an increasing number of online sales, which will require more personnel in the packaging and shipping departments, and customer support representatives. However, it can be argued that the H&M staff members have sufficient expertise based on their previous work with online sales. Thus the implementation should be successful. The control process will consist of several indicators that help determine whether the plan is being implemented correctly.
Firstly, value indicators should be set that will help control the outcomes of this plan and whether the targets are reached. For this strategy, H&M will focus on online sales through its website. Therefore, the first goal is to increase sales volume through an online store by 30%. Additionally, the market share of H&M in online retail should grow by 10% within the next two years. Stock rotation of the items sold through the online platform should improve due to the ability to sell more items; however, it is expected that the number of returns will be higher. Therefore, this metric is not included in the control process. The tolerance range is estimated at a 5% difference for all parameters, which will allow H&M to proceed with the implementation even in case some metrics will have a less significant outcome than expected. Therefore, it can be concluded that the type of control system proposed in this plan is control of efficiency because that allows determining the effects of the marketing plan, advertisement campaigns, sales, and distribution strategies. Thus, implementation and monitoring are crucial for this marketing plan because they will allow H&M to follow the described policy and alter it if needed.
Conclusion
The retail environment in the UK is currently experiencing difficulties due to a decline in sales and changes in consumer behaviour that affect sales. In Huddersfield, a significant brand M&S decided to close down its store as part of its strategy for shifting towards online shopping. The objectives highlighted in this paper emphasise the importance of the online shopping experience, usage of customer data and the transformation of physical locations. Based on the resources available to H&M the project can be implemented.
References
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