“It is part of our daily business to always make sure that we have the best location, the best business deal and optimise our store portfolio,” the spokeswoman said.
According to the retailer’s most recent full-year report, it plans to close 350 stores and open just over 100 new stores in FY21, resulting in a net decrease of around 250 stores.
The majority of the closures will be in established markets, while most of the openings will be in growth markets. This was also the case in FY20, when H&M Group closed 187 stores and opened 129.
Does the group’s broader shift in focus to emerging markets explain the closure of stores in Australia? Is it a sign that the retailer left the launch of its local online offering too late and was hit harder than some of its competitors by the drop in foot traffic during Covid? Does it reflect consumers’ increasing demand for sustainable fashion?
We asked four Australian retail experts for their opinion on the move. Here’s what they had to say.
Rosanna Iacono, advisor and partner, The Growth Activists
I think the biggest contributors to this decision are related to both the global HQ strategy and underperformance in the local market. When it comes to global strategy, it makes sense for them to focus on emerging markets where consumption patterns for newly upwardly mobile consumers are different to those in developed markets. In BRIC [Brazil, Russia, India, China] countries alone you typically have around 50 million people per year emerging from poverty into the middle classes and they fuel the growth of mass market retailers in those regions.
As for the local market, I think their biggest competitor has not been other foreign fast fashion retailers like Zara and Uniqlo (who are doing it equally tough, with Zara announcing they will be closing 1200 stores worldwide), but rather local players with similar price points and a much better ability to tailor product offerings to the local customer – Kmart and Cotton On are good examples of this.
I wouldn’t say [H&M] is over, but I would say its heyday is behind it, just as Topshop’s was. There was a time where they helped drive a zeitgeist around constant (and disposable) newness. Unless they radically overhaul their business model and positioning they simply won’t have the same relevance for what is emerging on the next horizon.
Brian Walker, founder and CEO, The Retail Doctor
I think the factors [behind the store closures] are a little more macro. H&M globally did US$23.3 billion in FY20 – that’s basically 20 per cent of our entire retail sector – they’re a machine. And if you look at a group level, online sales are now 28 per cent. I believe Australia will come up to that mark.
They’re looking at their strategy in these established countries and saying: We grew our brand quickly and we formed a good beachhead. Yes, there’s competition, but we’re a globally known brand. We’ve done what we set out to do, and now we can focus on omnichannel.
They’ll keep their prime locations, but they’re coming out of the long tail of their physical distribution. They’ll focus on online and grow much more on social media. It’s not uncommon, it’s what other retailers are doing around the world.
If they’re guilty of anything it’s that they probably opened too quickly in some sites. In hindsight, they didn’t need to do that, but they were trying to establish locational dominance. That’s not the differentiator it once was.
Do I think it’s the end of fast fashion? No. Is it the end of H&M? No. By the way, Zara and Uniqlo are doing the same thing.
Jude Kingston, founder and director, JMK Style
What I’ve been noticing for a while now with H&M is that their store experience hasn’t evolved. Everyone seems to be moving very quickly, but they’re not. Compared to the experience and the theatre of other retailers, H&M is a very sterile environment. It’s hard to navigate and doesn’t seem to flow very well. And they’re still very clearly overstocking, even though their customer wants sustainable and ethical practices. They allude to sustainability, and yet their stores are bursting at the seams with stock. There’s a disconnect there.
I’m also blown away by the fact that it took them so long to get online, particularly in Australia. It’s staggering, given that’s where their target audience shops and the shift to online globally. It should have been fast-tracked the minute Covid gained traction. They should have been online at the start of Covid, not the end.
Paula Bogaz, senior strategist, Retail Oasis
I’d say the number one factor has to be the impact of Covid – this has played out in a number of different ways. Firstly, the closure of stores and restricted movements of customers is the obvious one, and secondly, the hold on most social occasions for 2020 has had a huge impact. The two categories hardest hit have been dresses (occasion wear) and workwear (suiting, etc).
But in addition to the obvious, the pandemic has also had a significant impact on the fashion customer’s mindset. Conscious consumerism is growing, people are taking stock of what they already have and deciding to buy less, or buy sustainably.
H&M have been criticised in the past for greenwashing, and I think their recent US$100 million allocation of funds through their H&M Foundation to develop the technology to be able to recycle unwanted garments with minimal cost/carbon emissions is not a coincidence. They are seeing the shift in the customer’s mindset, moving away from disposable fashion to organic, sustainable and investment pieces. They are working hard at keeping their customers and going on this journey with them.
I think their focus now on digital, and their recognition of the shift in customer mindset should see them survive for a while yet. People will always be driven by price, and their global presence means they will always be able to offer low prices.