Presentation by Georgetown University - Runner Ups in the CBS Case Competition 2011

Yu-Ching Chiang!Christine Chung!Keenan Timko!

Melissa Wu!

Getting Dressed!for the Future!

Simply Stylish… Simply You.

Situational Analysis of H&M!

Strengths!• High penetration rate!• Broad appeal!• High brand value!• Mix of brand core with

fast-fashion !

Weaknesses!• Stagnating growth

in mature regions!• Local competition in

new markets!• Retaining &

attracting the right people!

Opportunities!• Expanding product

categories!• Channel expansion!• Expansion into

emerging markets!• Supply chain

optimization!

Threats!• Increasing raw

materials prices!• New competitors!• Different consumer

preferences!

Situation SSSY Implementation Financials Risks Alternatives !

Identifying the Problem!

• Encourage existing customers to buy more!• Maintain position in markets with low growth

rates!

Market Saturation!

• Expand the number of channels to purchase products!

• Need to address social networking opportunities!

Technological Trends!


• To create opportunities for profitable and sustainable long-term growth !

– Maintain our 10-15% annual growth target for number of stores per year!

– To increase market share in low-growth regions!

Defining the Objective


To Improve Position In Low-Growth Regions!

European & American markets generate 90% of total sales. Market shares have been falling in Western Europe from 29% 25% during 2005-2010




Fashion Forward : Increasing H&Mʼs Online Presence

North American Online Store!

H&M Club!

H&M Mobile Application!


Tapping into the E-‐commerce Space • Rise of e-‐commerce and m-‐commerce

– Fastest rising pla8orm: 35%

• Convenience is key • Key demographic for m-‐commerce: 25-‐34 yr olds

10%

29%

25%

18%

13% 5%

U.S. Smartphone Users by Age 64% of Smart Phone Users are 18-‐44 Years Old

18-‐24 25-‐34 35-‐44 45-‐54 55-‐64 65+


Fastest Growing Pla8orm: Mobile


Bringing Online Store to America

• Already present in Western Europe!

• Integrate with H&M Fashion Studio!

• Recent e-commerce trends!


Apparel is biggest category in online sales, growing at high rates

40.3

36

30.3

19.2

10.4

9.6

7.4

7.1

5.5

3.9

3.7

0 5 10 15 20 25 30 35 40 45

Apparel accessories and footwear

Computers and accessories

Appliances home improvement

Consumer electronics

Toy and video games

OTC medicines

Office products

Books

Jewelry

SporXng Goods

Furniture

2013 Forcasted Online Sales for Selected Categories (USA; $B)

2009-2013 CAGR for Apparel accessories and footwear is +11%.


• Transfer spending into rewards • Exclusive deals for club members

– H&M Sweepstakes

– H&M Shopping Sprees

• Perks for points – New arrivals – Into physical stores

Accumulating H&M Points


• Interoperable mobile applications!• Coupon codes!• Rewards program!• Fashion Studio!

Integrating with Smart Phones


Dollar Spent Becomes Redeemable Points

• Every $200 dollars spent = $5 rewards!• H&M Sweepstakes every year!

– Chance to meet guest designers!• Ex: Matthew Williamson!

– Fashion show tickets!• Ex: Copenhagen Fashion Week!

• H&M Shopping Sprees!– Regional; every 20 stores/raffle!– 4 times/year, $300 each person!

• Monthly perks can include freebies!– Articles under $5!


Benefits of ion Forward

Attractive for price-sensitive consumers!

Inexpensive to implement!

Increase multi-channel platform!



• A lifestyle brand through category expansion !– Embody H&Mʼs values and aspirations!– Leverage the creative talents of fashion-

forward guest designers!

: Establishing a Way of Life

Apparel H&M Home ?


• A larger furnishing and home décor section of the store!– Significant opportunity !– One-stop shop!– Includes bedding,

curtains, candles, and other home accessories and textiles!

Establishing a Lifestyle Brand: Home


Establishing a Lifestyle Brand: H&M Home

• Sales as point-‐of-‐purchase and online ordering – Use of in-‐store displays for design ideas and templates from noted designers

– Store as point of purchase – Opportunity for online ordering for delivery


Sample Site


• Leverage creaXve talent of well-‐known designers and stylists – The style geniuses behind the actors, singers, and fashionistas

– Promotes being your own trendseaer

The Talent Behind the Talent


• The unheralded hero behind the famous ones – Resonate with creaXve, edgy, and street-‐smart H&M customers

– “live an H&M lifestyle” – Mold the “H&M Man” & “H&M Woman”

Recognizing the Unheralded Genius


Example Lifestyle Themes

• OrganiChic!• Urban Sophistication !• Effortless Edge !

Core Themes!

• Forties Fox!• Pastel Pretty!

Fast-‐Fashion Themes


Benefits of Lifestyle

Brand enhancement and differenXaXon

Product category extensions

DetecXon of popular consumer trends



Value ProposiXon of

ConsolidaXon of Brand Image and

Loyalty

Reinforcing

AcXviXes

MulX-‐channel

IntegraXon


Defining a Target Market!

Age

• 15-‐35 year olds

Gender

• Female

LocaXon

• US • Western Europe

• Scalable

MoXvaXon

• Cost-‐conscious

• Convenience

CreaXng trendy H&M women with different lifestyles


Market Segment Overview


Comparing with Competitors!

Online Store X X X

Rewards Program X X

Home TexXle Line X X

Guest Designers X X

Mobile ApplicaXon X X X


PromoXng


Combining H&M Lifestyle and Fashion Studio


CreaXng Your Own Lifestyle


Implementing Forward!


Implementing Lifestyle!


Projected Net Income from !


Managing Potential Challenges

B2C Supply Chain

TransiXon Replicate Stockholm model

Storeroom Space Cost

One-‐room displays, order-‐in-‐store, and buy online opXons

High-‐capital Outlay

Gradual rollout, then ship from one distribuXon center

RISK SOLUTION


Alternative 1:Human Resources Initiative!

1) Training programs for employees up for promotions!

2) Campus ambassadors to attract new talent!• Rationale!

– showcase “H&M spirit” on campuses to attract young new capital!

– Maintain employee morale and prepare internal employees for administrative roles!


Alternative 2:Vertically Integrate the Supply Chain!

• Outsourcing production to independent suppliers In-house production facilities!

• Rationale: !– Shorter lead time from creation-to-shelf!– Increased quality control!– Unique consumer feedback system that

detects popular trends!


Decision Variable

Strategic Importance

Simply Stylish, Simply You

AlternaPve 1:Human Resources

AlternaPve 2: VerPcal IntegraPon

Profitability 35% 9 6 5

Strategic Fit 20% 8 7 4

Growth Opportunity

20% 7 7 6

Scalability 15% 9 8 6

Sustainability 10% 8 8 5

Total: 100% 8.3 6.9 5.2

Methodology Used to Assess Options

Situation SSSY Implementation Financials Risks Alternatives!

ConsolidaXon of Brand Image and Loyalty

Reinforcing

AcXviXes

MulX-‐channel IntegraXon

Your Winning Strategy!

Appendix!

• Key Industry Trends • H&M’s Strengths

• Threats & Weaknesses

• Successful Rewards Program

• ROI on Talent Endorsements

Key Growth-‐Driving Industry Trends

Brand building and differenXaXon

Brand and offer

extensions

Driving growth

MulX-‐Channel


Identifying Strengths !High

penetraXon rate

Broad appeal

High brand value

Supply chain pracXce

Mix of brand core with fast-‐

fashion


Addressing Threats & Weaknesses!

• StagnaXng growth in mature regions • Local compeXXon in new markets • Retaining and aaracXng competent people in organizaXons • Low customer loyalty • Low switching costs • High degree of product differenXaXon

Weaknesses

• Increasing raw materials prices • New compeXtors • Different consumer preferences • LogisXcal challenges (entry into new high-‐growth markets)

Threats


Creating a Successful Rewards Program !

• Focused on making loyal customers even more loyal.

• Focused not just on transacXons but on core strategic values.

• Focused on the individual • Enabled by new technologies • The human touch.


ROI on Talent Endorsements

• European companies pursued talent to endorse their brand -‐> successful ROI – Past success of Jimmy Choo’s work with Project Pep AIDS FoundaXon 20x ROI and drove in-‐store sales 33%

– Jamie Oliver Sainsbury's: ROI of 27:1; £1.12 billion in incremental revenue


Business

Presentation by Georgetown University - Runner Ups in the CBS Case Competition 2011