Introduction
Hennes and Mauritz (H&M) remained above its competitors in the clothing industry in terms of profitability and satisfaction of customers. H&M chain store successfully used components of marketing mix to increase overall sales of its products. In order to attract low-income earners to this scheme, the company kept the prices of clothes low. For instance, the average prices of the items were £10 compared to competitors like Gap and Zara that kept prices above £16 (Jobber 1995). In making the prices affordable to a large customer base, the company intended to increase the sales volume to allow new fashion-trend products to get into the market. At one instance, a 22-year-old customer, Sabrina Farhi, agreed with the company’s strategy of offering products at low prices as well as maintaining quality and high fashion. The company sold cheap wears in all its outlets across Europe and the US. In using different demographics, such as age, H&M used trendy fashions in producing wears that could meet the needs of a certain age group. Teenagers, for instance, preferred trendy fashions that kept changing at all times. The company took advantage of the constantly changing fashion styles to produce clothes that met the needs of the customers.
Main Body
In keeping with the current fashions, H&M could spot new trends before the trendies in order to remain relevant and profitable in the dynamic market. H&M understood differences in socio-economic status of its customers given that not all consumers could buy expensive clothes. Consequently, H&M decided to manufacture same models of clothes at low prices to capture low-income earners. The company maintained strong global market presence by treating fashions as perishable products that must get going. After understanding the nature of customers, H&M had to sell products that had to meet customers’ needs at any instant. Therefore, it kept updating fashions in order to provide products that met customers’ tastes and preferences (Jobber 1995). Customers’ tastes and preferences on fashionable clothes kept changing at a high rate. Since things went out of style at a faster rate, this forced the company to maintain strong research on fashion trends.
H&M after realizing that the needs and references of its customers globally differed, it went on to segment the large market so that it could meet the needs of its customers. Notably, when a company serves specific customers, it fully meets the needs of the customers, as it understands the diversities and differences that exist among the large pool of customers. For example, in the US market, H&M stores tailored their products’ fashions to meet the needs of younger females; while in Europe, the outlets stocked a wide range of merchandize that factored in all family members (Jobber 1995). When H&M realized that the US market was not strong in menswear like in Europe, it used a hefty 4% of their revenues to market the products.
Using the different behavioral patterns in the two markets, the company had to target the male Americans through the marketing process. In the branding, the company kept overheads low as possible in order to cut on cost of operations. Promotions helped the company to attract more customers. At another instance, the company used the cost-cutting strategy by commissioning Karl Lagerfeld, Chanel’s designers to produce limited edition of Lagerfeld range at cheaper prices than the usual market prices (Jobber 1995). Customers had to queue from as early as 6.30 am at least to pick the new designs. Most designs that H&M commissioned were sold out in less than two hours in most stores in the US and Europe.
In keeping its expenses down as possible, the company had to outsource all manufacturing to a huge network of 900 garment shops that were located in low-wage nations. This was an effective approach of cutting expenses given that it was cheaper to produce same volume of products in countries like Bangladesh and China than in the US and Europe (Jobber 1995). H&M bought products as cheaply as possible, and could only fly business flags in cases of emergencies in order to cut on expenses. Evidently, the company’s move helped in realizing more profits at relatively cheaper cost of manufacturing wears. The company kept on shifting its manufacturing deals mostly to low-wage countries to obtain best deals, which could manufacture high-quality clothes at low prices. In addition, maintained its production rate of quality items during any season by reducing lead times to as little as three weeks. Since H&M had more stores than Zara, which had a faster turnaround, it was able to avoid congestion at the stores.
For a competitor like Gap, which had an average of nine months for turnaround, chronic overstocking problem became a common problem. H&M Company marked down products that tended to have low selling rates in order to give room for new styles. From this dimension, H&M maintained a high product flow in the market or faster turnaround, which assured the company of high profits and sales. According to Fagerlin, the company’s daily reports on sales of items revealed a daily restocking of items at the stores, signifying faster turnaround and high sales. In 2008, the company had pre-tax profits of £1.7 billion, which represented a 10% rise from 2007 sales of £7.4 billion (Jobber 1995). In all these analysis, H&M aimed at gaining competitive advantage over its competitors like Gap and Zara, and providing quality and up-to-date fashionable clothes. The company dominated most markets, and used it financial power to understand the needs of different customers in order to provide required products to the right target market or at the right place.
The company used the cheap-chic formula in selling wide range of clothing particularly to the age between 15 and 30. A 19-year-old Emma Mackie agrees that H&M’s version of corduroy trench coat that was retailing at £32 was too good to pass up, instead of purchasing Dolce & Gabbana’s make that went for £600 plus (Jobber 1995). The teenager could purchase the new version easily given her low financial base, thus realizing the value for her money.
Conclusion
Design process at H&M took a center stage and dynamism just like the clothes. H&M designers who had an average age of 30 came from countries like South Africa, the USA, and Britain. The 95-person design group could even follow people off the subways to inquire about where they purchased an unusual scarf or top (Jobber 1995). Moreover, H&M merchandise managers in each country talked to customers, engaged them in negotiations, and took their feedbacks on varied products. The company hired designers of an averagely low age to help in attracting young shoppers and taking off in international markets. These challenges had been common with Gap, which had also been slow in reacting to changes in fashion trends. In all these initiatives, H&M wanted to control the global market.
Reference
Jobber, D 1995, Principles and Practice of Marketing, McGraw-Hill, London.