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!

Situation SSSY Implementation Financials Risks Alternatives !

•  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

Situation SSSY Implementation Financials Risks Alternatives !

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

Situation SSSY Implementation Financials Risks Alternatives !

Situation SSSY Implementation Financials Risks Alternatives !

Situation SSSY Implementation Financials Risks Alternatives !

Fashion Forward : Increasing H&Mʼs Online Presence

North American Online Store!

H&M Club!

H&M Mobile Application!

Situation SSSY Implementation Financials Risks Alternatives !

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+  

Situation SSSY Implementation Financials Risks Alternatives !

Fastest  Growing  Pla8orm:  Mobile  

Situation SSSY Implementation Financials Risks Alternatives !

Bringing Online Store to America

•  Already present in Western Europe!

•  Integrate with H&M Fashion Studio!

• Recent e-commerce trends!

Situation SSSY Implementation Financials Risks Alternatives !

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%.

Situation SSSY Implementation Financials Risks Alternatives !

•  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

Situation SSSY Implementation Financials Risks Alternatives !

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

Integrating with Smart Phones

Situation SSSY Implementation Financials Risks Alternatives !

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!

Situation SSSY Implementation Financials Risks Alternatives !

Benefits of ion Forward

Attractive for price-sensitive consumers!

Inexpensive to implement!

Increase multi-channel platform!

Situation SSSY Implementation Financials Risks Alternatives !

Situation SSSY Implementation Financials Risks Alternatives !

•  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   ?  

Situation SSSY Implementation Financials Risks Alternatives !

• 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  

Situation SSSY Implementation Financials Risks Alternatives !

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  

Situation SSSY Implementation Financials Risks Alternatives !

Sample  Site    

Situation SSSY Implementation Financials Risks Alternatives !

•  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  

Situation SSSY Implementation Financials Risks Alternatives !

•  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  

Situation SSSY Implementation Financials Risks Alternatives !

Example  Lifestyle  Themes  

• OrganiChic!• Urban Sophistication !• Effortless Edge !

Core Themes!

• Forties Fox!• Pastel Pretty!

Fast-­‐Fashion  Themes    

Situation SSSY Implementation Financials Risks Alternatives !

Benefits  of      Lifestyle  

Brand  enhancement  and  differenXaXon  

Product  category  extensions  

DetecXon  of  popular  consumer  trends  

Situation SSSY Implementation Financials Risks Alternatives !

Situation SSSY Implementation Financials Risks Alternatives !

Value  ProposiXon  of      

ConsolidaXon  of  Brand  Image  and  

Loyalty    

Reinforcing  

AcXviXes  

MulX-­‐channel  

IntegraXon  

Situation SSSY Implementation Financials Risks Alternatives !

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    

Situation SSSY Implementation Financials Risks Alternatives !

Market  Segment  Overview    

Situation SSSY Implementation Financials Risks Alternatives !

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  

Situation SSSY Implementation Financials Risks Alternatives !

PromoXng  

Situation SSSY Implementation Financials Risks Alternatives !

Combining  H&M  Lifestyle  and  Fashion  Studio  

Situation SSSY Implementation Financials Risks Alternatives !

CreaXng  Your  Own  Lifestyle  

Situation SSSY Implementation Financials Risks Alternatives !

Implementing Forward!

Situation SSSY Implementation Financials Risks Alternatives !

Implementing Lifestyle!

Situation SSSY Implementation Financials Risks Alternatives !

Projected Net Income from !

Situation SSSY Implementation Financials Risks Alternatives !

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  

Situation SSSY Implementation Financials Risks Alternatives !

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!

Situation SSSY Implementation Financials Risks Alternatives !

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!

Situation SSSY Implementation Financials Risks Alternatives !

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  

Situation SSSY Implementation Financials Risks Alternatives !

Identifying Strengths !High  

penetraXon  rate  

Broad  appeal  

High  brand  value  

Supply  chain  pracXce  

Mix  of  brand  core  with  fast-­‐

fashion    

Situation SSSY Implementation Financials Risks Alternatives !

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  

Situation SSSY Implementation Financials Risks Alternatives !

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.    

Situation SSSY Implementation Financials Risks Alternatives !

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    

Situation SSSY Implementation Financials Risks Alternatives !