H&M Meets Performance Bottlenecks To Fully Access Tmall

According to the world clothing and shoe net, Guangzhou's good Plaza is located in the most prosperous Tianhe Road commercial area in the city.

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There are two storehouses with an area of 1300 square meters.

Last Saturday (23) around 7:30 in the evening, there was a crowd of people in H&M's good Plaza. Many customers were fitting.

However, although there are large price reductions hanging around the shop, the checkout counter is not available.

H&M's earnings report may be more specific about its embarrassment in the face of declining sales.

In December 15th, H&M announced the initial performance of the fourth quarter of 2017.

The results showed that H&M sales fell 4% year-on-year in the quarter, far below the company's expectations.

On the day of the announcement, H&M fell 15% in the afternoon, the biggest decline in 8 years.

On the same day, H&M announced a strategic cooperation with Tmall, and its core brands, H&M and H&M Home, will enter Tmall in the spring of 2018.

H&M's current situation is the whole fast fashion industry in the Chinese market to decline, had to join the local electricity giant to stimulate sales growth in the market epitome.

"The market has become saturated and competitive.

It's changing too much.

At present, the growth of almost all fast fashion brands is slowing down, which is an inevitable trend. "

No Agency analyst Tang Xiaotang told reporters.

Encounter performance bottlenecks

Zara benefited from the electricity supplier business and made brilliant achievements in the same period. H&M gave up a bad report card.

H&M said that despite the year-round growth in sales, the apparel industry is undergoing major changes. The company's performance in the four quarter has not reached expectations, of which the continuous decline in physical store customer traffic has led to a slump in sales, and sales of H&M stores have declined, with quarterly sales showing the biggest decline in 10 years.

However, H&M said that the group's brand name online business and other brand sales continued to grow.

At present, H&M has more than 500 entity stores and online stores in Greater China. According to financial reports, H&M has earned 1 billion 300 million dollars in 10 years.

However, in the past two years, H&M's performance in the Chinese market began to decline.

According to the financial report data, the sales of H&M in the Chinese market in fiscal year 2016 only recorded an increase of 5% per cent, and by 2017, the situation was still not optimistic.

In the first 9 months, sales in the Chinese market increased by 8% compared with the same period last year, but still below the expected level.

In contrast, the Inditex of Zara parent company increased by 6% in the first 9 months of 2017.

Analysts believe that this is because of the excellent performance of its electricity supplier.

In order to better retain Chinese consumers, H&M formally launched an integral membership system H&M CLUB in China in October this year. It is reported that Japan and China are the first Asian countries to introduce H&M membership system.

H&M spokesman said that launching member activities is conducive to further strengthening the brand and the relationship between H&M and consumers.

H&M's sluggish performance growth has also attracted strong attention from the capital market.

After the fourth quarter earnings announcement, H&M shares fell 16%, the biggest decline since 2001.

As early as November, Barclays Bank (Barclays) downgraded its H&M rating to "reduction", and pointed out that the growth of H&M was mainly due to the opening of new stores. However, it is impossible to expect new stores to solve problems in the long run.

In response, H&M group CEO Karl-Johan Persson said in the announcement that "in order to cope with the fast changing behavior of customers faster, the company is accelerating pformation, including continuing to integrate physical stores and digital stores, and strengthening the optimization of H&M brand store portfolio - closing more stores and reducing the number of shops."

"H&M management has been aware of the importance of e-commerce channels since 10 years ago and began investing in e-commerce channels.

So far, we have invested in e-commerce channels for many years, so that we can accomplish what we want to do in every stage of electricity supplier and digitalization, and get a good commercial return.

H&M China Public Relations Manager Chen Shuoying pointed out to reporters.

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Full access to Tmall

Perhaps aware of the importance of the electricity supplier to the new sales growth point, H&M group finally announced that its core brand H&M and H&M Home will enter Tmall in the spring of 2018.

Previously, Tmall has already gathered three fast fashion giants such as UNIQLO, Gap and Zara.

"H&M group's brand Monki has been very strong in China since its flagship store in Tmall in 2016, and this gives us confidence that the cooperation between the two groups will extend to H&M and H&M Home brands in early 2018."

H&M replied to reporters that after the cooperation with Tmall, the original online store and Tmall's two online platforms will be an important complement to the physical stores. At present, there is no plan to make a pition to the official online store.

"At present, we focus on mainland China, which is also the area where most Tmall customers are located.

But we do not rule out further expansion in the area of cooperation.

H&M told reporters that H&M stores, online stores and Tmall mall are important platforms for H&M to provide customers with better fashion choices.

At the group level, the two sides are also exploring the possibility of H&M group's other brands entering Tmall.

"Performance factors and Tmall's channel traffic advantages are the reasons for H&M to make this choice."

Ma Gang, a senior garment industry analyst, told reporters that covering online platforms and offline stores is complementary strategy. As the consumption behavior of the Internet era is in the whole channel, online and offline are equally important for fast fashion brands.

The role of e-commerce providers in fast fashion brands can not be underestimated.

On the day of double eleven this year, UNIQLO's single day sales in Tmall broke through 600 million yuan, compared with 260 million yuan last year.

In September, GAP participated in Tmall's super brand day, using Tmall's data capabilities to synchronize the game of "catching small meow" for consumers in the global stores, and 1 million consumers participated in the game that day.

No Agency analyst Tang Xiaotang told reporters that in the Chinese market, cooperation with Tmall's e-commerce giant is almost an unavoidable choice for all clothing brands. "On the one hand, clothing brands need to lay more channels to seize the market space, but the cost of electricity providers is relatively low compared with offline stores. On the other hand, Chinese consumers have become accustomed to consumption in the relevant brand e-commerce channels.

Thirdly, if the brand is built independently, there will be no cost in terms of logistics cost or user volume.

Tang Xiaotang said.

Sales slowdown

The situation of H&M is the epitome of slow growth of sales and performance bottlenecks in the fast fashion industry in China.

In recent years, the sales growth of fast fashion brands has declined collectively, and news from stores and shops has been released from time to time.

The gross profit margin of Inditex group, the parent company of ZARA, has declined since 2013, and even fell to 56.4% in the first half of 2017. Net profit increased by only 1.5% to 712 million euros, and its growth rate in China decreased to 10% from 10% in previous years.

In February, Zara closed the biggest flagship store in China, which is the first time that Zara has been closed in China.

The sales growth of UNIQLO parent company XXX group in 2016 also slowed down significantly.

Its growth rate dropped from 21.6% in fiscal 2015 to 6.2%, net profit plunged 56.32% to 48 billion yen, and several Chinese stores were closed in 2017.

The days of GAP group are also bad.

After seven consecutive quarters of decline in sales, GAP group in the first quarter of 2017 the largest decline in history, sales in Asia fell 20.5% to 283 million U.S. dollars.

First of all, after the rapid expansion and development of fast fashion brands, the Chinese market has become saturated. Secondly, due to inflation and price rise, Chinese consumers have reduced the proportion of clothing expenses and consumer demand has decreased correspondingly. Third, labor costs are rising now, and finally, the competition among brands is becoming more and more intense.

Tang Xiaotang analyzed reporters.

Facing the difficult problem of fast growing fashion brands, Ma Gang thinks, "how to get the favor of the emerging consumer groups after 95 and 00, and combine clothing with the emerging two elements of culture and consumption elements, is what manufacturers need to study."

However, H&M China responsible person told reporters that "as one of the fastest growing markets in the H&M group, we are still expanding in China."

She said, "the fourth quarter earnings statement mentioned" continue to integrate offline stores and online sales channels, optimize H&M brand store portfolio ", which means speeding up the adjustment of physical stores, and concentrating on better store selection. Of course, it includes shutting down some poorly performing stores, and at the same time optimizing our confidence stores.

In 2018, we will also more actively adjust the combination of offline stores and make them more closely integrated with online stores. "

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