Burning Stock Doesn'T Solve The Problem. How Can H&M Find The Love Of Consumers?

The inventory clearing business of clothing industry has been getting more and more popular recently.

In the industry, there is a saying that "who can make money in this industry is to see whose inventory is cleaner." in the long run, clothing business is a combination of fashion, quality, price and continuity. However, a clothing company often has problems in inventory.

Previously, tiger sniffing had reported that it was through the brand side.

The good clothes Bank of the channel, love the stock, the good clothes bank got the B round financing of Tencent's leading investment, and the vip.com, which grew on the storehouse sale, began to set up the platform in WeChat.

"It's hot", and there are also a lot of brand names in it.

Channels.

Famous brands are carrying "brand burden" and will be cautious in choosing special sale and discount channels. In the covert scene of WeChat channel's centralization, the influence of distribution stock on brand image is lower.

The contradiction between "brand burden" and inventory is bigger in fast fashion brands.

It is expected to be popular, a small amount of money, fast and new, and put the right products in the right place at the right time. Fast fashion brands have higher turnover speed than the industry.

But similarly, the trend of miscarriage of justice and the weakness of long tail goods will bring great inventory risk.

Fast fashion brands are reluctant to sell too much discount, affecting brand image and squeezing profits of new products.

Now, the world's second largest apparel retailer, H&M group, is experiencing its biggest performance trough in twenty years, and is also beset by inventory problems.

Performance brake, backlog stock

According to H&M's first half year (December 2017 ~2018 May) earnings report, in the past six months, the group's tax sales volume was 114 billion 17 million kronor (about 12 billion 700 million US dollars), which was flat compared with the same period last year. In the first half of the year, its operating profit was 7 billion 215 million kronor (about 800 million US dollars), down 33% compared to the same period last year, and the operating profit margin was 7.3%, which was 11% last year, down 3.7 percentage points from the same period last year.

Sales were flat compared with the same period last year, but the number of stores in the H&M group increased by 62 in the first half of the year, and there was no increase in the number of stores, and sales of H&M had problems.

At the end of last year, H&M began to think about boosting its performance. According to the first half of the year's report, sales of H&M in Germany and the US market have declined sharply, and the situation has not improved.

H&M's sales growth has stagnated, which has further expanded the H&M's inventory.

In the first half of this year, H&M stock reached 36 billion 333 million Swedish kronor (US $4 billion), an increase of 13% over the same period last year.

It has accounted for 31.9% of H&M sales, compared with 28.2% in the same period last year.

How can such a high inventory? Fast fashion brand new speed, every time the new depth is relatively shallow, the core issue, or in sales.

"The market has become saturated and the brands of competition are also increasing.

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

No Agency analyst Tang Xiaotang once said.

On the other hand, H&M is facing the pressure of online rivals. In the 2017 fiscal year, the electricity revenue of H&M is 29 billion kronor, or 22 billion 200 million yuan, which accounts for 12.5% of total revenue. It seems that there is still much room for improvement. However, ASOS, Zalando, Boohoo and other "ultra fast fashion" brands are accelerating faster and more frequent new, lower price and channel advantages to rob young customers of H&M.

Promoting sales or handling inventory is no more than marketing activities and discount means. In the first half of 2018, its gross profit margin was 53.2%, which was 1.5 percentage points lower than that of 54.7% in the same period last year. Obviously, H&M lowered its selling price.

In parallel with the increase in sales and management costs, H&M sales and management fees increased by 5% in the first half of 2018, accounting for 39.5% of revenue, compared with 37.8% in the same period last year, up 1.7 percentage points over the same period last year.

The results showed that the cost of marketing and management costs increased by 9.5%, 7.5%, 17.8% and 20.1% in the past four years, mainly for offline stores, IT and logistics, and online expansion.

Burning stocks to relieve symptoms

H&M is constantly introducing new styles to boost consumers' desire to shop, and anticipate the market, get new ways quickly, and produce large quantities of clothing.

But the discount will damage the brand image. H&M attaches great importance to the external evaluation. It vigorously promotes environmental protection and recycling, thereby showing a good corporate image to win public goodwill.

Denmark's "Operation X" has revealed that H&M regularly incinerate stocks on the basis of moldy or inconsistent safety and quality standards, and incinerate 12 metric tons of unsold clothing annually, and its incineration products are identical to those detected on sale.

On the one hand, establishing a sustainable and environmentally friendly image while burning products and wasting resources and polluting the environment, H&M has "faced" its own sustainable development strategy.

But for the sake of brand image, it is better to burn and donate than to sell.

Just like the recent Burberry burn up about 250 million yuan of stock, donation and downgrade circulation will affect the brand's intellectual property and brand force, while H&M and Burberry are not special cases.

H&M also admitted regularly burning clothes.

To tell the truth, dealing with the discount price may not cover the cost, but will also affect the sales of new products. It is the most convenient way to burn a fire, but this practice is "temporary solution", and the inventory provision needs reasonable reasons.

Although management does not want to sell too much discount and make H&M a cheap discount brand, it is obvious that the waste of resources will further blacken the brand.

Gross profit margin slipped in the first half of the year, indicating that H&M is making a discount. H&M expects that in the third quarter of 2018, there will be a sharp decline in the price of clothing, obviously preparing for a quick handling of inventory problems.

How to grasp the trend?

For sales slump and inventory problems, H&M hopes to integrate on the independent discount platform and online and offline.

The general view is that H&M needs to force the electricity supplier, but BOF quoted Anne Critchlow, an analyst at Societe Generale, as saying, "for retailers such as H&M, selling products from two outlets online and offline will seriously reduce profits.

H&M's price is low, expanding the new logistics cost of e-commerce business, making H&M's business development slow.

(referring to the self operated electricity supplier).

In March of this year, H&M was launched on Tmall mall. This is the first time that it has been sold through third parties. Although the Chinese market is not the main market of H&M, many product lines have not been put into operation. However, the contact with China's large population plates should bring about the growth of online sales.

In addition, H&M also set up a discount e-commerce platform Afound, Afound not only sells H&M group's brand, the wood industry has other well-known brand goods, while Afound includes websites and offline offline discount stores, Afound's investment is not low, but H&M still wants to control the online channels, and can try to be "decent".

H&M expects the online revenue of the group will grow by at least 25% in the current fiscal year, inspired by measures such as Tmall and Afound.

However, the electricity supplier is only one aspect. The advantage of H&M lies in the accumulation of direct store network. The focus of future sales will still be online.

Earnings also showed that H&M did not slow down the pace of shop opening, especially in the expansion of new markets, H&M is still the first choice for expansion of stores.

According to Forbes's report in August, H&M is now upgrading technology to improve its supply chain and store operation efficiency, and to understand the trend and consumer behavior through big data and artificial intelligence in order to get rid of the sales slump. The main actions are as follows:

1, rely on big data to enhance supply chain efficiency and optimize pricing, and avoid unnecessary inventory through reasonable pricing strategy.

2, analyze the return, receipt and Huiyuan data of local users, and promote 1000 faces and localization.

3, improve logistics efficiency, enhance delivery and return experience;

4, overweight RFID technology to open online and offline, the development of smart stores;

5, the design and production services of clothing materials, colors and details can be customized according to the climate of the site.

In the past, fast fashion brands could predict consumers' preferences by quickly simulating the design of top brands, but now social media has broken the original fashion communication path from top to bottom, and the demand has become more diversified.

We need to increase the demand for large data to understand the demand, and H&M will have the potential to successfully pform the C2B mode by means of quick response supply chain production.

In addition, H&M has expanded its product line.

In April this year, H&M launched ninth new brands: /Nyden.

Basically, fast fashion brands are all sub brands, with the aim of cutting into more market segments and high-end markets. ZARA and UNIQLO are also doing so through the self building and acquisition of high-end brands.

Nyden positioning for the Millennium generation of light luxury clothing, from concept to goods brand whole production cycle for 3~4 weeks, but H&M stressed that this is not a fast fashion brand, but to view leaders as brand partners, to create a certain threshold of semi closed "consumer groups", in addition, from the design, the new brand has strong asexual flavor, conceptual and social topics are good.

Attracting the millennial generation with community identity, the idea of /Nyden is worth looking forward to, but the co founder and CEO OscarOlsson of the brand announced the departure of the project in July, which cast a shadow over the new brand.