H&M offers a value proposition that succeeds during recession

Hennes & Mauritz (H&M) is a Swedish clothing company established in 1947. The company's business concept has been to offer fashion and quality to customers at the best possible price. First, the company started with only women’s apparel but it has turned into a large chain selling men’s and children’s clothing and accessories. Unlike most retailers at the moment, H&M has succeeded to gain strong profits during the time of financial crisis. This is what makes H&M interesting: what is that they offer to consumers that appeals to them even during recession? How can H&M promise to create thousands of new jobs when others are sacking their employees?

H&M’s retail value proposition is centered mostly on low product prices and a good selection. But I would say that H&M is not successful at the moment only because of low prices: H&M is not only about that. H&M has created a strong brand that is associated with high fashion and top designers. Being associated with names like Madonna, Kate Moss, Karl Lagerfeld and Stella McCartney, H&M has really created something unique. The fact that a company is offering low price products, doesn’t necessarily mean that the brand has to be a cheap one too. H&M has put a lot of effort into building a brand associated with top fashion but yet has kept the prices low for most products. Most popular clothing brands from the same price range cannot be seen in small boutiques or runways in Italy like some of H&M’s products can be. H&M proofs how a strong brand can be built even if the company is mostly selling low price products.

Of course, nothing is only black and white and H&M definitely isn’t known as a luxurious brand in most countries. For example, when the Finnish fashion brand Marimekko signed a licensing agreement for fabrics with H&M in 2008, there were speculations about how the connection to H&M would affect Marimekko’s image as high quality brand. At the moment, I would say that Marimekko is feeling satisfied with its choice to work together with one of the blooming retailers in the fashion industry.

I would say that convenience is to some extent important to H&M’s value proposition too. Most of the shops are situated in shopping malls or conveniently in the center of a city. However, convenience is not what they’re offering to customers everywhere. For example in Stockholm, in the very heart of H&M business, H&M doesn’t serve clients with a one stop policy. There are several smaller stores in downtown Stockholm and you can’t get all styles and products from just one store.

To conclude, one of H&M’s keys to success has been its ability to offer low prices while staying flexible and building a strong brand. You don’t have to be similar in every country even though you are a large chain: some countries want more convenience; some may need more references with high fashion. H&M has understood how to serve different needs without compromising their core competence in economies of scale and low prices.

1. http://www.thelocal.se/17220/20090129/
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