468 Retail and Channel Management Blog

Friday, February 5, 2016

H&M and the Absence of Online Commerce in Canada

As a university student, I love H&M. Their budget-friendly trendy offerings keep me looking fly without emptying my wallet. They even offer designer collaborations as Bianca Barry notes in her recent post. But it puzzles me that the world’s second largest global clothing retailer does not have online shopping in over half of their markets, including Canada.
Typical H&M Storefront

Up until August 2013, fast-fashion retail giant Hennes & Mauritz, wasn’t even engaging in e-commerce in the United States. Yet a 2015 IBISWorld report revealed that the average annual online sales of men’s clothing grew by over 17% from 2010 to 2015, the fastest growing category even when looking towards the future. Canadian online clothing retailer Frank & Oak, for example, has seen tremendous success by focusing on the digital customer, while other competitors like Zara, Gap, and J. Crew offer Canadians an online shopping experience in addition to their brick and mortar stores.

So why might H&M in Canada be lagging with their e-commerce adoption?

Let’s first examine their history. H&M began in Sweden in 1947 with the business concept of “Fashion and quality at the best price”. Their first store outside of Sweden opened in Norway in 1960, spread across Europe in the 1980s and 1990s, came to the US in 2000, and finally set up shop in Canada in 2004. Today H&M has more than 3,900 stores in 61 markets, 78 of which are in Canada. Of those 61 countries, only 23 are offered online shopping. The first non-Nordic country to have online sales was The Netherlands in 2006, resulting in demand which exceeded expectations.
Online Shopping on H&M's US website

In their Full Year Reports, H&M cites long-term investments in IT costs for online shopping as a main component for increased costs. Additionally, the low population density and large land area of Canada could make logistics appear daunting. There have been strides made in recent years, however, with 10 markets gaining online shopping capabilities in 2015, and another nine planned for 2016. If H&M continues at this pace, then we should likely be able to see online shopping in Canada within the next five years at most.
H&M Canada Website. Notice the note indicating online shopping is not available.

Additionally, we have learned that only 58% of respondents to a Retail Systems Research (RSR) study engaged in e-commerce as of September 2015. But RSR also revealed in 2014 that multi-channel retail customers were 54% more profitable than single-channel customers. But while H&M’s sales after expanding online in the US increased to 13,675 million SEK in 2013 from 12,550 million SEK in 2012, this could have also been induced by the opening of 44 additional American stores. Canada on the other hand had decreased sales from 3,125 million SEK to 3,024 million SEK during the same period and an additional five new stores. Therefore, it is possible that H&M feared that the losses of implementing the online system would loom larger than the gains, a risk which may be unattractive when facing decreasing profit. In 2015, however, Canadian sales increased 26% in SEK. If this upward trend continues, could we Canadians see online shopping in 2016? Holding a huge market share already, adopting consumer trends by investing in e-commerce in all their markets may help H&M move towards the goal of overtaking Zara’s parent company Inditex for the spot of number one global clothing retailer.



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