H&M: Moving Away from Fast Fashion
By: Natasha Boyd & Daniella Strazzeri
The Ivey Business Review is a student publication conceived, designed and managed by Honors Business Administration students at the Ivey Business School.
A Retailer in Trouble
Hennes & Mauritz (H&M) is a Swedish multinational brand known for its fashionable offerings at affordable prices. H&M has gained notoriety as a leader in the fast fashion space, with more than 5,000 stores spanning across 74 global markets and employing over 120,000 people. Over time, H&M has expanded its product lines from only womenswear to include menswear, childrenswear, footwear, accessories, cosmetics, and even home furnishings. In 2020, H&M realized net sales of $23.2 billion, which marked an 18 percent decrease from the prior year due to pandemic-related store-closures that shut 80 percent of the group’s retail locations. Subsequently, the fast-fashion retailer achieved a bottom line of $130 million in 2020, a significant drop from their $1.42 billion net profit in the pre-pandemic, 2019 fiscal year.
Fashion-Forward Growth
A major trend emerging from the global fashion industry was a shift towards “fast fashion” in the early 2000s. This term is used to describe mass-market retailers which quickly design, produce, and ship inexpensive clothing to keep up with changing consumer trends. This system hinges on the availability of cheaper and more efficient manufacturing, an increase in consumers’ appetite for contemporary styles, and cheap price tags — making it easy for consumers to regularly update their wardrobes. From 2000 to 2014, clothing production doubled and consumers began keeping clothing pieces for half as long, signaling the rising popularity of fast fashion. The global fast fashion market approached a value of $68 billion in 2020, and is expected to see a 19 percent CAGR to $163 billion in 2025, and $212 billion in 2030.
Green is the New Black
As a result of the COVID-19 pandemic, the fashion industry faced many challenges, including logistical and manufacturing delays, reduced foot traffic in brick-and-mortar locations, a rapid shift towards e-commerce, and an uneven post-pandemic recovery across global markets. Beyond the challenges, the pandemic also highlighted a shift in consumer behaviour towards the consideration of the environmental and social impacts of their purchases. A 2021 survey revealed the pandemic reshaped consumer perceptions of sustainability, with 38 percent of respondents stating that they became more cognizant of the fashion industry’s environmental impacts in the past year.
Fast fashion has increased mass clothing consumption in recent years exacerbating numerous environmental issues. The world consumes more than 100 billion pieces of clothing each year, with over 92 million tons of clothes being dumped in landfills annually. While governments around the world legislate acceptable chemical compounds and concentrations, studies have shown fast fashion garments can often be riddled with hazardous waste like lead and phthalates. Such inputs come with negative consequences for both human health and the environment.
Restructuring consumer perceptions of fashion and consumption is a key factor that plays into the shift towards sustainability. As Millennial and Gen-Z consumers stock their wardrobes with eco-friendly clothing, retailers must incorporate product lines that are long lasting and high quality to align with consumer preferences.
Not Fast Enough for Fast Fashion
Although H&M is currently a dominant player in the fast fashion space, it has proven difficult to secure market share, as emerging players are offering trendier clothes at cheaper price points. The entry of e-commerce brands including ASOS, Shein, Missguided, and Fashion Nova have created significant competitive pressure for fast-fashion incumbents such as H&M and Zara. Pure-play e-commerce brands, which are businesses that solely sell through online channels, have simplified their supply chains to bring out new product offerings in as little as a week. The catalyst behind this recent change has been a social media-centric strategy as many of these brands have used online platforms and social media to gain traction and promote their clothing. H&M’s legacy business model leaves it between these ultra-fast fashion competitors and higher-end brands.
Additionally, this struggle has worsened due to the pandemic, as retailers with strong online presences were able to reach consumers faster. As of June 2021, Shein comprised 28 percent of American fast fashion sales, surpassing both H&M (20 percent) and Zara (11 percent). Shein is considered a rapidly growing competitive threat in the industry as it grew 160 percent in 2021 while the global fast fashion retail space grew only 15 percent. Given H&M cannot compete with new entrants like Shein on price or efficient delivery times, it must differentiate through other means to maintain its market position.
Fabric-ating Circular Fashion
In recent years, there has been growing pushback from both Millennials and Gen-Z, as they become increasingly aware of the environmental and social damage of fast fashion. This is known as “top-down” fashion evolution, which focuses on moving away from mass consumption and towards higher quality, longer-lasting clothing.
While H&M’s core business model, strategy, and reputation remain synonymous with fast fashion, the group has made significant strides towards integrating sustainability. This includes the launch of the H&M Conscious Collection in 2012, which featured exclusive articles of clothing made from eco-friendly fabrics — like organic cotton, hemp, recycled polyester — while still tailoring to prevailing fashion trends. The group has also launched and invested in numerous sustainability initiatives across varying geographies. These initiatives include Loop, which recycles old garments into new pieces; Colour Story Collection, which brings awareness to the environmental impacts of dyeing fabrics; and ReWear to promote the extension of garment lifecycles. These initiatives reflect H&M’s attempts to align with changing consumer preferences, which have increasingly prioritized social and environmental impact.
Ironing Out the Creases
Despite investing millions in initiatives, H&M has largely failed to meet its sustainability goals. Consequently, they are unable to differentiate themselves on the basis of sustainability, as consumers’ perceptions of the brand have not yet shifted away from fast fashion. Good on You, an online platform that ranks companies’ performance on sustainability metrics, rates H&M’s efforts a mediocre 3 out of 5. As such, while H&M intends to shift towards sustainable practices and increase accessibility of fashion to best align with increasingly eco-conscious consumers, tangible results have yet to materialize.
Sustainability “For Days”
Launched with the idea, “What if we could have everything we want without creating waste?” For Days is a novel brand based on circularity (a product created with its end-of-life taken into account). The store offers organic cotton basics such as t-shirts, sweatshirts, and pants that can be worn and eventually returned to be repurposed. For Days’ “Closet and Credit” system lists two prices beside clothing on their site; one is an upfront cost and the other is a credit that the customer receives when they return the clothing to be recycled. For instance, a customer purchasing a printed t-shirt with an upfront cost of $28 would receive a $7 credit when returned. For Days’ ultimate ambition is to create a one-stop destination for closed-loop commerce that engages brands, designers, and retailers. In the long-term, For Days aims to be a provider of upcycling and circular infrastructure for other fashion entities, ultimately providing a seamless circular consumer experience.
Spring Into Sustainability
For H&M to rewrite its reputation as an environmentally conscious company, it should pursue a strategic partnership with For Days. The rise in competition from ultra-fast fashion brands like Shein and Fashion Nova provide H&M with an opportunity to differentiate by doubling down on sustainability efforts. Through this partnership, H&M will differentiate itself from competition on the basis of commitments to sustainability and circularity, diversify its product offering with sustainable brands, and provide customers with the flexibility to upcycle clothing.
Given H&M’s store closures and decreasing profitability, a partnership with For Days will attract new customers who support sustainable clothing. This partnership will also enable H&M to attract customers through its partners’ unique fashion offerings. Ultimately, H&M will be able to provide its customers with more purchasing options from H&M stores. Furthermore, For Days’ “Closet and Credit” system will serve as a loyalty program to retain customers. Considering that 6% of loyalty programs like gift cards and credits are never redeemed, H&M’s loyalty program becomes a channel for H&M to obtain free clothes and materials for upscaling and reselling at a higher margin. Furthermore, the credits will expire annually with minimal redemption values, incentivizing customers to shop at H&M to spend their credits. This program will also drive foot-traffic into H&M stores, thereby converting non-H&M customers into H&M customers.
Dress to Impress
As fast fashion companies begin to encroach on H&M’s market share in the fast fashion space, doubling down on its sustainability efforts allows the company to differentiate itself based on environmental performance rather than price or speed of product introductions. By partnering with For Days, H&M can improve its brand image, reduce supply chain risks, and improve financial performance as a whole. While H&M may not be able to match the product introduction speed of all e-commerce brands like Shein or Fashion Nova, it can be the fastest to adapt to changing consumer fashion preferences towards sustainability and win over consumers.