Since its founding in 1947, H&M has become synonymous with fast-fashion. In fact, on average, it takes H&M just 2 weeks to bring new styles to market. 

However, though H&M once reigned supreme in every mall and shopping district across the globe, like many other retail outlets, there have been struggles in recent years. First and foremost, the competition has caught up. Now there are dozens of fast fashion brands out there capable of producing inexpensive clothing at a rapid, if not ungodly, pace.

Secondly, consumer shopping habits have changed. As consumers are turning towards digital marketing places, brick & mortar retailers must reinvent themselves for the digital age. 

However, for low-margin retailers such as H&M, digital transformation can be especially challenging. Shipping expenses, return logistics and building up a new, digital technology infrastructure can be incredibly expensive. Which begs the question, how does a company like H&M, who’s business model is based on keeping operational costs down to a bare minimum, launch a successful digital transformation? Is it even possible? Let’s find out. 

H&M Goes Digital

Back in 2018, H&M launched a new, improved online shopping platform and mobile app. Similar to Nike, Walmart and LVMH, H&M’s new digital shopping channels were designed to compliment physical stores to deliver one, integrated omni-channel shopping experience. As such, the new site and included features like payment via PayPal, scan & find, click and collect, shopper product reviews, free return to stores, live chat, the #HMxME social gallery for style inspiration and visual search. 

In addition, H&M also invested in digitizing behind the scenes operations to both reduce costs and maximize operational agility. For example, in Europe, H&M has fully automated its warehouse enabling them to facilitate one day delivery. Through the use of RFID tags, H&M can track and manage its inventory in real-time.  

By applying AI to the data generated by the RFID tags, in addition to other data sources, H&M is also able to deliver more precise supply and demand predictions. Not only are these ML algorithms helping the company to optimize its supply chain from a financial perspective, but also drive down its environmental impact. 

“It's all about how you make sure the right product is in the right place at the right time and is transported into the warehouse,"  Arti Zeighami, global head of advanced analytics and AI at H&M, shared at the 2020 National Retail Federation's Big Show. "Utilizing data analytics allows us to do that. You see a significant impact.”

On average, shoppers return 15-40% of the items they purchase online - a significant increase over in-store purchases which range from 5-10%. To combat this, H&M is developing digital twin technology to not only enable customers to “try on clothing” before they purchase, but also enable zero-waste design.

On average, only about 53% of fabric produced actually makes into the clothing we buy. The rest becomes waste. However, with 3D fashion design technology and digital twins, designers can create zero-waste patterns that eliminate fabric scraps. 

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Digital Transformation Success or Failure? 

When the COVID-19 crisis hit, H&M was forced to shutter 80% of its stores. If it had not already built up its digital infrastructure, it would have surely gone bankrupt. 

As H&M Group chief executive Helena Helmersson explained in a recent financial briefing, “The recent years’ transformation initiatives and investments, focusing on the digital, have been especially important for managing the crisis and this work is continuing at full speed. Customers want to meet us where, when and how they choose – in the stores, on our websites, on digital marketplaces and on social media. They are showing us clearly that they appreciate a convenient and inspiring experience in which the channels interact and strengthen each other. We are continuing our initiatives for digital growth, integration of the channels and optimisation of the store portfolio. Speed and flexibility will be even more important going forward, particularly in the supply chain, to ensure the best customer offering and increase availability in all channels.”

Going forward, H&M has repeatedly emphasized its intentions to use digital technology to further its sustainability targets and enable its transition to a circular business model. This relationship between digital transformation and environmental sustainability is something we at IAN are hearing a lot about these days. Is this something you’re also hearing about or discussing at your organization? If so, let us know @AiiA_Network.