Online shopping is where profits are found
The Short Version
Forbes magazine is reporting that fast-fashion retailer H&M is going to start closing under-performing stores and is abandoning its goal of opening 10-15% new stores each year. The chain is moving to put more emphasis on online shopping as it continues to chase a younger demographic that doesn’t shop in stores.
A Bit More Detail
No, your favorite H&M store isn’t going to close tomorrow. Probably. Maybe. Unless it’s one that has been defined as “under-performing.” For now, those are the only stores on the chopping block. The majority of stores in the US and Europe will keep right on putting out the fashion as fast as those factories in Bangladesh and Turkey can churn them out.
For now.
However, H&M’s CEO Karl-Johan Persson has changed his mind about the company’s growth strategy, away from physical stores in Europe and the US and more toward online sales. The reasons are numerous. In posting a six percent increase in sales last year, net income actually dropped almost eleven percent, largely because of increased markdowns necessary to stay competitive. Persson also said that events such as terror attacks and Brexit are creating problems in certain areas of the world.
The move toward a more online strategy isn’t universal, however. Persson says that emerging markets such as India, Mexico, South Africa, and Turkey are growing and will see more stores open. In fact, 430 stores will open this year, including new entry into Kazakhstan, Colombia, The Republic of Georgia, and Taiwan.
As H&M grows its online presence, it looks directly at competing with Amazon, Zalandro, and Alibaba, hoping to capitalize off its online/brick-and-mortar combination. The company still expects a 10-15% annual sales increase despite the shift in focus. They are also expanding their online presence, adding Malaysia, Mexico, Hong Kong, Singapore, Taiwan, and Turkey to the list of cyber markets.
The move by H&M is important in light of the continued struggles that have plagued mall-based retailers over the past several years. Rumors that Hudson’s Bay, who already owns Saks, is making a takeover move on troubled department store Macy’s was greeted with considerable optimism. Traditional fashion retailers are struggling and brick-and-mortar stores are a large cost factor that yields little, if any, profit.
Fast-fashion retailers, such as H&M and Forever21, have been seen as the exception to the decline of retail fashion stores. Where others have failed, fast-fashion outlets have been booming, for the most part. H&M’s change in strategy seems to signal the popping of that bubble.
Again, H&M emphasizes that only under-performing stores are going to close. However, there was no detail defining “under-performing” and whether that might expand should on-line sales beat sales goals. We only know that once a store is targeted for closure, that the door-shuttering will happen quickly. Don’t expect a lot of huge clearance sales.
We also don’t know how this might effect H&M’s partnerships with fashion brands such as Kenzo and its relationships with designers, things that have made the store popular in the past.
What we do know is that this could be a serious blow to real estate and mall developers in the long-term. Any hope for a resurgence based on fast-fashion growth would appear to be crushed. As Amazon and other companies look at faster and cheaper delivery methods, the days of physical in-store shopping look to be shorter than previously anticipated.
At the same time, this move makes the opportunities for smaller boutiques that much stronger. Located in more urban areas in places where storefront rents are not quite so expensive, boutiques counter the online trend with a more intimate shopping experience. As bigger brands drop physical stores to move online, boutique owners are likely to see an increase in traffic, especially from shoppers over 40 who still like to touch and try on clothes before buying.
Either way one looks at the situation, however, the consumer almost certainly comes out the winner.
Thursday, January 16, 2025
The Holding Of Horses.
Pain. The last knuckle on the pinky fingers of my left hand decided it wanted not to cooperate last night. That’s all it took to make my night miserable. None of the larger joints seemed to have any problems for a change, but that one itty bitty knuckle was enough to make rest impossible for most of the night. This proves yet once again that little things can make a big difference.
There’s an interesting article in today’s New York Times reviewing the new book by Gay Talese, “A Town Without Time,” a new collection of his New York writings. One of the “little” things he notices, particularly as people get older, is how people dress. He and his wife, the retired publisher Nan Talese, live next door to a 16-story medical building. He sees cars pull up and people get out to see a doctor, and they’re dressed “dreadfully, in blue jeans, sneakers, windbreakers,” he said. If they’d only dress better, they’d feel better, he’s convinced. “Look in the mirror, you’d feel better,” he said. “You wouldn’t have to spend so much time in doctors’ offices.”
I’m sitting here in a long-sleeve compression shirt, old jeans, and baggy socks. I haven’t worn a suit in so long I’m not sure any of them still fit; they’d likely hang on me like an old dish rag. These days, I’m more likely to settle for less style and greater ease. Just the act of getting ready to take the dogs out in the cold each morning is exhausting. When I come back inside and un-layer myself, I have to sit down and catch my breath before doing anything else. Do I look like a mess? Yes. Do I feel like a mess? Yes. Would wearing a suit change that? Not one bit.
Headlines started hitting my phone late last night heralding a truce between Gaza and Israel. After 17 months of stupidly going back and forth at each other, this is good news, right? I wouldn’t start those celebrations just yet. Netanyahu says ‘last minute crisis’ with Hamas holding up approval of Gaza truce and hostage deal. Even if the Israeli Cabinet approves the deal, it wouldn’t take effect until Sunday. In between now and then, Israel is going to fire all the rockets they can. Israeli strikes in Gaza killed at least 70 people after the peace accord was announced! Remember, it was Netanyahu who torpedoed the Camp David Accords that Jimmy Carter brokered between Menachem Begin and Anwar Sadat, preventing them from being approved. Netanyahu is a war criminal who can’t be trusted. The details matter.
The FDA finally got around to banning Red Dye 3 from food yesterday. The cancer-causing dye has been illegal in cosmetics for decades, but for some stupid reason, it’s still a mainstay in a number of overly processed foods and medicines. Store-branded gummy vitamins are especially likely to be full of the dangerous stuff, along with cake icing and candy corn. Seems like a little thing, perhaps, but have you noticed the increase in cancers among younger people? Little things. Pay attention.
Local Indianapolis news stations went nuts last night as the state’s governor signed an executive order eliminating the DEI office and related initiatives at the state level. Who does that most affect? Primarily anyone looking for a state job. It means no one’s going to be making sure that the handicapped person isn’t overlooked because hiring them might mean having to make costly accommodations. At the same time, the governor also signed orders for state agencies to reconsider whether state employees actually need a college degree and to eliminate ‘burdensome’ requirements from various state licenses. Why? Because the state’s workforce is too undereducated to meet the current requirements. Little things.
Before heading out the door this morning, G took a look at the seven-day forecast. In addition to a chance for more snow on Sunday, morning temps are all well below zero for at least the first three days of next week. That means we’ll want to make sure everyone’s blankets are clean and dry. Sure, it sounds like a small thing, but it can make a big difference when one is fighting off frostbite.
I wonder what Gay Talese thinks about snow boots.
You can wonder if I really give a shit what Gay Talese thinks.
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