H&M has transformed the UK fashion market. In a rare interview, UK boss Magnus Olsson tells Lisa Berwin the secret of its success and why the downturn could be an opportunity.
Walking into H&M's flagship Regent Street store, there is little evidence that there is a credit crunch gripping the UK.
During an afternoon spent in the store, the queue for the tills never fell below six or seven customers deep.
The Swedish clothing giant has now been in the UK for 32 years and, along with its Spanish rival Zara, has taught the British market a serious lesson in fast fashion and taken a strong foothold in the market, with sales up 17.6 per cent to £527.5 million last year H&M's low-profile UK and Ireland managing director Magnus Olsson has headed the business here for the past three years. Famously media-shy, he gave a rare interview to Retail Week on the eve of its latest London opening at Westfield this week.
Young and energetic, Olsson overflows with enthusiasm for the business and, having worked at the company for 12 years, is a keen ambassador for the brand. He started his career in Sweden, where he worked until 2001, and was then seconded to work for the US business. After four years, he took the helm in the UK, now H&M's third-biggest market, with 139 stores and 1.7 per cent market share.
Olsson is excited about the opening of Westfield London. "The great and different thing about Westfield is that there are so many new companies coming from overseas, creating a truly unique shopping destination," he says.
He believes that new competition encourages H&M to do a better job and is not worried that it will woo customers from its High Street Kensington store, which is its second-largest in the UK after Regent Street.
"High Street Kensington will still be High Street Kensington," he says. "When we opened in Regent Street we did not know what to expect as it was so close to the Oxford Circus store, but Regent Street has so far exceeded expectations."
The 37,450 sq ft Regent Street store opened on Valentine's Day this year. It was created to be a statement for H&M and has won praise for its design. And design, says Olsson, is key to the retailer's success. "We are a design-intensive company. We put a lot of energy into that. We always try to combine the features of the locations we choose with a modern fashion store."
Apparel design is, of course, paramount for H&M, which has 100 designers at its Swedish head office, working closely with buyers. "We have new items in store every day, the idea being to constantly inspire our customers," says Olsson.
The retailer closely monitors which trends are selling well. "We are always talking to our customers and we know that trends such as gothic and rock have had positive feedback," he says.
Although Olsson's focus is the UK and Ireland, he says that for the H&M group, performance and fashion is not just judged on a country-specific basis."We see that fashion is global and there are more similarities between bigger cities than between countries," he says. "I would not expect London to be much different from Paris or Barcelona."
He also disagrees with some fashion watchers who have heralded the "end of fast fashion" as shoppers allegedly switch to less throwaway items. Instead, Olsson argues that the shopper has just become savvier. "Customers today are more interested in what they buy and put a little more thought into it," he says. "Some trends stay around longer than others and you see them carried over from season to season, whereas other trends are, of course, more fleeting. I do not think this will change."
Investing in People
This autumn, H&M has opened nine new stores in the UK and two in Ireland, and the chain employs about 5,500 employees in the two countries. Career progression for his employees is high on Olsson's priority list. "We have lots of internal promotion. It is important that people can move from the stores to higher positions within the company. We also encourage movement from store to store," he says.
"For us working in the store is exciting – that is where it happens, the energy, the pace. We are not just a big organisation behind the stores. A few weeks ago we closed the London office completely and all went out to the shops to work. I find that it inspires the shop staff and also we learn a lot from it."
Globally, one of H&M's biggest success stories has been its designer collaborations, which have continued to create excitement and bring customers through the doors. There has been one such initiative a year for the past five years, with high-profile tie-ups featuring Stella McCartney and Madonna.
When it launched its design collaboration with iconic Italian designer Roberto Cavalli last year, there were frantic battles over products with staff barely able to replenish stock quick enough. In many stores the collection sold out in just days.
The next collaboration will hit shops on November 13, this time with Rei Kawakubo of popular Japanese fashion label Comme des Garçons, which will include a full men's and women's collection, plus accessories and a unisex fragrance.
"We surprise customers each time we have done one [a collaboration] and they get very excited about it. The buzz around Comme des Garçons is fantastic," says Olsson. He jokes: "Our security team is worried."
When asked if Madonna may now have to do another collaboration following her potentially expensive pending divorce from Guy Ritchie, Olsson quips. "Maybe he will want to do one now though?"
The one area that H&M has yet to explore is online sales. Although the retailer has an online offer for its German and Scandinavian customers, Olsson will not commit to any imminent step into e-commerce in the UK. "We are not sure yet if we will do it, but are looking into it. When we do it, if we do it, we want to do it good," he says.
In the past few years H&M has been experimenting with new fascias including upmarket Cos, which it debuted on London's Regent Street in March last year. A second Cos store will open this week in Westfield and the retailer believes there are further opportunities for the offer in the UK. The 14th Cos store in Europe will open next spring in Paris.
This year H&M also introduced its young Divided fascia, in the predominantly market- and independent-dominated shopping area of London's Camden. Olsson says that this has been well received. "That store was tailor-made for Camden; we wanted to respect the area and the feel of Camden. It is all about music and the underground scene. We appreciate that and wanted to contribute to the area. We are always looking for our next opportunity, but have not decided on a roll-out," he says.
In March H&M bought a 60 per cent stake in Swedish firm Fabric Scandinavien, which operates two fashion fascias – Weekday and Monki. Olsson says it is possible that these stores could come to the UK, but no discussions have taken place here so far.
While the high street is facing a serious slowdown in consumer spending, Olsson seems unfazed. He believes that H&M's value proposition will keep trade robust. "We give the customer value for money, not only in the product, but in the whole shopping experience. That is what we strive for in good times and in bad," he says.
"For us it's business as usual. We try to listen to the customer, find out what they want and adjust to that. There are opportunities when disposable income is a little bit less than it was before. We just need to be much more on our toes because the customer will be more demanding."
Competition in the value and fast fashion sector has grown rapidly in the past few years, with the supermarkets and Primark leading the charge on M&S to become the UK's largest clothing retailers.
But Olsson is reluctant to single out which retailers H&M sees as its strongest competitors. "In today's fashion market everyone is a competitor. Customers mix and match designer brands with high street. You can no longer say a customer is a box or a square; people are constantly moving across price and quality scales," he says.
Internationally, H&M has experienced some sales declines in recent months and sales across the business were 2 per cent down year on year at established stores in September. Olsson, however, refuses to admit any serious threat to H&M's success, stressing again its solid offer. "It is not about value, but value for money and I think we are unique when it comes to combining price, quality and fashion. It is the feedback we get from our customer and it is our success factor," he says.
H&M was started in 1947 by Swedish salesman Erling Persson. Initially called Hennes – the Swedish word for "hers" – it sold only women's apparel before buying hunting and gun store Mauritz Widforss in 1968 and becoming Hennes & Mauritz.
In 1967 it opened its first UK store in Brent Cross. In 2007 it opened its new fascia, Cos – Collection of Style – on London's Regent Street. This year H&M entered four new markets: Egypt, Saudi Arabia, Bahrain and Oman. Its roll-out in Russia will begin next year in Moscow.
Author: Lisa Berwin, www.retail-week.com