Principles of Fashion Marketing- Marketing Audit Report PDF

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A Marketing Audit of H&M's current marketing activities including external & internal analysis, competitive environment and customer segmentation....

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Sevda Pinar Kiratli Student ID: KIR15459982 BA (Hons) Fashion Marketing, Year 1 Word Count: 1646 Words

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Unit: The Principles Of Fashion Marketing Tutor: Edwin Phiri

Marketing Audit Report Sevda Kiratli I KIR15459982

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I, Sevda Kiratli certify that this is an original piece of work, I have acknowledged all sources and citations. No section of this report has been plagiarised.

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Executive Summary _______

This marketing audit report researches H&M Hennes & Mauritz AB marketing practices and their effectiveness. It notes six key findings, and makes two recommendations for future strategies. The brand has a strong market position (sustainability at affordable prices) and uses promotion effectively for its current target audience hereby, creating a unique brand identity. The pricing and availability of the products are also highly developed in regard to this. However, items by the brand are also perceived to be ‘throw away fashion’. A recommendation for the brand is to diversify its target customer segments and cater more effectively to the growing plus size market and to older customers (Market diversification). Moreover, it should also work on improving the quality of its garments.

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Contents _______

1. 2. 3. 4.

Introduction A brief overview Brand philosophy Marketing Environment 4.1 Macro-Environment 4.2 Micro Environment 5. Competitor analysis 5.1 Porter’s Five Forces 6. Consumer analysis 7. Marketing Mix Analysis 7.1 Product 7.2 Price 7.3 Promotion 7.4 Place 7.5 The additional P’s 8. SWOT Analysis 9. Conclusion 10. Reference List 11. Bibliography 12. Appendix

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List of Figures _______ Figure Page Nr. 1 Image- Cover Page 2 Image- First ‘Hennes’ Store in Sweden 2 3 H&M History Timeline 3 4 Image- H&M Conscious Actions Sustainability Report 4 5 Image- H&M Recycling Initiatives 4 6 Image- H&M Foundation 4 7 Table- PESTEL Analysis 5 8 Table- SPICC Analysis 8 9 Chart- H&M Main Suppliers 10 10 Table- Competitor Analysis 11 11 Chart- H&M Social Media Analysis 13 12 Chart- Perceptual Positioning Map 14 13 Chart- H&M Segmentation & Targeting 17 14 Image- Pen Portrait 18 15 Table- Pen Portrait Elaboration 18 16 Table- Segmentation by Womenswear Concepts 19 17 Chart- H&M Apparel Lines 20 18 Image- H&M Accessories in store 20 19 Chart- H&M UK Product Portfolio 21 20 Table- Conscious Collection Product Portfolio 21

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Figure 21 Chart- H&M Price Architecture 22 Table- H&M Concept Entry and Exit Points 23 Chart- H&M Online and Offline Points of Sale 24 Image- H&M London Store Locations 25 Table- H&M Promotion Analysis 26 Image- H&M Halloween Window Display 27 Image- KENZOxHM Window Display 28 Image- H&M escalator and wall decoration 29 Image- H&M in-store Feedback tablet 30 Image- H&M ‘Trend’ in-store Display 31 Image- H&M Divided in-store Display 32 Image- H&M in-store displays 33 Image- Screen Window Display 34 Image- H&M Website Screenshot 35 Image- H&M Website Screenshot 2 36 Chart- H&M Group Structure 37 Image- H&M Board of Directors 38 Table- H&M CEO Overview 39 Table- H&M Processes 40 Chart- H&M Online Purchase Returns 41 Table- SWOT Analysis

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- 1. INTRODUCTION This Marketing Audit Report will research the efficiency of Hennes & Mauritz AB marketing practices by looking at the marketing-environment and the marketing mix as well as analysing consumers and competitors. It will therefore enable the creation of successful marketing strategies and will form a footing for a marketing plan. The audit report will focus on the European market with the UK market as a focal point and the main emphasis on the womenswear lines.

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3,748

in

stores globally

63

markets on six continents.

(all brands within the H&M Group)

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2. A BRIEF OVERVIEW -

In 2015 (1 Dec 2014 - 30 Nov 2015) the total sales including VAT for all H&MGroup-brands accounted for SEK 210 billion with an increase of 11 percent compared to the previous year (H&M, 2016). H&M possesses a UK womenswear market share of 1,7% (Portal.euromonitor.com, 2016). Figure 2, The first store in Västerås, Sweden.

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H&M History

Hennes, founded by Erring Persson 1947

Acquisition of Mauritz Widforss, lines for women & men 1968

Expansion to the UK (and other European countries)

1976

Launch of the Online Shop

1998

First Designer Collaboration (Karl Lagerfeld)

Founded by Erring Persson in 1947, H&M Hennes & Mauritz AB is an international retailer that is based in Sweden and offers a wide range of products at low prices. The high-street brand that is a part of the H&M Group started expanding beyond Sweden in 1969 by opening first stores in other European countries including the UK. In 1998 H&M started its online shop. The popular designer collaborations were added in 2004 to create designer fashion at affordable prices (About.hm.com, 2016).

2005 Figure 3 (Author, 2016)

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3. BRAND PHILOSOPHY –

H&M PRACTICES FOR A SUSTAINABLE FUTURE

H&M Sustainability Report Figure 4, (Sustainability.hm.com, 2016)

Recycling Initiatives Figure 5 (About.hm.com, 2016)

H&M Foundation Figure 6 (About.hm.com, 2016)

Every brand within the H&M Group has a unique brand identity. The H&M-brand creates “fashion and quality at the best price in a sustainable way” (About.hm.com, 2016) This approach reflects the societal marketing concept in response to a growing global awareness for ecological challenges and sustainability. Thus, the brand strives to create a long term positive impact for both customers and society (Kotler, 2012; adapted by Author, 2016).

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4. MARKETING ENVIRONMENT ANALYSIS –

The H&M marketing environment will be analysed by using the SPICC and PESTEL tools.

4.1 THE MACRO ENVIRONMENT

The PESTEL analysis looks at the macro environment for external uncontrollable factors. Companies should aim to make the company capabilities fit the customer wants in the context of the marketing environment (McDonald and Wilson, 2011)

Political

Economic

Social

- H&M sources internationally and is subjected to custom duties and international trade regulations (About.hm.com, 2016)

Brexit à - Higher import costs - Inflation of the British pound - Less disposable income - Thus, retailers should refine USPs and focus on “innovation, technology and responsiveness” (Ormrod, 2016).

- Because of low birth rates and rising life expectancy European countries like the UK, Germany or France experience an ageing population - The UK population aged above 65 will have increased by 7,5% in 2060 (see table below)

- The Brexit referendum might lead to political instability and customer hesitation (Ormrod, 2016) If the UK stays in the EEA “the economic and legal changes would be much smaller” (Dhingra and Sampson, 2016).

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- Wages are increasing in most Asian countries heavy in garment-production (Adam and Chen, 2013) e.g. labour costs in China rose 10 percent in 2015 compared to 2014 (Knowler, 2015)

- The British population is growing while other European populations (see Germany) are decreasing (European Commission, 2016). - There is a shift towards “more casual styling” (including sportswear and athleisure) with a focus on

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- Trump’s policies might have a positive impact on high-street retailers such as H&M or Zara and negative effects on European luxury brands (WWD, 2016)

- UK GDP growth: 2.1 % in the 2nd quarter of 2016 (Ferreira, 2016) (see Appendix I) - National wealth distribution via the people-at-risk-of-poverty rate à UK: 24.1%, better than the EU-28 average of 24.4% (European Commission, 2016).

comfort and style because people have more free time (Easey, 2009) - There are more obese people worldwide (Lancet, 2016) - there is a perceived contradiction between sustainability and fast fashion for consumers à slow fashion as the alternative (Portal.euromonitor.com, 2016, see Appendix II)

Technological

Environmental

Legal

- 3D printing offers new opportunities to create “made-to-measure fashion” for a massmarket

- Rising consciousness for ethical consumption (78% of UK consumers think that “companies should act ethically”)

- H&M is a public limited company listed on NASDAQ OMX Stockholm

- Virtual-Reality-models can enable consumers to see what the product will look like on them and reduce product returns

- a strong pressure on retailers to manufacture sustainably and offer transparency (Dover, 2016)

- “Wearables” (wearable-technology) will gain importance and range from footwear to clothing (GfK, 2016) - NFC-beacons in retail locate customers instore and distribute customer-tailored product or promotional information to their

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- Because of climate change customers look for trans-seasonal items that are worn throughout the year rather than seasonal pieces (Sharma, 2016)

- The “corporate governance is based on external laws, regulations and recommendations as well as internal rules.” (About.hm.com, 2016) - External regulations: Swedish legislation, international and EU law, the Swedish Code of Corporate Governance (companies may depart with a sufficient explanation)

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smartphones. H&M is testing NFC-beacons in Stockholm (Abhishek and Hemchand, 2016). - Pure players are gaining market share (Sender, 2016)

- Internal regulations include the H&M Code of Ethics, Code of Conduct, Financial Policy and Human Rights Policy and more (About.hm.com, 2016)

- Emergence of the ‘see now, buy now’ concept (Abnett, 2016) Figure 7

H&M needs to adapt to political changes like the Brexit-referendum and the US-election which affect international economies and national developments such as the UK GDP. Social trends include a higher obesity rate and the ageing European population. Current examples for technological advances include 3D printing, virtual-reality-models, wearables, NFC-beacons and the ‘see now, buy now’ concept- which generally increased searches for the products featured but not necessarily sales.

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4.2 THE MICRO ENVIRONMENT

The micro environment can be analysed by using the SPICC tool. It looks at the following mostly controllable factors: suppliers, publics, intermediaries, consumers and competitors and how they can affect the company and its productivity (Easey, 2009; Adapted by Author, 2016).

Suppliers

Publics

Intermediaries

Competitors

Customers

- H&M does not possess any factories - The brand works with many suppliers located mostly in Asia (80%) and Europe - Full disclosure of supplier and manufacturer names and locations online - Supplier grades depending on the length of the cooperation (Silver, Gold & Platinum) - Largest number of suppliers in Bangladesh (444) and China (433), 3 in the UK (Adapted by Author from Sustainability.hm.com, 2016)

- H&M is in a constant public spotlight

- “Very few intermediaries” to sustain competitive prices

- target market “fashionconscious women aged 18 to 45” (Just-style-com, 2003)

- Funding and fiscal management by the H&M group with an annual general meeting for shareholders (About.hm.com, 2016)

- H&M centrally manages its distribution channels and promotion (Sustainability.hm.com, 2016) ex. promotional activities by employees rather than agencies. (Adapted by Author from D’Arcy, 2016, see Appendix III)

- UK fast fashion market becomes saturated with brands and more competitive both online and offline

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- Focus on ethical treatment of employees: HIP program for employee benefits, Fair Living Wage Map to ensure fair minimum wages (Sustainability.hm.com, 2016)

- 13 distribution centres in Asia and Europe in 2003 (Just-style-com, 2003)

à relatively hard for new brands to establish themselves - direct competition to Primark, Zara and Topshop in the UK high-street market (Euromonitor.com, 2016) For more information on the competitive environment see Competitor Analysis

- multiple brand approach to target a wider audience (Saunders, 2012) Karen Belva: “We do carry all these different lines in our stores, we allow our customers to address personality.” (Just-style-com, 2003) - USP: “young, fast fashion and value for money” (Saunders, 2012)

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- Combination of a traditional and vertical supply chain à 2 main collections and several subcollections with short leadtimes per year (Petro, 2012) - shortest lead-time: threeweeks (Hayes and Jones, 2016) - “Multi-month lead times” for a quantity of products (Lopez, 2016) - H&M Code of Conduct sets safety and working condition requirements for its suppliers (H&M, 2016). - The Sustainable Impact Partnership Program audits suppliers’ sustainability efforts (H&M, 2016)

- For public image see Promotion

- Collaboration with the European Retail Round Table (ERRT) for “greener transport” à e.g. SmartWay (environmental assessment of US road carriers) and WayAhead (environmental assessment of European road carriers since 2010) (Sustainability.hm.com, 2016)

- market size is declining, see PESTEL Analysis

- The ‘Clean Shipping Project’ oversees maritime transportation partners’ practices à H&M possesses most of the power over its distribution channels

Figure 8

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The SPICC analysis above shows that H&M possesses most of the power in its supply chain by using many suppliers from diverse locations (see chart below) and implementing regulations to control its few intermediaries. Thus, the brand ensures a better responsiveness to trends and agility.

500 400 300 200 100 0 1. Bangladesh

2.

China

3.

Turkey

4.

India

5.

Italy

6.

Indonesia 7.

Cambodia 8.

Portugal

9.

Vietnam

10. Romania

Figure 9 (About.hm.com, Adapted by Author, 2016)

Through multi-branding and using multiple concepts for different customer types the H&M Group targets a diverse customer market mostly aged between 18 and 45.

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The market the brand operates in is very competitive with H&M being one of the top-ten retailers in the UK (Portal.euromonitor.com, 2016).

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5. COMPETITORS Within the UK high-street market, there are many competitors. Verdict Retail reports that M&S and Arcadia have been losing share in the UK womenswear market.

On the other hand, H&M ASOS and Primark have been strengthening their market position during the last five years (Intelligence.verdictretail.com, 2015). H&M stands in direct competition to Primark, Zara and Topshop. The table below illustrates the USPs of each.

Primark

Topshop

Zara

H&M

Women’s, Men’s and Children’s wear, Shoes, Accessories, Home & Beauty

Women’s and Men’s Clothes, Shoes, Accessories & Beauty

Women’s, Men’s and Children’s wear, Shoes, Accessories, Home & Beauty

Women’s, Men’s and Children’s wear, Shoes, Accessories, Home & Beauty

Nr. of womenswear products online Price Range in £

537

7 942

3 880

5 470

0.90 - 40.00; avg. 8.08

3.50 - 695.00; avg. 35.82

3.99 - 239.99; avg. 34.83

2.99 - 199.99; avg 19.73

Places

290 stores globally, shopping streets, no online shop, first steps towards e-commerce (Intelligence.verdictretail.com, 2013)

High street central locations, online shop

2100 stores globally in high street central locations, online shop

3748 stores globally in high street central locations, online shop

H&M Competitors 4P’s Product Range

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Promotion

No advertising

Celebrity endorsements/ collaborations

No advertising

Big advertising campaigns with celebrity endorsements

Company Sales in million pounds (2015)

5 347.0 (Abf.co.uk, 2016)

1 414.5 (Arcadiagroup.co.uk, 2016)

17 815.5 (20900.3 €) (Inditex.com 2016)

18 403.3 (210000 SEK) (about.hm.com, 2016)

UK retail market share 2015 (Euromonitor.com 2016, see Appendix V)

4,5% (total Associated British Foods Plc)

3,1% (total Arcadia)

1,0 (total Inditex)

1,7%

Advantages

Low prices

Relatively low prices for trendy items

Relatively low prices for trendy items

Sustainability and low prices

Figure 10

The analysis shows that Topshop and H&M showcase the biggest online-shop presence with 7942 and 5470 womenswear items respectively. The two retailers share a similar approach to promotion with high-profile celebrity endorsements and collaborations (e.g. Ivy Park by Beyoncé for Topshop & KENZOxH&M). Primark and Zara do not advertise relying on ‘word-of-mouth’ promotion (Kalb, 2016). H&M offers lower prices on average than competitors Zara and Topshop with Primark offering the lowest prices on average (£8.08). All of the brands succeed in communicating a clear price architecture. (as of 29.11.2016) .

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According to Edited Analyst Katie Smith, Zara’s successful approach consists of the constant addition of new products to the product portfolio with an average product lifecycle of only 26 days (112 days for H&M) (Smith, 2015). This is mainly caused by Inditex’ choice of production location (65% of production in Spain, Portugal, Turkey and North Africa) and thus its shorter lead times making it more adapted to respond to trends than H&M which concentrates on replenishments. (Lopez, 2016; just-style.com, 2003)

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- SOCIAL MEDIA ANALYSIS -

H&M h...