A Report of

A STUDY ON PRODUCT AND PRICING STRATEGY

OF Hennes & Mauritz (H&M)

Submitted
By
Adil Ismail Ahmed (Fk-3365)
Nikhil Chandran (Fk-3375)
Vaishnav V.J (Fk-3441)
Krishnadas K (Fk-3418)
Batch 28 PGDM
Table of contents

Chapter 1 Introduction 1
INTRODUCTION 2
Fast-Fashion in India 3
Chapter 2 RESEARCH METHODOLOGY 4
Chapter 3 COMPANY PROFILE 5
Chapter 4 Analysis 6
Chapter 5 Findings & Conclusion……………………………………………………………………………………………………….7

Bibliography………………………………………………………………………………………………………………………………………8
 CHAPTER I
INTRODUCTION
INTRODUCTION
In India the Textile & Apparel market was estimated at INR 3,20,000 crore (USD 58 billion),
in 2013, and is projected to grow at a CAGR of 9% to INR 7,57,000 crore (USD 138 billion)
by 2023 (Techno Pak 2015). It is the second largest industry in India, giving employment to
approximately 45 million people (India Brand Equity Foundation 2015). Moreover, if you
look at the market size projection in table below India got the highest annual compound
growth rate of 12% that means that the market size in India is projected to grow at the highest
pace in the following forecast.

The growth of apparel industry and the potential of the nation haslead to increased investment
of foreign retailers. The partial growth in this sector can be attributed to the emergence of
new industry players called “fast fashion retailers”- which can be seen as an explosive
expansion in past few years. Fast fashion is a phrase used for designs that move quickly from
the catwalk to showrooms to tap the latest consumer trends, is growing at a yearly pace of 25-
30%, twice the rate of the overall market (Tandon,S&Agarwal,S 2013) The tables were
turned from classic fashions to fast fashion by coming up of ZARA in India in 2009 which
became the first apparel brand in India to cross $100-million sales mark, five years after it
opened its first shop here.(Malvinas 2015)

Fast-Fashion in India

The reasons for the rapid growing fast fashion in Indian consumers could be following:

1) Increase in disposable income. By 2005, 21 million of India’s 210 million households

already earned more than $4,000 a year, qualifying them for membership in what we call “the
consuming class.” Based on McKinsey research, by 2015 the number of consuming class
households will likely triple to 64 million.

2) Both the Genders in India equally love shopping for clothes: According to UN reports
India’s population is the youngest across the world. Another research tells that both the
genders in India equally love shopping for apparels.In a market where almost all shoppers
love or enjoy clothes shopping, it is no surprise that India is projected to become the world's
third largest apparel market by 2020. Source: Statista.com Figure:1 Source: Cottoninc.com
Figure: 2 H&M- Fashion for All MAFMG Semester 0 3 Ashima khurana
3) New occasions: As the lifestyles of India’s prospering urban consumers have evolved,
their clothing needs have broadened, reflecting more varied usage occasions. With more
socializing opportunities consumers are buying more sophisticated combination of outfit
which is different for different occasions, also the ideology of wearing a garment for a season
or for one particular occasion has lead to increased opportunities of fast fashion retailers.
Today, Indians are more inclined than consumers in other markets to buy apparel for a
specific purpose. Indeed, 38 percent of Indian respondents to a recent McKinsey study said
they were highly likely to buy apparel for special events—a significantly higher proportion
than in Brazil (5 percent), Russia (3 percent) or China (6 percent).

4) Fashion increasingly a form of self-expression. Increasingly, Indian consumers are

embracing the idea of fashion for its own sake, as a means of self-expression, and not merely
as a functional purchase. Television, movies, advertising and the Internet bombard today’s
Indian consumer with new ideas about style, even as American-style shopping malls lure
them away from traditional marketplaces. In a recent McKinsey survey of Indian consumers,
62 percent said they thought it was important to “keep up with trends.” 5) Further
urbanization and the comparative youth of India’s population. At present, just 29 percent of
India’s population resides in cities, among the lowest urbanization rates of any nation in the
world. But that has been changing. Over the next 20 years, we expect the number of Indians
living in cities to grow by 300 million, where they will don new styles and fashions to match
new lifestyles.

6) Continued rise of “organized retail”: The increase in number of organized retail outlets
has given the opportunity to the Indian consumer to undergo the transformation in terms of
taste and preferences as the influence from the west is so strong in India that organized
retailing has become a medium to narrow the gap between the fashion of west and the
domestic trends. (Vittal, I 2010) Zara one of the leading fast fashion retailers entered India in
2009 and became the first company to cross $100 million in five years since it opened up.
Following the same trend Hennes and Muaritz (H&M) entered India recently on October 2
2015 exploring Indian market with the aim to spread all across nation. The response received
for H&M was seen in the sales of the first day of launch which was 1.75 crores that is
approximately double of what Zara earned on it’s first day launch (Maliviya, S &Bhushan,R
2015). Thereby the brand chosen for the project is H&M since it’s completely new to Indian
market and thereby provides and interesting field to further more research on.
 CHAPTER II

RESEARCH METHODOLOGY
TOPIC OF THE STUDY

A Study on Product and Pricing Strategy of H and M

OBJECTIVES OF THE STUDY

• To identify and analyse the product strategies of H and M

• To identify and examine the pricing strategies followed by H and M

SCOPE OF THE STUDY

This study provides an overview of marketing strategies taken in the retail industry by H and
M. The study focuses on identifying and analysing the product and pricing strategies used by
H and M and how these strategies have helped them to be them to stay in the business.

RESEARCH METHODOLOGY

Research Design

The project is based on descriptive research as the facts and information used for this study
are already available. The study is structured and well defined. The study analyses the
product and pricing strategies adopted by H and M.

Data Collection

The study is based on Secondary Data. Secondary Data source includes the data collected
from H&M website, Research publications, new archives, brochures and magazines of the
company, online research papers, presentations etc.
 CHAPTER III

COMPANY PROFILE
HISTORY OF H AND M

The history of H&M started with a man named ErlingPersson, who was a Swedish former
salesman that became fascinated with America’s high-volume efficient outfits that 8 Barneys
and Macy’s carried. Persson first discovered the outfits when coming to the United States
after World War II. Persson brought the retail concept – that high turnover produced lower
prices – and brought it back with him to Sweden.

It was then that Erling chose to open his own store which he called Hennes, standing for
“hers” in Swedish. During this time the store only sold women’s clothing (International
Directory of Company Histories, 1999). The company Hennes was established in 1947 in
Vasteras, Sweden and by 1968 Persson had purchased the men’s sportswear inventory and
property of a Stockholm hunting equipment store which was named MauritzWidforss.
ErlingPersson then changed the name of his store Hennes to Hennes&Mauritz to express the
expansion, and later downgraded to just the abbreviations H&M.

Mission of H&M

The prime focus of H&M is to serve fashion and quality at the best price in sustainable way.
The believe that they should have best customer offering in each and every market and offer
collection that are wide ranging and varied for women, men, teenagers and children. For them
design, quality and sustainability are not a question of price but ability to offer inspiring
fashion with unbeatable value for money.

Sustainability Vision H&M’s

business operations aim to run in a way that is economically, socially and environmentally
sustainable where it means that the need of both present and future generations must be
fulfilled.

Why Name H&M

The company initially started off with the name “Hennes” meaning ‘hers’ is Sweden language in
1946, selling exclusive women’s apparel and accessories. ErlingPersson was going around the US on
a tour when a business plan struck him. He felt the need for high end designer clothing brand for
women and set his first shop in Sweden in 1947. Twenty-one years after its establishment, in 1968
Hennes took over another apparel retailer MauritzWidforss, and that’s when the name was changed to
"Hennes&Mauritz" (H&M).
COMPETITORS OF H AND M

1. Zara
Spanish clothing and accessories brand, Zara was founded in the year 1975. It is one of the
topmost fashion companies. It is owned by the largest distribution group, Inditex. Their
business operations include design, production, and sales through many retail outlets. This
brand was founded by Amancio Ortega and RosaliaMera. They had opened the first store of
Zara in a street in Galicia, Spain which was in the name Zorba. Over the years, this company
started its operations in Portugal, France and so on. The various products of Zara cater to the
necessities of men, women, and kids clothing, accessories, and bags. The products designs
are best suited to the trends of the consumer.

2. GAP

Founded in the year 1959, Gap is headquartered in San Francisco, California. It is an

American retail company, manufacturing clothes which are founded by Donald Fisher and
Doris F Fisher. The company provides accessories, apparel, and various personal care
products for women, men, and children. The various brands under Gap are Gap, banana
republic, Old Navy, Intermix brands, and Athleta. Their products are sold through franchisee
stores, company stores, and online.

3. American Eagle Outfitters

A popular American accessories and clothing retailer, American Eagle Outfitters is
headquartered in Pennsylvania, US.  This brand caters to all fashion requirements of men and
women. The popular products of this brand are polo shirts, jeans, sweatpants, graphic T-
shirts, vanity boxers, briefs, swimwear, outerwear, and Henley shirts. It is a chain of mall-
based stores which sells casual and outdoor fashion apparel. It has about 700 stores in Canada
and the United States. It has a steady growth in the fashion industry since 1977. This brand
has been expanded to other sub-brands like kids and Aerie which has
different segmentation to reach many customers.
 4. Forever 21
An American fast fashion retailer, Forever 21 is headquartered in Los Angles. Established
in the year 1984 this company products and sells clothing and accessories. This brand is
known for its low price and trendy offerings. Various products sold by the company are
beauty products, accessories, and clothing for kids, men and women. It is the fifth largest
specialty retailer in the US. It serves the customers across the globe. This brand always
stays updated with the latest fashion trend. Their stores have new things every day to
attract customers. The products of this brand are affordable. This brand is more customers
friendly.

5. Chanel
Chanel is a privately owned company in France which is established in the year 1909. It
is a high fashion house that specializes in ready-to-wear clothes, fashion accessories, and
luxury goods. This brand is famous for the ‘little black dress’, and the ‘perfume No.5 de
Chanel’. It makes use of the jersey fabric to produce garments and hence the clothes were
comfortable. It is a well-known brand and has a brand value of about $7.2 billion.

6. Benetton

A global fashion brand, Benetton group is based in Italy. This brand was founded in the
year 1965 and has a network of about 5,000 stores in the main international markets. The
brand’s core business is the production of clothing lines under the name United Colors of
Benetton and Sisley.

7. Louis Vuitton

Also regarded as a top H&M competitor, Louis Vuitton is established in the year 1854 and
headquartered in France. It produces various products like ready-to-wear, watches,
accessories, books, and sunglasses. It is one of the world’s largest fashion brands and its
products are sold through various channels like department stores and online commerce. It
has about 460 stores across 50 countries. The products of Louis Vuitton have never
compromised in quality and it is one of the biggest strength of this brand. This brand has a
strong association with class and status.
BUSINESS PERFORMANCE OF H and M

Net sales at H&M Hennes & Mauritz AB increased by 9 percent to 61,694 million Swedish
krona (6,399 million dollars) in the fourth quarter, while in local currencies net sales
increased by 5 percent. The company said in a statement that net sales in the financial year
2018/2019 increased by 11 percent and amounted to 232,755 million Swedish krona (24,138
million dollars), while in local currencies the increase was 6 percent. Gross profit increased to
33,287 million Swedish krona (3,452 million dollars) in the fourth quarter, corresponding to a
gross margin of 54 percent, while for the financial year, gross profit increased to 122,453
million Swedish krona (12,699 million dollars), corresponding to a gross margin of 52.6
percent. Profit after financial items increased by 24 percent to 5,403 million Swedish krona
(560.3 million dollars) in the fourth quarter, while for the full-year, increase was 11 percent
to 17,391 millions

Commenting on the full year results, Karl-Johan Persson, the group’s CEO said, “The H&M
group’s transformation work continues to bear fruit. Increased full-price sales and decreased
markdowns contributed to an improvement in profit for the full year and in the fourth quarter,
when we achieved a 25 percent increase in operating profit. In India sales increased by 33
percent in local currency, in Poland by 21 percent, in Mexico by 18 percent and in Russia by
12 percent. In Sweden sales increased by 7 percent, while sales in the US and UK increased
by 6 and 3 percent respectively. For 2020 we plan to open around 200 new stores, while
around 175 stores will be closed.”

H&M expands online and offline reach during 2019

Online sales increased by 24 percent in SEK in the financial year and by 18 percent in local
currencies. New Business increased sales in the financial year by 17 percent in SEK and by
16 percent in local currencies compared with the previous year. Net sales in the period from
December 1, 2019 to January 28, 2020 increased by 5 percent in local currencies compared to
the corresponding period the previous year.

In 2019 H&M and H&M Home opened online in Mexico, and H&M via franchise in
Indonesia, Thailand and Egypt making H&M’s online store available in 51 markets and in
addition, H&M was also launched on India through ecommerce platform Myntra. Cos,
Monki, Weekday, & Other Stories and Arket opened online in Norway, & Other Stories also
opened on Tmall in China and Afound opened online in the Netherlands. New store markets
in 2019 for H&M were Bosnia-Herzegovina, Belarus and – via a franchise partner – Tunisia.
In 2019 Iceland became a new store market for Cos, Weekday and Monki. Weekday, & Other
Stories and Arket opened their first stores in Luxembourg. Cos also opened in Lithuania and
Slovakia, while Monki also opened in Poland as well as via franchise in the United
Arab Emirates. Weekday also opened in Poland and Switzerland and & Other Stories
in Latvia.

The company said that net addition of new stores for full-year 2019 was 108, rather than 175
as communicated at the beginning of the year. For the 2020 financial year around 200 new
stores are planned to open including franchise stores and there will be around 175 closures,
making a net addition of around 25 stores. The majority of the openings will be in South
America, Asia (excluding China) and in Russia and Eastern Europe, while the consolidations
will take place mainly in Europe, the US and China. Australia is scheduled to become a new
H&M online market in the second half of 2020. H&M will also be launched on the
ecommerce platform SSG.COM in South Korea during 2020. An agreement has been signed
with a new franchise partner in Central America. The first H&M store is planned to open in
Panama at the end of 2020. The H&M group’s growth target is to increase sales in local
currencies by 10–15 percent per year with continued high profitability remains a long-term
target.

In the financial year 2018/2019, the H&M group opened 281 stores including franchise and
closed173 stores, making a net increase of 108 stores. The group had a total of 5,076 stores as
of November 30, 2019, of which 272 were operated by franchise partners.

The company’s board of directors has decided to propose an unchanged dividend of 9.75
Swedish krona (1.01 dollars) per share to the annual general meeting on May 7, 2020,
corresponding to 120 percent of the group’s profit after tax. The first payment of 4.90
Swedish krona will be made in May and the second payment of 4.85 Swedish krona will be
made in November 2020.
CHAPTER IV

ANALYSIS
 Countries H&M operates in

 The price strategy of H&M is designed based on their customers’ needs which is low
price and high fashion.
 In fact, this is the one of the biggest challenges for H&M.
 If not making this happen, the special feature of H&M cannot be realized.
 How could they combine fashion and cheapness?
 This objective was achieved by two steps: first, H&M outsources the production to
countries where the labour cost is much lower.
 To control transportation cost, outsourcing was arranged according to different
product. Those high fashion product which target at the European market were
produced in Turkey, because of the short product life cycle.
 In addition, basic product is produced in Asia because they allow longer
transportation time and bear lower risk. Second, the company also conduct strict cost
control plan. For example, very few executives have secretaries or have cell phone
privilege (Jobber, 2007). These two steps allow H&M to achieve a low-price fashion
business.
 Although H&M’s low price is the foundation of success, we would argue that the low
price also gives H&M an image of bad quality.
 This image hinders H&M from keeping their customers.
 When a young girl turns to a middle-aged lady or a school girl becomes a office lady,
H&M may not suits them. As a result, H&M face a challenge of constantly attracting

new customers. This challenge may call for more cost in promotion.
 The product of H&M is low price and high fashion which is based on their customer
needs. The promotional actions of H&M focus on the two features.
 It is easy to find the posters of H&M are in fashionable style and always with
the price of the clothes. On H&M's website, price is put at obvious position.
 The target market for H&M is for younger people. Even though H&M offers clothing
and accessories for all ages, their target market is women.
 Women usually shop more for them, but also buy all their children's clothing and
often their husbands as well.

Is H&M expensive in India?

 H&M's entry to the Indian market signifies so much more for brand lovers. The

collection is at par any international brand, but without the expensive tag. Every item
in the store has been given a price favouring Indian standard and it clearly cannot get
better than that!
 The brand stocks in-house created fast fashion items and teams up with designers for
one-time collections. large inventories of basic items are sourced from places like
India and its neighbours that carry a price tag much lower than most of its rivals as a
result of which it is able to charge lower prices as compare to its rivals
 Currently, H&M sales in India doubled in nine months because of its strategy of
selling merchandise at lower prices than rival Zara. Its first store opened in October
2015, H&M's Indian unit reported revenue of Rs 194 crore by the end of March 2016,
which increased exponentially to about Rs 640 crore during 2016-17 through 15
stores, many of them barely a few months old then.
 However, H&M is behind its competitor Zara in terms of sales and revenue but it is
slowly catching up. Regarding expansion to other channels too Zara is planned to
enter the e-commerce market in October 2017 whereas H&M is still behind with its
target of entering the market in 2018. It will be exciting to see how Zara and other
competitors will counter this strategy of H&M and for how long this strategy will
sustain.  
 CHAPTER V
FINDINGS AND CONCLUSION
FINDINGS

 Pricing strategy has designed based on their customers’ needs, which is low price and
high fashion.
 H&M outsources the production to countries where the labour cost is much lower.
 H&M products are produced in Asia because they allow longer transportation time
and bear lower risk.
 H&M’s low price is the foundation of its success.
 Even though H&M offers clothing and accessories for all ages, their target market is
younger people, especially women.
 Most of H&M customers like Women usually shop more for them, but also buy all
their children's clothing and often their husbands as well.
 Their low pricing strategy often gives their products an image of low quality.
 Every item in the H&M store has been given a price favouring Indian standard.
 H&M is behind its competitor Zara in terms of sales and revenue but it is slowly
catching up.
 H&M sales in India doubled in nine months because of its strategy of selling
merchandise at lower prices than rival Zara.
 H&M stores are all located in well-known locations.  They also have Online website
which gives consumers access to different products that they offer.
 H&M focuses a vast amount of time on Promotion and advertising.

CONCLUSION

H&M have from their establishment in 1947 developed from a little Swedish attire
organization to one of the greatest on the planet with regards to shabby and popular garments.
H&M have possessed the capacity to build up a solid and practical brand name where the
item is all around adjusted to the necessities and needs of the clients. They have demonstrated
the market that form doesn’t need to be costly and you don’t need to gain a considerable
measure of cash to have the capacity to dress elegantly. This idea is for the most part
extremely alluring for more youthful individuals that still don’t have such a high pay since
they are in the start of their vocation or they are yet considering. H&M has effectively
imparted their vision to their clients and made a solid brand name, and in this manner
possessed the capacity to pick up a place in the psyche of the clients, which is essential in a
focused point of view. Amid the most recent decade the opposition between organizations
that offer shabby and popular garments has expanded, which will drive H&M to never quit
creating and enhance their business. Their showcasing methodologies must be focused and in
the meantime moral to draw in and keep clients.
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