H&M Faces Glitches With New Logistics System

Despite problems with its new logistics system, which cost H&M an additional $45 million, the retailer saw a positive sales trend during September — the first month of the fourth quarter. In a call with analysts, H&M CEO Karl-Johan Persson said that the glitches would have a cost and sales impact, but Reuters reported that they would be to a “lesser extent” in the quarter.

In an effort to increase speed and efficiency in its supply chain, the retailer is introducing a logistics systems that connects its website and 4,700 stores. But Reuters noted that glitches with the system in the U.S., Italy, France and Belgium have caused an 8 percent sales drop in those markets as well as additional costs.

The retailer’s other 66 markets saw a rise of 8 percent in overall sales, and Credit Suisse analysts said that, as a result, “comparable sales in those markets may well have been up for the first time in three years.”

H&M is turning to artificial intelligence (AI) and Big Data to tailor its merchandising mix in its brick-and-mortar stores. To that end, the fashion retailer is using algorithms to gain insights from returns, receipts and data from loyalty cards to improve its bottom lines.

H&M is utilizing the technology in a store located in an upscale section of Stockholm, Sweden. It has so far learned that women make up most of its customer base, and that fashionable items, such as floral skirts, have sold at better-than-predicted rates. Sales have improved with these insights and H&M is moving away from the idea of stocking each location with a similar selection. That strategy previously led to unsold inventory and subsequent markdowns, as the retailer needed to clear out approximately $4 billion in excess merchandise.

The brand also announced in January that the year will feature fewer brick-and-mortar store openings as it moves to adapt to increasingly digital shopping patterns. The change comes after years of rapid growth from the fast-fashion giant, which now finds itself somewhat struggling to integrate into the eCommerce landscape.