H&M Refines Retail Strategy, Taking Cues From Retailers for a Localized Edge

H&M announced on Friday (Jan. 26) its plan to close down more than 20% of its stores in Spain and lay off up to 588 employees. The company cited unspecified organizational, productive and economic reasons. The move comes in response to competition from Inditex, owner of Zara.

H&M is adopting a new strategy to attract consumers. This involves focusing on a different demographic and adopting a more localized retail approach.

“This involves … enhancing the shopping experience in our existing stores, actively seeking out new opportunities and making informed decisions about closing stores when necessary,” the retailer said in a statement.

Last month PYMNTS reported that amid the intensifying competition in the fast fashion industry, H&M is facing challenges beyond just Shein. With rivals like Zara competing for attention and capturing market share, H&M has found itself compelled to reassess its strategic approach.

H&M sales fell 4%, marking the most substantial drop since the third quarter of the previous year. Inditex reported 15% growth in local-currency sales over the nine months leading up to October, followed by an additional 14% surge in the subsequent six weeks as of Dec. 13.

Despite the sales downturn, H&M’s performance demonstrated improvement compared to the initially expected 10% fall in September. The earlier decline was attributed to warm weather affecting autumn/winter collection sales across the industry. Other retailers facing similar challenges included Kohl’s, which sought support from Sephora to boost sales, and Designer Brands, the parent company of DSW.

Read more: H&M Loses Market Share in Fast Fashion, Pivots to Target New Spenders

Having navigated through a recent downturn, H&M is now aiming to engage a new demographic of consumers through a more localized approach, tailoring its offerings to the specific surroundings.

Earlier this month, PYMNTS highlighted that the fast fashion retailer is gearing up to launch a store on King’s Road in Chelsea, London, in the spring, in response to the growing demand in the fashion sector.

The planned concept store is designed to showcase the brand’s newest and most fashionable offerings, presenting elevated designs and trends curated for the local environment. Its goal is to inspire female customers who frequent the store.

A Winning Formula?

Customizing the shopping experience based on the local community’s needs and preferences is a way for stores to create a sense of familiarity and connection. This personal touch has an opportunity to strengthen the bond between the brand and consumers.

Smaller, community-focused stores can offer selected products that match the tastes and trends of the area. Staff in these compact stores are more likely to understand the community, allowing them to give personalized recommendations and services that resonate with customers.

Consumers can also come to appreciate the convenience and simplicity of navigating these smaller spaces, fostering a feeling of belonging and loyalty to the brand.

According to H&M’s annual report, the company operates 133 stores in Spain, employing nearly 4,000 people. The retailer has confirmed its plans to close 28 stores. H&M is likely to apply its new localized approach in Spain, taking a more personal and thoughtful approach.

Proving Localization Works

Foot Locker came up with a plan to connect better with customers in stores by focusing on smaller, more personalized experiences. In the third quarter, the sports retailer shook things up by moving away from regular mall locations and trying out new store formats, as reported by PYMNTS in December.

The president and CEO, Mary Dillon, highlighted the commitment to making each store unique. During the quarter, Foot Locker opened or revamped 30 new community and power stores globally, bringing the total of these modern-format stores to 198.

Dillon pointed out the success of these locations, mentioning increased foot traffic, conversion rates, and average purchase amounts compared to the rest of the stores in the fleet.

Read more: Foot Locker: Sales Bump Shows Personalized Retail a Good Fit

Petco in Union Square, New York, has also taken a local approach and offers a curated assortment of premium products sourced from vendors that resonate with the community.

The company has envisioned a shopping experience where pets and their owners could explore the latest styles from Petco’s in-house brand, Reddy. The store includes fitting stations, a customization table, and a lounge area to elevate the overall immersive shopping experience.