Is H&M unfit to pursue strategy to grow number of stores?

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As the global market is growing tougher for fashion retailers, Sweden-based H&M decided to expand its network of outlets in Vietnam. However, the strategy may not work out as planned due to the strong preference for online retail.
is hm unfit to pursue strategy to grow number of stores
H&M will launch two new stores on Januaray 23

H&M is planning to launch two new stores in the southern city of Can Tho and the northern city of Halong on January 23. Thus, the company raised its total number of outlets to 11 across the country.

Back in 2017, when the brand initially set foot in the 100-population market, Fredrik Famm, H&M managing director of the Southeast Asia region, told VIR that Vietnam plays an important role in H&M’s strategy. “H&M considers Vietnam a potential market and this is the best time to make Vietnam the 68th market of the global H&M family.”

By the end of 2019, it had eight stores located in golden destinations in popular shopping malls in big cities with stellar leasing prices. For example, with a rate of $102 per sq.m at Vincom Dong Khoi, H&M has to pay nearly $225,000 a month after its 2,000 sq.m store. Other places charge $50-100 per sq.m a month for stores of a similar size.

In 2020, during the COVID-19 lockdown, the brand inaugurated only one store. It has also shut 250 stores across the globe since October – just after closing 140 stores in 2018 due to the downturn in its physical business operations.

At the time, H&M launched its eighth store in the central city of Danang in 2019, Famm said that even as the online business has been taking off, physical establishments still play an important role in its performance in Vietnam and the world.

He said that customers come to the stores for not only clothes but also the space with particular decorations. Therefore, despite the growth of online shopping, the demand for direct experience at the outlets remains.

However, this has changed since the pandemic and the lockdown descended on Vietnam for more than a month, with the market freezing almost entirely over. Even after the social distancing, H&M’s performance did not improve because of the changes in customers’ shopping behaviour in favour of e-commerce.

According to Sapo, fashion items were one of the most popular categories for online shopping in Vietnam last year. Moreover, consumers tended to save money during the pandemic, reducing expenses by more than half.

By Van Anh

Nguồn: Vietnam Investment Review

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