Presentation by National University of Singapore - Winners of CBS Case Competition 2011
- 1. H&M: Bolder.Bigger. Be8er Caroline Ng Candice Lim Peh Che Min Tobias Chen F . O . C . A . L
- 2. H&M’S Identity: Our winning proposition Analysis Stage Runway Backstage Implementation Conclusion Objec+ve Winning Proposition 1. “Sustainable growth with High Impact strategic initiatives whilst keeping things Simple” 2. 10-15% growth in number of stores per year Affordable Chic Fast Fashion Inclusive
- 3. Challenges Ahead Analysis Stage Runway Backstage Implementation Conclusion Key Issues 1 Stagnating growth in Europe 1. Prioritizing growth options 2 Diverse consumer preferences 2. Maximizing shareholder’s value 3 Intense Competition 3. Managing Challenges cost to support growth 4 Increase in raw material prices 5 Talent attraction & retention
- 4. Criteria to evaluate growth options Analysis Stage Runway Backstage Implementation Conclusion Degree of High Impact Growth Competition Complexity (x2) Potential • imple S • ales S • uture potential F • imilarity S • ongruent with C • mpact on brand I • calability S • lustering effect C core business & • xpertise E • ost-benefit C • conomies of E expertise analysis scale • ost effective C
- 5. Evaluating Growth Opportunities Analysis Stage Runway Backstage Implementation Conclusion Degree of High Impact Growth Growth Options Complexity (x2) Potential Competition Improve day to day performance Expand online channels Geographic expansion Expand product category (Home) Brand Expansion Favorable Unfavorable
- 6. Recommendations:Project Runway Analysis Stage Runway Backstage Implementation Conclusion Managing Set the Stage Strut the Runway Backstage 1. Increase no. 1. Geographic 1. Secure new of customers Expansion suppliers - Focus on male -Asia Pacific -South East Asia segment 2. Online Channel 2. H&M’s talents 2. Increase sales -Advertise on - Increase efficiency per customer ‘taobao’ of sales people - Increase - H&M online - Management accessories segment wardrobe associate programme
- 7. Recommendations: Project Runway Analysis Stage Runway Backstage Implementation Conclusion Managing Set the Stage Strut the Runway Backstage 1. Increase no. of 1. Geographic 1. Secure new customers Expansion suppliers - Focus on male -Asia Pacific -South East Asia segment 2. Online Channel 2. H&M’s talents 2. Increase sales - Store on Taobao - Increase efficiency per customer Mall of sales people - Increase - H&M online - Management accessories segment wardrobe iphone app associate programme
- 8. Recommendations: Project Runway Analysis Stage Runway Backstage Implementation Conclusion Managing Set the Stage Strut the Runway Backstage 1. Increase no. 1. Geographic 1. Secure new of customers Expansion suppliers - Focus on male -Asia Pacific -South East Asia segment 2. Online Channel 2. H&M’s talents 2. Increase sales -Advertise on - Increase efficiency per customer ‘taobao’ of sales people - Increase - H&M online - Management accessories segment wardrobe associate programme
- 9. H&M: Project Runway Managing Set the Stage Strut the Runway Backstage
- 10. Backstage – Make it Happen Analysis Stage Runway Backstage Implementation Conclusion Grow existing segments Increase number of Increase sales per customers customer
- 11. Backstage – Make it Happen Analysis Stage Runway Backstage Implementation Conclusion Increase number of Increase sales per customers customer H&M MEN H&M ACCESSORIES 1. Greater Variety of Designs 1. The Fashion Fraternity 2. Integration with Apparel 2. Guest Designers CAGR: 3% (2005-2010) CAGR: 4.6% (2010 Inc.) Market Value 322.3Bn USD
- 12. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion 1 2 H&M’s Men Accessories Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
- 13. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion 1 2 H&M’s Men Accessories Purchasing Behaviour Process 1 2 3 Increase Male consumer Cater personal Need advertising to preferences Recognition Look Good space for men men Information Online Self- reliant Search Financial risks Evaluation of Market Size Acceptance Creatures of Habit Comfort, Price, Quality Alternatives Purchase Pilot Testing: Flagship stores in Beijing & Shanghai Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
- 14. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion 1 2 H&M’s Men Accessories Shanghai & Beijing The Fashion Fraternity Internet/Mobile: Chinese Information ‘ ’ forums Search Personal Space
- 15. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion 1 2 H&M’s Men Accessories Shanghai & Beijing The Fashion Fraternity Internet/Mobile: Chinese Information ‘ ’ forums Search Personal Space Newly Affluent middle class Trendy males seeking fashion tips
- 16. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion 1 2 H&M’s Men Accessories Shanghai & Beijing The Fashion Fraternity Internet/Mobile: Chinese Information ‘ ’ forums Search Baidu: Year 2010 Personal • hina: 64.02 billion C Space queries • AP and PDA based W mobile search • xclusive forums for E males – ‘ ’
- 17. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion 1 2 H&M’s Men Accessories Brick & Mortar Information Search Key Takeaways 1. Pilot market in Shanghai & Beijing – 12 months 2. Personal Interna>onal roll-‐out of improved H&M man in year 2012 Beijing Shanghai Space 3. Target 60 stores by Year 2013 Personal Entertain Music (Fuᶔball)/ Lounge Magazines
- 18. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion 1 2 H&M’s Men Accessories H&M ACCESSORIES HELPING YOU FIND…
- 19. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion 1 2 H&M’s Men Accessories H&M ACCESSORIES Sales /sqm 0.5% to Grp revenues
- 20. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion 1 2 H&M’s Men Accessories Integrating accessories with apparel Do it your way
- 21. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion 1 2 H&M’s Men Accessories Integrating accessories with apparel Trend, Modern, Classic, Everyday Mamma, Divided, & denim, L.U.G.G
- 22. H&M: Project Runway Managing Set the Stage Strut the Runway Backstage
- 23. Strengthen exis+ng forts while expanding new markets Analysis Stage Runway Backstage Implementation Conclusion 250 new stores in 2011 Aggressive pursuit of Increase dominance in Asia-‐Pacific W Europe and N America
- 24. Iden+fying KEY new markets Analysis Stage Runway Backstage Implementation Conclusion Growth Posi>ve Untapped markets Market Size Ease of Entry Poten>al Compe>>on Spillovers Asia-‐Pacific Middle East & Africa Eastern Europe South America Favorable Unfavorable
- 25. Where to expand in 2011 Analysis Stage Runway Backstage Implementation Conclusion Growth Posi>ve Emerging markets Market Size Ease of Entry Poten>al Compe>>on Spillovers Asia-‐Pacific Middle East High sales & Africa Ranked 3rd in value sales behind North America and Europe Eastern Europe High CAGR CAGR of 13% from 2010-‐2013E South America Dominant Chinese market Favorable 71% of total Asiapac sales Unfavorable Source: Euromonitor
- 26. Where to expand in 2011 Analysis Stage Runway Backstage Implementation Conclusion Growth Posi>ve Emerging markets Market Size Ease of Entry Poten>al Compe>>on Spillovers Asia-‐Pacific Aggressive greenfield expansion – large poten>al, large growth Middle East Franchise mode – cultural and legal constraints & Africa Eastern Europe Sizeable market near H&M stronghold South America Lucra>ve market to enter in the future Favorable Unfavorable
- 27. Strengthen exis+ng forts while expanding new markets Analysis Stage Runway Backstage Implementation Conclusion Western Europe: 45% N America: 15% Eastern Europe: 10% Asia-‐Pacific: 25% MENA: S America 10% 250 new stores in 2011
- 28. Asiapac: Focus on China Analysis Stage Runway Backstage Implementation Conclusion North Asia Southeast Asia 1 China, Japan, South Korea, Taiwan 2 Singapore, Indonesia, Malaysia Source: Euromonitor
- 29. Much poten+al for growth in China Analysis Stage Runway Backstage Implementation Conclusion CF Market Share (USD billions) in 2009 Germany 71.252 Large poten+al China 169 for growth in Chinese market 0 50 100 150 200 Source: Euromonitor, H&M
- 30. Domina+ng the Chinese stage Analysis Stage Runway Backstage Implementation Conclusion 42 stores, concentrated in Eastern China Source: H&M
- 31. Domina+ng the Chinese stage Analysis Stage Runway Backstage Implementation Conclusion 4.5% popula>on 4% of GDP 44.5% popula>on 32% of GDP 42 stores, concentrated in 51% popula>on Eastern China 64% of GDP Source: Ogilvy
- 32. Opportuni+es for growth in 2nd and 3rd +er ci+es Analysis Stage Runway Backstage Implementation Conclusion Rapidly emerging middle class in 2nd and 3rd >er ci>es 42 stores, concentrated in Eastern China Source: Ogilvy
- 33. Effec+ve way to reach out to Chinese masses Analysis Stage Runway Backstage Implementation Conclusion Source: Ogilvy
- 34. Leveraging on the Chinese e-‐commerce trend Analysis Stage Runway Backstage Implementation Conclusion
- 35. Efficient expansion via Taobao.com Analysis Stage Runway Backstage Implementation Conclusion Cri+cal mass • 370 million users • 50 million unique visitors daily Efficient expansion • Low capital investment • Aggregated distribu>on centers
- 36. Efficient expansion via Taobao.com Analysis Stage Runway Backstage Implementation Conclusion Cri+cal mass UNIQLO SUCCESS STORY • 2 million RMB sales daily • Exceeded retail store sales in just 4 days Efficient expansion
- 37. H&M on Taobao Mall Analysis Stage Runway Backstage Implementation Conclusion
- 38. Maximising the m-‐commerce plaform Analysis Stage Runway Backstage Implementation Conclusion The current The poten+al H&M applica+on In m-‐commerce Smartphone Basic penetra+on features M-‐shopping Limited takeup geographic reach Poten+al in mobile Source: Forrester Research, ABI Research, Modus Associates
- 39. Maximising the m-‐commerce plaform Analysis Stage Runway Backstage Implementation Conclusion The current The poten+al H&M applica+on inm-‐commerce Basic features My Limited Wardrobe geographic reach
- 40. H&M: cheap chic, 24/7, everywhere Analysis Stage Runway Backstage Implementation Conclusion Brand Saliency Network Effect New Retail Channel My Wardrobe
- 41. Increasing visibility 24/7, on-‐the-‐go Analysis Stage Runway Backstage Implementation Conclusion Brand Saliency Network Effect New Retail Channel My Wardrobe • Create your oueit using H&M Catalogue items • May also use your personal items
- 42. Increasing visibility 24/7, on-‐the-‐go Analysis Stage Runway Backstage Implementation Conclusion Brand Saliency # 02 out of 107 oueits Network Effect New Retail Channel • Create your oueit using H&M Catalogue items • May also use your personal items My Buy it. Wardrobe Keep it.
- 43. Increasing visibility 24/7, on-‐the-‐go Analysis Stage Runway Backstage Implementation Conclusion Brand Saliency # 02 out of 107 oueits Network Effect New Retail Channel My Buy it. Wardrobe Keep it.
- 44. Leveraging on network effects Analysis Stage Runway Backstage Implementation Conclusion Brand Saliency # 02 out of 107 oueits Network Effect New Retail Channel • Average of 220 friends My • Photo album Buy it. Wardrobe Keep it. • Newsfeed (and no>fica>ons) • Wall post
- 45. Complementary revenue stream Analysis Stage Runway Backstage Implementation Conclusion Brand Saliency # 02 out of 107 oueits Network Effect New Retail Channel Average of 150% increase in sales voume My Buy it. Wardrobe Keep it. Source: BCG
- 46. Increasing visibility 24/7, on-‐the-‐go Analysis Stage Runway Backstage Implementation Conclusion Brand Saliency # 02 out of 107 oueits Network Effect New Retail Channel Increased purchase frequency • Average of 220 friends • Photo album likely to buy 40% more • Newsfeed (and no>fica>ons) • Wall Larger purchase sizes post 20% higher expenditure My Buy it. Wardrobe Keep it. Case study: Source: Informa>onWeek
- 47. H&M: Project Runway Managing Set the Stage Strut the Runway Backstage
- 48. Backstage – Make it Happen Analysis Stage Runway Backstage Implementation Conclusion Limiting Agents 1 Cost of Production 2 Speed to Market 3 Human Resources
- 49. Backstage – Reducing Costs Analysis Stage Runway Backstage Implementation Conclusion (1) Soaring Cotton Prices Source: International Monetary Fund
- 50. Backstage – Reducing Costs Analysis Stage Runway Backstage Implementation Conclusion (2) Rising Cost of Production in China Labor Cost Rental Cost Other Fixed Cost Affordable Fashion?
- 51. Backstage – Reducing Costs Analysis Stage Runway Backstage Implementation Conclusion NhonTrach Industrial Park, Dong Nai Province • Established Textile Cluster • Heavy FDI Investments • Developed infrastructure • Proximity to Saigon • Proximity to Ports
- 52. Backstage – Increasing Speed to Market Analysis Stage Runway Backstage Implementation Conclusion NhonTrach as production base for Asia Pacific • entralised Production C • Shipping cost offset by production cost savings • Boosts speed to market
- 53. Backstage – Increasing Speed to Market Analysis Stage Runway Backstage Implementation Conclusion NhonTrach as production base for Asia Pacific • entralised Production C • Shipping cost offset by production cost savings • Boosts speed to market
- 54. Backstage – Overcoming Manpower Constraints Analysis Stage Runway Backstage Implementation Conclusion Salespersons Need to keep up with rapid expansion of physical stores 1 2 ↑ Number of ↑ Revenue / Salespersons Salesperson Managers Management Associate Programs • Targets Business students • Accelerated program, job rotations, international experience
- 55. Financials Analysis Stage Runway Backstage Implementation Conclusion Assumptions WACC of 11.2% Base growth rate of Sales Revenue (without Runway) at12% per annum COGS at 30% of Sales Revenue in 2011, decreases by 0.5% per annum until 2016, constant thereafter Selling expenses at 34% of Sales Revenue in 2011, 35% in 2012~14, decrease by 0.5% per annum until 33%, constant thereafter Aggregated Group tax rate of 25.3% Straight-line depreciation of capital expenditures over 5 years
- 56. Financials Analysis Stage Runway Backstage Implementation Conclusion SEK 23.5 Billion Incremental Profit in 2021 Break-even in 5 Years
- 57. Financials Analysis Stage Runway Backstage Implementation Conclusion Worst Case Base Case Best Case SEK 28.4 Billion SEK 35.4 Billion SEK 44.3 Billion
- 58. Implementa+on Timeline Analysis Stage Runway Backstage Implementation Conclusion Project Runway 2011 2012 2013 2014 2015 Set. Stage 1. Pilot H&M Man project in Shanghai and Beijing 1 Pilot Interna>onal roll out 2. Increase accessories 2 market
- 59. Implementa+on Timeline Analysis Stage Runway Backstage Implementation Conclusion Project Runway 2011 2012 2013 2014 2015 Set. Stage 1. Pilot H&M Man project in Shanghai and Beijing 1 Interna>onal roll out 2. Increase accessories 2 market 3 Interna>onal expansion with a focus in Asia Pacific Strut . Runway 1. Geographic expansion 4 2. H&M applica>on
- 60. Implementa+on Timeline Analysis Stage Runway Backstage Implementation Conclusion Project Runway 2011 2012 2013 2014 2015 Set. Stage 1. Pilot H&M Man project in Shanghai and Beijing 1 Interna>onal roll out 2. Increase accessories 2 market 3 Interna>onal expansion with a focus in Asia Pacific Strut . Runway 4 Develop 1. Geographic expansion 2. H&M applica>on Support functions ongoing through fiscal Manage. Backstage years 1. Suppliers 2. Strengthen HR
- 61. Conclusion Analysis Stage Runway Backstage Implementation Conclusion Sustainable growth with High Impact strategic Objec+ve ini>a>ves whilst keeping things Simple Priori>zing Recrui>ng and Cri+cal Issues Managing costs growth op>ons retaining talents Recommenda+on Set. Stage Strut. Runway Backstage Sustainable Benefits High Impact Simple growth
- 62. Conclusion Analysis Stage Runway Backstage Implementation Conclusion Sustainable growth with High Impact strategic Objec+ve ini>a>ves whilst keeping things Simple Priori>zing Recrui>ng and Cri+cal Issues Managing costs growth op>ons retaining talents Recommenda+on Set. Stage Strut. Runway Backstage Benefits NPV: 35.4bn SEK over 10 year
- 63. H&M: Bolder.Bigger. Be8er Caroline Ng Candice Lim Peh Che Min Tobias Chen F . O . C . A . L
- 64. Complementary Slides Caroline Ng Candice Lim Peh Che Min Tobias Chen F . O . C . A . L
- 65. Financials Analysis Stage Runway Backstage Implementation Conclusion
- 66. Financials Analysis Stage Runway Backstage Implementation Conclusion
- 67. Jus+fica+on for Addi+onal 1.6% CAGR Analysis Stage Runway Backstage Implementation Conclusion Equivalent of 1.6% of Sales Revenue in 2011
- 68. Prioritizing Options for Growth • ncrease sales per square feet I • Scheduling to maximize impact Op+on 1: -‐ Fashion credibility (Guest designers) • Revenue contribu>ons unjus>fied Day to day -‐ DifferenCaCon -‐ Cost effecCve performance -‐ Untapped segments • ncrease store traffic I -‐Revenues -‐ Brand visibility • onstant ‘fresh’ image C • 4/7 Shopping 2 • ntegra>on of online channel I Op+on 2: • reater reach to target segment G • evenue contribu>ons unknown R Online Channel • ost effec>ve C • ack points of differen>a>on L • hanging lifestyle C • iral marke>ng V • iversifica>on D • ack understanding of foreign markets L Op+on 3: • ncrease revenues fast I • ight >ming to enter emerging markets R Geographic Expansion • ncrease brand visibility I important • ompe>>ve pressures to move fast C • onstrained by resources C • ew collabora>ons with local designers N • iversifica>on D • ncompa>ble with brand image I Op+on 4: • ncrease revenue streams in lucra>ve market I • igh risks involved H Product Category (LT) • everage on exis>ng suppliers L • upply chain complexity S • uild H&M lifestyle concept B • preading resources too thin S • evenue contribu>on unjus>fied R • iversifica>on D • igh risks involved, H Op+on 5: • apture apparel market segments C • o economies of scale N Brand Expansion (LT) • rowth Poten>al G • ncrease complexity; resource constraints I • annibaliza>on C • ffect group culture A
- 69. Geographic Expansion: Where first? Variables Western Eastern North South MENA Asia Pacific Europe Europe America America Market Size US$379bn US$64bn US$352bn US$88.3bn US41.5bn China: US (Russia: 43.8bn) (Brazil: 43% of total US: US$329bn volume sales and $169bn nearly 55% of value Japan: US sales in 2008 – lower end market) $134bn Australasia: US$11bn Growth 2.4% 8.9% 4.7% 4% 12% 9% Poten+al (Exp increase) 5.1% (Male) Ease of • Easy • Rela>vely • Easy • Difficult • Difficult • Rela>vely Entry • Familiar easy • Unfamiliar • Unfamiliar easy market • Familiar market market • Familiar market • Sensi>ve market (P) Compe++on • Mature • Emerging • Mature • Emerging • Emerging • Emerging Note: Clustering is market market market market market market good • Stable • Intense • Stable • Intense • Less • Intense compe>>on compe>>on compe>>on Posi+ve -‐ve +ve (Russia) +ve +ve -‐ve +ve Spillovers (Brazil) (Franchise) (Singapore) Total Market Value in 2010: €769.3bn
- 70. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
- 71. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
- 72. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
- 73. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
- 74. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
- 75. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Too risky to increase emphasis on Menswear Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives PILOT TESTING in CHINA Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
- 76. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Recognition Information The Fashion Guest Designers Search Fraternity Evaluation of Lock in loyalty Alternatives Purchase iPhone Application Decision Purchase Evaluation
- 77. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Information The Fashion Fraternity Search To create a comfortable and pleasurable shopping experience - for men only Evaluation of Alternatives Lounge Catalogues Assistance Relaxing and What To Wear Subtle, non- Purchase unintimidating & Fashion intruding atmosphere Tips Decision
- 78. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Information The Fashion Fraternity Search To create a comfortable and pleasurable shopping experience - for men only Evaluation of Alternatives Lounge Catalogues Assistance Purchase Decision
- 79. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Information Guest Designers Search sales per customer x no. of customers Evaluation of Caters to both Alternatives Global Prestige genders Fred Perry Purchase Decision Tom Ford
- 80. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Information Shi shangyizhu Search To create a comfortable and pleasurable shopping experience - for men only Evaluation of Alternatives Lounge Catalogues Assistance Purchase Decision
- 81. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Information Shi shangyizhu Search To create a comfortable and pleasurable shopping experience - for men only Evaluation of Alternatives Lounge Catalogues Assistance Purchase Decision
- 82. SeAng the Stage – H&M MEN Analysis Stage Runway Backstage Implementation Conclusion Information iPhone Application Search sales per customer x no. of customers Evaluation of Alternatives Sales channel Fashion advice Purchase Decision
- 83. Back-‐up Slides
- 84. Why men category? • igh CAGR H • ncreasing market share I • ncreasing acceptance I • ncreasing affluence I • ncreasing need to look good and I trendy • o strong focus at the moment N • hina/India: Dominant market C • xperien>al E • es>ng area:male shopping habits r
- 85. Why not the franchising model? 1.Interna>onal brands in China are losing control and ability to monitor channels 2. Franchisee has the tendency to offer huge discounts when inventory builds up 3. Lack of compliance with brand building ac>vi>es to save money 4. Franchisee do not see brand building as part of their responsibility 5. No feedback loop on job informa>on, supply and sales rebate
- 86. Suits: Jul – Jan (Summer sales) Public holiday: Demand will spike 25 – 45 years old economic basis + strong pref for brand – 300,000,000 first >er ci>es – spill over to second >er ci>es 3rd >ers and 4th >ers are also upcoming shopping is a leisure and past >me…switch shops less ouen community malls are doing bever price focus to value driven
- 87. Why not verticalization? 1.Interna>onal brands in China are losing control and ability to monitor channels 2. Franchisee has the tendency to offer huge discounts when inventory builds up 3. Lack of compliance with brand building ac>vi>es to save money 4. Franchisee do not see brand building as part of their responsibility 5. No feedback loop on job informa>on, supply and sales rebate
- 88. Why not acquire? 1. Lack of exper>se 2. H&M is a growing business 3. Risk of cannibaliza>on 4. Risk of spreading one’s resources too thin 5. Unable to support too many brands
- 89. Why not Integrate? 1. Lack of exper>se 2. H&M is a growing business 3. Risk of cannibaliza>on 4. Risk of spreading one’s resources too thin 5. Unable to support too many brands
- 90. Value Proposi+on Analysis Stage Runway Backstage Implementation Conclusion Sustainable growth with High Impact strategic Objec+ve ini>a>ves whilst keeping things Simple Priori>zing Recrui>ng and Cri+cal Issues Managing costs growth op>ons retaining talents Recommenda+on Set. Stage Strut. Runway Backstage
- 91. • Wet Seal Shows The Way • Are you slowly, cau+ously sor+ng out how to engage with your customers in social networks? By Chris Murphy , Informa+onWeek September 25, 2010 12:00 AM • Are you slowly, cau>ously sor>ng out how to engage with your customers in social networks? Well, if your customers are teenage girls, and 72% of them are on Facebook and 36% of them have a smartphone, you don't have the luxury of taking your sweet >me.That's why teen-‐girls' clothing retailer Wet Seal is among those blazing a trail in marke>ng with Facebook. One lesson it's learned is that girls want to do different things on each medium. They use Wet Seal's site to create oueits-‐-‐500,000 of them-‐-‐but they prefer to share oueits with friends using Facebook. Girls don't use their iPhones much to post content, but they viewed 750,000 oueits a week on the retailer's iPhone app in the back-‐to-‐school season. Here are some hard results Wet Seal has seen with its integrated Web, social networking, and iPhone strategy: • Girls using the oueit tool are 40% more likely to buy, and they spend 20% more.Girls using a "Shop With Friend" feature, accessed through Facebook or the site, have a 2.5 >mes higher conversion rate. • Facebook is now the largest marke>ng base for store traffic, thanks to coupons and campaigns, and one of the biggest drivers of traffic to Wet Seal's Web site.Facebook also is a gold mine for the customer-‐support team. "It's one of the primary tools they use to know if there are problems out there," says Wet Seal development director Shawn Keim. Wet Seal doesn't erase complaints but tries to resolve problems with comments on Facebook, so people see issues gezng taken care of.
- 92. Smartphone penetra+on The current • 91% of all US consumers own H&M applica+on and use a mobile device • 1.8 billion smart-‐phones in use Basic features globally by 2013 • D, sta>c photo 2 M-‐shopping takeup • 8% of smartphone users say 4 Limited geographic reach they have already, or soon will, do mobile shopping • nly works when near certain O H&M stores Poten+al in mobile • Mobile marke>ng spend will top USD 1 billion in 2011 Source: Forrester Research, ABI Research, Modus Associates
- 93. Taobao Mall • Levi’s is the latest interna>onal brand to set up an online shop in China. Well, that is made possible through Alibaba Group’s Taobao Mall. It’s a wise choice as Taobao is China’s largest retail website with more than 370 million users and receives over 50 million unique visitors each day.In Levi’s new online store, users are spoilt for choice with over 200 Levi’s products to choose from. On top of that, Levi’s will also introduce exclusive online-‐only styles on Taobao, a bonus to keep users coming back.Despite in early stage, Levis’s effort seems to be paying off well. Several thousands pair of jeans were already sold online, according to Taobao’s sta>s>cs. Apparently, Levi’s isn’t the only brand that has entered China’s online market through Taobao.“UNIQLO, Adidas, Procter and Gamble, L’Oreal Paris, Lenovo, Li Ning and Revlon have all launched official online retail storefronts on Taobao Mall as part of their e-‐commerce strategy,” a Taobao spokeswoman told Penn Olson.“For corporate retailers, Taobao Mall offers the infrastructure for complete management of their own brand and online retail channel while providing access to consumers situated in second and third >er regions across China in addi>on to urban centers such as Shanghai and Beijing,” she added.Business-‐to-‐consumer (B2C) ecommerce is booming in China. Last quarter, China hit a new high with a total of 64 million B2C orders. Without a doubt, a large number of orders comes from Taobao. If you’re a retailer and looking to capture the Chinese market, Taobao seems like a good place.
- 95. 1) Eastern Europe & Asia Pacific 2) Grow by 10-‐15% new stores (220-‐330 stores in following 12 mths)
- 96. Eastern Europe
- 97. Back-‐up: Zara opera>onal efficiency
- 98. 2010 Expansion Region No of new % of total new stores stores Western Europe 151 62.1% Eastern Europe 29 11.9% Asia-‐Pacific 26 10.3% Middle East and 15 Africa 6.2% North America 22 9.1%
- 99. Variables Western Eastern North South MENA Asia Pacific Europe Europe America America Market Size US$379bn US$64bn US$352bn US$88.3bn US41.5bn China: US (Russia: 43.8bn) (Brazil: 43% of total US: US$329bn volume sales and $169bn nearly 55% of value Japan: US sales in 2008 – lower end market) $134bn Australasia: US$11bn Growth 2.4% 8.9% 4.7% 4% 12% 9% Poten+al (Exp increase) 5.1% (Male) Ease of • Easy • Rela>vely • Easy • Difficult • Difficult • Rela>vely Entry • Familiar easy • Unfamiliar • Unfamiliar easy market • Familiar market market • Familiar market • Sensi>ve market (P) Compe++on • Mature • Emerging • Mature • Emerging • Emerging • Emerging Note: Clustering is market market market market market market good • Stable • Intense • Stable • Intense • Less • Intense compe>>on compe>>on compe>>on Posi+ve -‐ve +ve (Russia) +ve +ve -‐ve +ve Spillovers (Brazil) (Franchise (Singapore -‐ model) SEA) Total Market Value in 2010: €769.3bn
- 100. M-‐commerce a complementary revenue stream • 5th: mul+-‐channel • build integrated mul>-‐channel plaeorms (addressing customers via different plaeorms and integra>ng them) call centers, web & mobile, direct, other, catalog, print/mail, TV, stores. • Customers touched by numerous channels will spend more with the retailer: Average annual spend (USD): 260 -‐> 660 -‐> 1,620 from single channel -‐> dual channel -‐> tri-‐channel (store, catalog, internet) also creates more loyal customers • push into online – e-‐/m-‐commerce • “Apparel, accessories and footwear” is biggest category in online sales, and is expected to con>nue to grow at high rates (2009-‐2013 CAGR: 11%, forecasted online sales for USA, $40.3 bn in 2013) • challenge for fashion industry – need to define equilibrium between brand and commercial objec>ves
- 101. Where to expand in 2011 Growth Posi>ve Emerging markets Market Size Ease of Entry Poten>al Compe>>on Spillovers Asia-‐Pacific Middle East & Africa Eastern Europe Franchise to MEA South America Cultural and legal constraints Favorable Unfavorable
- 102. Where to expand in 2011 Growth Posi>ve Emerging markets Market Size Ease of Entry Poten>al Compe>>on Spillovers Asia-‐Pacific Move to medium run – Middle East & Africa 1. compe>>on is intense 2.unfamiliar market Eastern Europe South America Favorable Unfavorable
- 103. Eastern Europe: mid-‐price on the rise Value Proposi>on Focus Forge Implementa>on Conclusion Timely opportunity • Economic crisis • Increased demand for middle-‐ market Geographical proximity • Manufacturers in Turkey, Morocco and Bangladesh • Headquarters in Stockholm
- 104. Variables Western Eastern North South MENA Asia Pacific Europe Europe America America Market Size US$379bn US$64bn US$352bn US$88.3bn US41.5bn China: US (Russia: 43.8bn) (Brazil: 43% of total US: US$329bn volume sales and $169bn nearly 55% of value Japan: US sales in 2008 – lower end market) $134bn Australasia: US$11bn Growth 2.4% 8.9% 4.7% 4% 12% 9% Poten+al (Exp increase) 5.1% (Male) Ease of • Easy • Rela>vely • Easy • Difficult • Difficult • Rela>vely Entry • Familiar easy • Unfamiliar • Unfamiliar easy market • Familiar market market • Familiar market • Sensi>ve market (P) Compe++on • Mature • Emerging • Mature • Emerging • Emerging • Emerging Note: Clustering is market market market market market market good • Stable • Intense • Stable • Intense • Less • Intense compe>>on compe>>on compe>>on Posi+ve -‐ve +ve (Russia) +ve +ve -‐ve +ve Spillovers (Brazil) (Franchise (Singapore -‐ model) SEA) Total Market Value in 2010: €769.3bn
- 105. Defining the Tiers First-‐Tier Ci+es Four municipali>es: Beijing, Chongqing, Shanghai, Tianjin Ci>es with total retail sales of more than RMB30bn, annual per capita income of RMB11,000 and high per capita retail sales as propor>on of income: 10 provincial capitals: Changchun (Jilin), Chengdu (Sichuan), Guangzhou (Guangdong), Hangzhou (Zhejiang), Harbin (Heilongjiang), Jinan (Shandong) Nanjing, (Jiangsu), Shenyang (Liaoning), Wuhan (Hubei), Xi’an (Shaanxi) Four leading ci>es: Dalian, Qingdao, Shenzhen, Xiamen Second-‐Tier Ci+es 17 provincial capitals: Changsha (Hunan), Fuzhou (Fujian), Guiyang (Guizhou), Haikou (Hainan), Hefei (Anhui), Hohhot (Inner Mongolia), Kunming (Yunnan), Lanzhou (Gansu), Lhasa (Tibet), Nanchang (Jiangxi), Nanning (Guangxi), Shijiazhuang (Hebei), Taiyuan (Shanxi), Urumqi (Xinjiang), Xining (Qinghai), Yinchuan (Ningxia), Zhengzhou (Henan) 50 prefecture-‐level ci>es, including, Ningbo, Suzhou, Wuxi, Wenzhou, Nantong, Dongguan, Zhanjiang 15 more ci>es with popula>ons of between 500,000 and 2mn Third-‐Tier Ci+es Approximately 200 county-‐level ci>es Fourth-‐Tier Ci+es Approximately 400 capitals of county towns Source: Ogilvy