H&M's CEO Karl-Johan Persson has admitted the fashion retail brand has "not improved the shopping experience" as quickly as customers expect in 2018.
In a conference call discussing H&M's Q4 2017 results, Persson said that while sales including the VAT amounted to $29.27 billion USD (their biggest drop in quarterly sales), there is a silver lining:
"This was clearly below our own and the market's expectations but...several parts of our business performed well during the year. The H&M Group online sales developed well. The new business portfolio with our newer brands such as COS, Monki, Weekday, and Other Stories, in H&M Home also continued to perform well.
"[P]erformance was weak in many of our large mature markets and this development narrowed the shift in the market from offline to online. And also we have to say that we have not improved the shopping experience as quickly or as rapidly -- as to rapidly increasing customer expectations require"
The Swedish company's turnaround plan includes shutting 170 stores and creating a new brand to sell marked-down clothing, as fewer shoppers visit H&M's physical stores in favour of eCommerce websites.
However some believe H&M's protracted embrace of the digital world is a red flag - a number of investors already selling shares in the company, leading to a 9.1% slump on the Swedish stock exchange this week. Instead of focusing on immediate digital expansion to improve the customer experience, Persson believes assortment of product and getting the physical store right is key:
"We have grown rapidly in the past years, and I believe, we haven't focused well enough on our customers...And this goes mainly for the H&M brand and this we need to change. We must always have the best customer offering for all brands and this, the most important part is our assortment [of] product.
"We also need to improve our physical stores. They need to be more inspiring and more convenient customer experience"
Persson also outlined H&M's digital strategy, saying the company will develop online stores to make shopping "easier and more aspiring" by improving navigation, payments and delivery, as well as investing in new technologies to improve the supply chain such as AI.
But when it comes to execution of these digital plans, Persson says it won't happen overnight:
“We’re working toward it, we believe in what we’re doing, but since we haven’t reached the goal we set this year I don’t want to say we’ll reach them for 2019, 2020"
In the meantime, Persson said they will continue to expand their online presence:
"We are expanding in both new and traditional ways... In 2017, we added another eight online markets, nine including Kuwait via franchise. Today, the H&M brand has e-commerce in 44 markets. In 2018, India will become a new online market for H&M, as well as Saudi Arabia, the United Arab Emirates via franchise. Looking ahead, we will expand online to all markets where we have stores and more markets added to that"
In conclusion the CEO said despite a challenging 2017, and an expectation that they will not reach the prospected growth targets for Q1 2018, there is hope for the business:
"All in all we feel 2017 was a year where we made many step forward and did more groundwork for the future. But we have also made mistakes, which slowed us down and these we are correcting and at the same times we're speeding up our transformation agenda"
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