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Presentation by National University of Singapore - Winners of CBS Case Competition 2011. Congratulations to Caroline Ng, Candice Lim, Peh Che Min, and Tobias Chen. Presented at the Finals March 4, 2011. This presentation form part of CBS Case Competition. Views, opinions and suggestions expressed in these presentations are the sole work of the case study writers, and are not neccessarily shared by H&M Visit www.casecompetition.com to see more.
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Caroline Ng Candice Lim Peh Che Min Tobias Chen
F . O . C . A . L
H&M: Bolder.Bigger. Be8er
H&M’S Identity: Our winning proposition Analysis Stage Implementation Conclusion Runway Backstage
Winning Proposition
Affordable Chic Fast Fashion Inclusive
Objec+ve
1. “Sustainable growth with High Impact strategic initiatives whilst keeping things Simple”
2. 10-15% growth in number of stores per year
Challenges Ahead Analysis Stage Implementation Conclusion Runway Backstage
Stagnating growth in Europe
Diverse consumer preferences
Intense Competition
Increase in raw material prices
Talent attraction & retention
Challenges
1
2
4
5
3
Key Issues 1. Prioritizing growth options
2. Maximizing shareholder’s value
3. Managing cost to support growth
Criteria to evaluate growth options Analysis Stage Implementation Conclusion Runway Backstage
Degree of Complexity
High Impact (x2)
Growth Potential
Competition
• Simple • Congruent with core business & expertise
• Cost effective
• Sales • Impact on brand • Expertise
• Future potential • Scalability • Cost-benefit analysis
• Similarity • Clustering effect • Economies of scale
Evaluating Growth Opportunities Analysis Stage Implementation Conclusion Runway Backstage
Growth Options Degree of Complexity
High Impact (x2)
Growth Potential
Competition
Favorable Unfavorable
Improve day to day performance
Expand online channels
Geographic expansion
Expand product category (Home)
Brand Expansion
Recommendations:Project Runway Analysis Stage Implementation Conclusion Runway Backstage
Set the Stage Strut the Runway Managing Backstage
1. Increase no. of customers
- Focus on male segment
2. Increase sales per customer
- Increase accessories segment
1. Geographic Expansion
-Asia Pacific
2. Online Channel -Advertise on
‘taobao’ - H&M online
wardrobe
1. Secure new suppliers
-South East Asia
2. H&M’s talents - Increase efficiency
of sales people - Management
associate programme
Recommendations: Project Runway Analysis Stage Implementation Conclusion Runway Backstage
Set the Stage Strut the Runway Managing Backstage
1. Increase no. of customers
- Focus on male segment
2. Increase sales per customer
- Increase accessories segment
1. Geographic Expansion
-Asia Pacific
2. Online Channel - Store on Taobao
Mall - H&M online
wardrobe iphone app
1. Secure new suppliers
-South East Asia
2. H&M’s talents - Increase efficiency
of sales people - Management
associate programme
Recommendations: Project Runway Analysis Stage Implementation Conclusion Runway Backstage
Set the Stage Strut the Runway Managing Backstage
1. Increase no. of customers
- Focus on male segment
2. Increase sales per customer
- Increase accessories segment
1. Geographic Expansion
-Asia Pacific
2. Online Channel -Advertise on
‘taobao’ - H&M online
wardrobe
1. Secure new suppliers
-South East Asia
2. H&M’s talents - Increase efficiency
of sales people - Management
associate programme
H&M: Project Runway
Set the Stage Strut the Runway Managing Backstage
Backstage – Make it Happen Analysis Stage Implementation Conclusion Runway Backstage
Increase number of customers
Increase sales per customer
Grow existing segments
Backstage – Make it Happen Analysis Stage Implementation Conclusion Runway Backstage
H&M MEN
1. The Fashion Fraternity
2. Guest Designers
CAGR: 3% (2005-2010) Market Value 322.3Bn USD
H&M ACCESSORIES
1. Greater Variety of Designs
2. Integration with Apparel
CAGR: 4.6% (2010 Inc.)
Increase number of customers
Increase sales per customer
SeAng the Stage – H&M MEN Analysis Stage Implementation Conclusion Runway Backstage
Purchasing Behaviour Process
Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Purchase Evaluation
Look Good
Online Self- reliant
Creatures of Habit Comfort, Price, Quality
Brick & Mortar Rationalization
Less reliance on information sharing
H&M’s Men Accessories 1 2
SeAng the Stage – H&M MEN Analysis Stage Implementation Conclusion Runway Backstage
Purchasing Behaviour Process
Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Purchase Evaluation
Look Good
Online Self- reliant
Creatures of Habit Comfort, Price, Quality
Brick & Mortar Rationalization
Less reliance on information sharing
H&M’s Men Accessories 1 2
Increase advertising to
men
Cater personal space for men
Male consumer preferences
1 2 3
Financial risks Market Size Acceptance
Pilot Testing: Flagship stores in Beijing & Shanghai
SeAng the Stage – H&M MEN Analysis Stage Implementation Conclusion Runway Backstage
H&M’s Men Accessories 1 2
Information Search
Personal Space
The Fashion Fraternity ‘时尚一族’
Internet/Mobile: Chinese forums
Shanghai & Beijing
SeAng the Stage – H&M MEN Analysis Stage Implementation Conclusion Runway Backstage
H&M’s Men Accessories 1 2
Information Search
Personal Space
The Fashion Fraternity ‘时尚一族’
Internet/Mobile: Chinese forums
Shanghai & Beijing
Newly Affluent middle class
Trendy males seeking fashion tips
SeAng the Stage – H&M MEN Analysis Stage Implementation Conclusion Runway Backstage
H&M’s Men Accessories 1 2
Information Search
Personal Space
The Fashion Fraternity ‘时尚一族’
Internet/Mobile: Chinese forums
Shanghai & Beijing
Baidu: Year 2010 • China: 64.02 billion queries
• WAP and PDA based mobile search
• Exclusive forums for males – ‘男人吧’
SeAng the Stage – H&M MEN Analysis Stage Implementation Conclusion Runway Backstage
H&M’s Men Accessories 1 2
Information Search
Personal Space
Brick & Mortar
Beijing Shanghai
Personal Lounge
Music Entertain (Fuᶔball)/ Magazines
Key Takeaways 1. Pilot market in Shanghai & Beijing – 12 months
2. Interna>onal roll-‐out of improved H&M man in year 2012 3. Target 60 stores by Year 2013
SeAng the Stage – H&M MEN Analysis Stage Implementation Conclusion Runway Backstage
H&M’s Men Accessories 1 2
H&M ACCESSORIES
HELPING YOU FIND…
SeAng the Stage – H&M MEN Analysis Stage Implementation Conclusion Runway Backstage
H&M’s Men Accessories 1 2
Sales /sqm
0.5% to Grp revenues
H&M ACCESSORIES
SeAng the Stage – H&M MEN Analysis Stage Implementation Conclusion Runway Backstage
H&M’s Men Accessories 1 2
Integrating accessories with apparel
Do it your way
SeAng the Stage – H&M MEN Analysis Stage Implementation Conclusion Runway Backstage
H&M’s Men Accessories 1 2
Integrating accessories with apparel
Trend, Modern, Classic, Everyday Mamma, Divided, & denim, L.U.G.G
H&M: Project Runway
Set the Stage Strut the Runway Managing Backstage
Strengthen exis+ng forts while expanding new markets
250 new stores in 2011
Aggressive pursuit of Asia-‐Pacific
Increase dominance in W Europe and N America
Analysis Stage Implementation Conclusion Runway Backstage
Untapped markets
Asia-‐Pacific
Middle East & Africa
Eastern Europe
South America
Market Size Ease of Entry Growth Poten>al
Compe>>on
Favorable Unfavorable
Iden+fying KEY new markets
Posi>ve Spillovers
Analysis Stage Implementation Conclusion Runway Backstage
Emerging markets
Asia-‐Pacific
Middle East & Africa
Eastern Europe
South America
Market Size Ease of Entry Growth Poten>al
Compe>>on
Favorable Unfavorable
Where to expand in 2011
Posi>ve Spillovers
High sales
High CAGR
Dominant Chinese market
Ranked 3rd in value sales behind North America and Europe
CAGR of 13% from 2010-‐2013E
71% of total Asiapac sales
Source: Euromonitor
Analysis Stage Implementation Conclusion Runway Backstage
Emerging markets
Asia-‐Pacific
Middle East & Africa
Eastern Europe
South America
Market Size Ease of Entry Growth Poten>al
Compe>>on
Favorable Unfavorable
Where to expand in 2011
Posi>ve Spillovers
Aggressive greenfield expansion – large poten>al, large growth
Franchise mode – cultural and legal constraints
Sizeable market near H&M stronghold
Lucra>ve market to enter in the future
Analysis Stage Implementation Conclusion Runway Backstage
Strengthen exis+ng forts while expanding new markets
Asia-‐Pacific: 25%
Eastern Europe: 10%
MENA: 10%
N America: 15%
250 new stores in 2011
Western Europe: 45%
S America
Analysis Stage Implementation Conclusion Runway Backstage
Asiapac: Focus on China
Southeast Asia
Source: Euromonitor
Singapore, Indonesia, Malaysia
North Asia
China, Japan, South Korea, Taiwan
1
2
Analysis Stage Implementation Conclusion Runway Backstage
Much poten+al for growth in China
169
71.252
0 50 100 150 200
China
Germany
CF Market Share (USD billions) in 2009
Large poten+al for growth in
Chinese market
Source: Euromonitor, H&M
Analysis Stage Implementation Conclusion Runway Backstage
Domina+ng the Chinese stage
Source: H&M
42 stores, concentrated in Eastern China
Analysis Stage Implementation Conclusion Runway Backstage
Domina+ng the Chinese stage
4.5% popula>on 4% of GDP
44.5% popula>on 32% of GDP
51% popula>on 64% of GDP
42 stores, concentrated in Eastern China
Source: Ogilvy
Analysis Stage Implementation Conclusion Runway Backstage
Opportuni+es for growth in 2nd and 3rd +er ci+es
42 stores, concentrated in Eastern China
Source: Ogilvy
Rapidly emerging middle class in 2nd and 3rd >er ci>es
Analysis Stage Implementation Conclusion Runway Backstage
Effec+ve way to reach out to Chinese masses
Source: Ogilvy
Analysis Stage Implementation Conclusion Runway Backstage
Leveraging on the Chinese e-‐commerce trend Analysis Stage Implementation Conclusion Runway Backstage
Efficient expansion via Taobao.com
• 370 million users • 50 million unique visitors daily
• Low capital investment • Aggregated distribu>on centers
Cri+cal mass
Efficient expansion
Analysis Stage Implementation Conclusion Runway Backstage
Efficient expansion via Taobao.com
Cri+cal mass
Efficient expansion
UNIQLO SUCCESS STORY • 2 million RMB sales daily • Exceeded retail store sales in just 4 days
Analysis Stage Implementation Conclusion Runway Backstage
H&M on Taobao Mall
潮流指标
Analysis Stage Implementation Conclusion Runway Backstage
Maximising the m-‐commerce plaform
The current H&M applica+on
Source: Forrester Research, ABI Research, Modus Associates
Basic features
Limited geographic
reach
The poten+al In m-‐commerce
Smartphone penetra+on
Poten+al in mobile
M-‐shopping takeup
Analysis Stage Implementation Conclusion Runway Backstage
Maximising the m-‐commerce plaform
The current H&M applica+on
Basic features
Limited geographic
reach
The poten+al inm-‐commerce
Analysis Stage Implementation Conclusion Runway Backstage
My Wardrobe
H&M: cheap chic, 24/7, everywhere
My Wardrobe
New Retail Channel
Network Effect
Brand Saliency
Analysis Stage Implementation Conclusion Runway Backstage
Increasing visibility 24/7, on-‐the-‐go
My Wardrobe
Brand Saliency
New Retail Channel
Network Effect
• Create your oueit using H&M Catalogue items • May also use your personal items
Analysis Stage Implementation Conclusion Runway Backstage
Increasing visibility 24/7, on-‐the-‐go
Brand Saliency
New Retail Channel
Network Effect
My Wardrobe
# 02 out of 107 oueits
Buy it. Keep it.
• Create your oueit using H&M Catalogue items • May also use your personal items
Analysis Stage Implementation Conclusion Runway Backstage
Increasing visibility 24/7, on-‐the-‐go
Brand Saliency
New Retail Channel
Network Effect
My Wardrobe
# 02 out of 107 oueits
Buy it. Keep it.
Analysis Stage Implementation Conclusion Runway Backstage
Leveraging on network effects
My Wardrobe
# 02 out of 107 oueits
Buy it. Keep it.
New Retail Channel
Network Effect
Brand Saliency
• Average of 220 friends • Photo album • Newsfeed (and no>fica>ons) • Wall post
Analysis Stage Implementation Conclusion Runway Backstage
Complementary revenue stream
My Wardrobe
# 02 out of 107 oueits
Buy it. Keep it.
Network Effect
New Retail Channel
Brand Saliency
Source: BCG
Average of 150% increase in sales voume
Analysis Stage Implementation Conclusion Runway Backstage
40% more likely to buy
20% higher expenditure My Wardrobe
# 02 out of 107 oueits
Buy it. Keep it.
Increasing visibility 24/7, on-‐the-‐go
Network Effect
New Retail Channel
Brand Saliency
• Average of 220 friends • Photo album • Newsfeed (and no>fica>ons) • Wall post
40% more likely to buy
20% higher expenditure
Increased purchase frequency
Source: Informa>onWeek
Larger purchase sizes
Case study:
Analysis Stage Implementation Conclusion Runway Backstage
H&M: Project Runway
Set the Stage Strut the Runway Managing Backstage
Backstage – Make it Happen Analysis Stage Implementation Conclusion Runway Backstage
Limiting Agents
Cost of Production
Speed to Market
Human Resources
1
2
3
Backstage – Reducing Costs Analysis Stage Implementation Conclusion Runway Backstage
(1) Soaring Cotton Prices
Source: International Monetary Fund
Backstage – Reducing Costs Analysis Stage Implementation Conclusion Runway Backstage
(2) Rising Cost of Production in China
Labor Cost
Rental Cost
Other Fixed Cost
Affordable Fashion?
Backstage – Reducing Costs Analysis Stage Implementation Conclusion Runway Backstage
NhonTrach Industrial Park, Dong Nai Province
• Established Textile Cluster • Heavy FDI Investments • Developed infrastructure • Proximity to Saigon • Proximity to Ports
Analysis Stage Implementation Conclusion Runway Backstage
NhonTrach as production base for Asia Pacific
• Centralised Production • Shipping cost offset by production cost savings • Boosts speed to market
Backstage – Increasing Speed to Market
Analysis Stage Implementation Conclusion Runway Backstage
NhonTrach as production base for Asia Pacific
• Centralised Production • Shipping cost offset by production cost savings • Boosts speed to market
Backstage – Increasing Speed to Market
Backstage – Overcoming Manpower Constraints Analysis Stage Implementation Conclusion Runway Backstage
Salespersons
Need to keep up with rapid expansion of physical stores
↑ Number of Salespersons
1 ↑ Revenue / Salesperson
2
Managers
Management Associate Programs • Targets Business students • Accelerated program, job rotations,
international experience
Financials Analysis Stage Implementation Conclusion Runway Backstage
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
Financials Analysis Stage Implementation Conclusion Runway Backstage
SEK 23.5 Billion Incremental Profit in 2021
Break-even in 5 Years
Financials Analysis Stage Implementation Conclusion Runway Backstage
Worst Case Base Case Best Case
SEK 28.4 Billion SEK 35.4 Billion SEK 44.3 Billion
Implementa+on Timeline Analysis Stage Implementation Conclusion Runway Backstage
Project Runway 2011 2013 2012 2014 2015
Pilot 1
2
Interna>onal roll out
Set. Stage 1. Pilot H&M Man project
in Shanghai and Beijing 2. Increase accessories
market
Implementa+on Timeline Analysis Stage Implementation Conclusion Runway Backstage
3
4
Interna>onal expansion with a focus in Asia Pacific
1
2
Project Runway 2011 2013 2012 2014 2015
Set. Stage 1. Pilot H&M Man project
in Shanghai and Beijing 2. Increase accessories
market
Strut . Runway 1. Geographic expansion 2. H&M applica>on
Interna>onal roll out
Implementa+on Timeline Analysis Stage Implementation Conclusion Runway Backstage
3
4
Interna>onal expansion with a focus in Asia Pacific
Develop
1
2
Project Runway
Set. Stage 1. Pilot H&M Man project
in Shanghai and Beijing 2. Increase accessories
market
Strut . Runway 1. Geographic expansion 2. H&M applica>on
2011 2013 2012 2014 2015
Manage. Backstage
1. Suppliers 2. Strengthen HR
Support functions ongoing through fiscal years
Interna>onal roll out
Conclusion
Priori>zing growth op>ons
Sustainable growth with High Impact strategic ini>a>ves whilst keeping things Simple
Cri+cal Issues
Objec+ve
Managing costs Recrui>ng and retaining talents
Analysis Stage Implementation Conclusion Runway Backstage
Set. Stage Recommenda+on Strut. Runway Backstage
Benefits Sustainable growth
High Impact Simple
Conclusion
Priori>zing growth op>ons
Sustainable growth with High Impact strategic ini>a>ves whilst keeping things Simple
Cri+cal Issues
Objec+ve
Managing costs Recrui>ng and retaining talents
Analysis Stage Implementation Conclusion Runway Backstage
Set. Stage Recommenda+on Strut. Runway Backstage
Benefits NPV: 35.4bn SEK over 10 year
Caroline Ng Candice Lim Peh Che Min Tobias Chen
F . O . C . A . L
H&M: Bolder.Bigger. Be8er
Caroline Ng Candice Lim Peh Che Min Tobias Chen
F . O . C . A . L
Complementary Slides
Financials Analysis Stage Implementation Conclusion Runway Backstage
Financials Analysis Stage Implementation Conclusion Runway Backstage
Jus+fica+on for Addi+onal 1.6% CAGR Analysis Stage Implementation Conclusion Runway Backstage
Equivalent of 1.6% of Sales Revenue in 2011
Prioritizing Options for Growth
Op+on 1: Day to day performance
• Increase sales per square feet -‐ Fashion credibility (Guest designers) -‐ DifferenCaCon -‐ Cost effecCve -‐ Untapped segments
• Increase store traffic -‐Revenues -‐ Brand visibility
• Constant ‘fresh’ image
• Scheduling to maximize impact • Revenue contribu>ons unjus>fied
Op+on 2: Online Channel
• 24/7 Shopping • Greater reach to target segment • Cost effec>ve • Changing lifestyle • Viral marke>ng
• Integra>on of online channel • Revenue contribu>ons unknown • Lack points of differen>a>on
Op+on 3: Geographic Expansion
• Diversifica>on • Increase revenues fast • Increase brand visibility • Compe>>ve pressures to move fast • New collabora>ons with local designers
• Lack understanding of foreign markets • Right >ming to enter emerging markets important • Constrained by resources
Op+on 4: Product Category (LT)
• Diversifica>on • Increase revenue streams in lucra>ve market • Leverage on exis>ng suppliers • Build H&M lifestyle concept
• Incompa>ble with brand image • High risks involved • Supply chain complexity • Spreading resources too thin • Revenue contribu>on unjus>fied
Op+on 5: Brand Expansion (LT)
• Diversifica>on • Capture apparel market segments • Growth Poten>al
• High risks involved, • No economies of scale • Increase complexity; resource constraints • Cannibaliza>on • Affect group culture
Geographic Expansion: Where first? Variables Western
Europe Eastern Europe
North America
South America
MENA Asia Pacific
Market Size US$379bn US$64bn (Russia: 43.8bn)
US$352bn US: US$329bn
US$88.3bn (Brazil: 43% of total volume sales and nearly 55% of value sales in 2008 – lower end market)
US41.5bn China: US$169bn Japan: US$134bn Australasia: US$11bn
Growth Poten+al
2.4% 8.9% 4.7% (Exp increase)
4% 12% 9% 5.1% (Male)
Ease of Entry
• Easy • Familiar market
• Rela>vely easy
• Familiar market
• Easy • Difficult • Unfamiliar market
• Difficult • Unfamiliar market
• Sensi>ve
• Rela>vely easy
• Familiar market (P)
Compe++on Note: Clustering is good
• Mature market
• Stable compe>>on
• Emerging market
• Intense
• Mature market
• Stable compe>>on
• Emerging market
• Intense
• Emerging market
• Less compe>>on
• Emerging market
• Intense
Posi+ve Spillovers
-‐ve +ve (Russia) +ve +ve (Brazil)
-‐ve (Franchise)
+ve (Singapore)
Total Market Value in 2010: €769.3bn
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Purchasing Behaviour Process
Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Purchase Evaluation
Look Good
Online Self- reliant
Creatures of Habit Comfort, Price, Quality
Brick & Mortar Rationalization
Less reliance on information sharing
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Purchasing Behaviour Process
Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Purchase Evaluation
Look Good
Online Self- reliant
Creatures of Habit Comfort, Price, Quality
Brick & Mortar Rationalization
Less reliance on information sharing
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Purchasing Behaviour Process
Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Purchase Evaluation
Look Good
Online Self- reliant
Creatures of Habit Comfort, Price, Quality
Brick & Mortar Rationalization
Less reliance on information sharing
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Purchasing Behaviour Process
Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Purchase Evaluation
Look Good
Online Self- reliant
Creatures of Habit Comfort, Price, Quality
Brick & Mortar Rationalization
Less reliance on information sharing
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Purchasing Behaviour Process
Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Purchase Evaluation
Look Good
Online Self- reliant
Creatures of Habit Comfort, Price, Quality
Brick & Mortar Rationalization
Less reliance on information sharing
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Purchasing Behaviour Process
Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Purchase Evaluation
Look Good
Online Self- reliant
Creatures of Habit Comfort, Price, Quality
Brick & Mortar Rationalization
Less reliance on information sharing
Too risky to increase emphasis on Menswear
PILOT TESTING in CHINA
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Purchasing Behaviour Process
Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Purchase Evaluation
The Fashion Fraternity
Guest Designers
Lock in loyalty
iPhone Application
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Information Search
Evaluation of Alternatives
Purchase Decision
The Fashion Fraternity
To create a comfortable and pleasurable shopping experience - for men only
Lounge Catalogues Assistance
Relaxing and unintimidating atmosphere
What To Wear & Fashion
Tips
Subtle, non- intruding
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Information Search
Evaluation of Alternatives
Purchase Decision
The Fashion Fraternity
To create a comfortable and pleasurable shopping experience - for men only
Lounge Catalogues Assistance
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Information Search
Evaluation of Alternatives
Purchase Decision
Guest Designers
sales per customer x no. of customers
Global Caters to both
genders Prestige
Fred Perry
Tom Ford
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Information Search
Evaluation of Alternatives
Purchase Decision
Shi shangyizhu
To create a comfortable and pleasurable shopping experience - for men only
Lounge Catalogues Assistance
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Information Search
Evaluation of Alternatives
Purchase Decision
Shi shangyizhu
To create a comfortable and pleasurable shopping experience - for men only
Lounge Catalogues Assistance
SeAng the Stage – H&M MEN Implementation Conclusion Runway Backstage Stage Analysis
Information Search
Evaluation of Alternatives
Purchase Decision
iPhone Application
Fashion advice Sales channel
sales per customer x no. of customers
Back-‐up Slides
Why men category?
• High CAGR • Increasing market share • Increasing acceptance • Increasing affluence • Increasing need to look good and trendy
• No strong focus at the moment • China/India: Dominant market • Experien>al • res>ng area:male shopping habits
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
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
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
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
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
Value Proposi+on
Priori>zing growth op>ons
Sustainable growth with High Impact strategic ini>a>ves whilst keeping things Simple
Cri+cal Issues
Objec+ve
Managing costs Recrui>ng and retaining talents
Analysis Stage Implementation Conclusion Runway Backstage
Set. Stage Recommenda+on Strut. Runway Backstage
• 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.
• 91% of all US consumers own and use a mobile device • 1.8 billion smart-‐phones in use globally by 2013
Smartphone penetra+on
• Mobile marke>ng spend will top USD 1 billion in 2011
Poten+al in mobile
• 48% of smartphone users say they have already, or soon will, do mobile shopping
M-‐shopping takeup • 2D, sta>c photo
• Only works when near certain H&M stores
Basic features
Limited geographic reach
The current H&M applica+on
Source: Forrester Research, ABI Research, Modus Associates
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.
1) Eastern Europe & Asia Pacific 2) Grow by 10-‐15% new stores (220-‐330 stores
in following 12 mths)
Eastern Europe
Back-‐up: Zara opera>onal efficiency
2010 Expansion
Region No of new stores
% of total new stores
Western Europe 151 62.1%
Eastern Europe 29 11.9%
Asia-‐Pacific 26 10.3%
Middle East and Africa
15 6.2%
North America 22 9.1%
Variables Western Europe
Eastern Europe
North America
South America
MENA Asia Pacific
Market Size US$379bn US$64bn (Russia: 43.8bn)
US$352bn US: US$329bn
US$88.3bn (Brazil: 43% of total volume sales and nearly 55% of value sales in 2008 – lower end market)
US41.5bn China: US$169bn Japan: US$134bn Australasia: US$11bn
Growth Poten+al
2.4% 8.9% 4.7% (Exp increase)
4% 12% 9% 5.1% (Male)
Ease of Entry
• Easy • Familiar market
• Rela>vely easy
• Familiar market
• Easy • Difficult • Unfamiliar market
• Difficult • Unfamiliar market
• Sensi>ve
• Rela>vely easy
• Familiar market (P)
Compe++on Note: Clustering is good
• Mature market
• Stable compe>>on
• Emerging market
• Intense
• Mature market
• Stable compe>>on
• Emerging market
• Intense
• Emerging market
• Less compe>>on
• Emerging market
• Intense
Posi+ve Spillovers
-‐ve +ve (Russia) +ve +ve (Brazil)
-‐ve (Franchise model)
+ve (Singapore -‐ SEA)
Total Market Value in 2010: €769.3bn
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
Emerging markets
Asia-‐Pacific
Middle East & Africa
Eastern Europe
South America
Market Size Ease of Entry Growth Poten>al
Compe>>on
Favorable Unfavorable
Where to expand in 2011
Posi>ve Spillovers
Franchise to MEA Cultural and legal constraints
Emerging markets
Asia-‐Pacific
Middle East & Africa
Eastern Europe
South America
Market Size Ease of Entry Growth Poten>al
Compe>>on
Favorable Unfavorable
Where to expand in 2011
Posi>ve Spillovers
Move to medium run – 1. compe>>on is intense 2.unfamiliar market
Eastern Europe: mid-‐price on the rise Value Proposi>on Focus Forge Implementa>on Conclusion
• Economic crisis • Increased demand for middle-‐market
Timely opportunity
• Manufacturers in Turkey, Morocco and Bangladesh • Headquarters in Stockholm
Geographical proximity
Variables Western Europe
Eastern Europe
North America
South America
MENA Asia Pacific
Market Size US$379bn US$64bn (Russia: 43.8bn)
US$352bn US: US$329bn
US$88.3bn (Brazil: 43% of total volume sales and nearly 55% of value sales in 2008 – lower end market)
US41.5bn China: US$169bn Japan: US$134bn Australasia: US$11bn
Growth Poten+al
2.4% 8.9% 4.7% (Exp increase)
4% 12% 9% 5.1% (Male)
Ease of Entry
• Easy • Familiar market
• Rela>vely easy
• Familiar market
• Easy • Difficult • Unfamiliar market
• Difficult • Unfamiliar market
• Sensi>ve
• Rela>vely easy
• Familiar market (P)
Compe++on Note: Clustering is good
• Mature market
• Stable compe>>on
• Emerging market
• Intense
• Mature market
• Stable compe>>on
• Emerging market
• Intense
• Emerging market
• Less compe>>on
• Emerging market
• Intense
Posi+ve Spillovers
-‐ve +ve (Russia) +ve +ve (Brazil)
-‐ve (Franchise model)
+ve (Singapore -‐ SEA)
Total Market Value in 2010: €769.3bn
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