H&M market Essay
Customers of any age group are able to select suitable products, no matter young or old, men or women. However, the main marketing target is young people between 15 to 30 years old who chase fashion but cannot afford to buy luxury clothes. Based on Fast-Fashion concept, the biggest characteristic is that the time of the whole process including designing, producing, delivering and selling is very short, and all can be done even in only 21 days (Fay & Jobber, 2012). Compared with its competitor, EZRA, although they have similar fashion designs, H&M has lower price of about 30 per cent to 50 per cent than EZRA Figure 1) (Buoy-linen, 2011).
Moreover, it usually cooperates with world famous designers or super stars, such as Karl Laagered in 2004 and Madonna in 2007, to design its products (H&M. com). Product life cycle Product life cycle theory was proposed by Raymond Vernon, a professor of Harvard University, in 1966. Most product life-cycle curves are presented as bell-shaped including four stages: introduction, growth, maturity and decline (figure 2) (Beanies, Fill & Page, 2013). In introduction, when a products is brought to market, sales growth is slow and profits are virtually nil because of heavy
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While the new product is accepted in the market, it could generate improvement of profit in growth. In maturity, the demands of market are of stabilization and saturation, and the profits stabilize or decrease due to higher competition. In decline, with the development of science and technology, new products or new substitutes appear which will make the customers turn to other new products. As a result, original product sales and profits decline rapidly. The products are entered into a recession (Kettle & Keller, 2012). However, there are three special categories of product life yes, style, fashion and fad (Kettle & Keller, 2012).
As a “fast fashion” clothing industry, the main feature is fashion and fad, so H&M belongs to the life cycle of fashion and fad (figure), its life cycle is very short. Generally, it takes only 21 days to get product from the design to a retail store and its products are updated about every two weeks (Fay & Jobber, 2012). 2. 4 Competitive positioning According to Kettle & Keller (2012), all of marketing strategies would be based on STEP concept, segmentation, targeting and positioning (Appendix 4). H&M is a clothing retailer, who focuses on “fast-fashion” in clothing industry.
It has numerous competitors including Gap, Top Man and Unique. As a founder of “fast-fashion”, EZRA, H&M market By Christiansen end of the financial year 2012, H&M had a total of 2,776 stores in 48 countries. In China, it has 134 stores and its sales (include Vat. ) was 5,mom (SEEK) (H&M annual report, 2012). Facing the fierce competition of clothing industry, H&M has got its own competitive advantages. According to Kettle (1997), positioning is the act of designing the company’s offering and image so that they occupy a meaningful and distinct competitive position in the target customer’s minds.
It means that the company need to concern with how customers in different parts of the market perceive the competing companies, products, services and brand (Holey, Pierce & Nicola, 2012). Competitive advantage According to Best (2014), a company competitive advantage could is divided into three main parts to analyze from differentiation, cost and marketing (Appendix 5). 2. 4. 1 Differentiation advantage It includes product quality, service quality, brand image and relative price. 2. 4. 1. 1 Product quality and relative price H&M business concept is fashion and quality at the best price.
Although H&M usually stuck in problems of product quality in China, its quality is good comparing with its competitors EZRA (People’s daily online, 2012). Therefore, its relative price got 6 score and quality got score (Appendix). 2. 4. 1. 2 Brand image and product service The brand of H is well known to most people in China, especially young people who live in first-tier cities. When H opened new store, many people queued to get into the store (Windcheaters ,201 1 & Sanctities 2010). Although the brand image of H is good, its service is not approved.
For example, as the clothing size of H s followed with Europeans, so the trousers may be too long for Asian customers. Therefore, many trousers have to be cut short, but this service is not offered in China. By contrast, its competitor, Unique, offers it for free, customers could get suitable trousers only with waiting for two hours (Unique. CNN, 2013). 2. 4. 2 Cost advantage It is an essential factor that enables H to keeps a lower price in competition. 2. 4. 2. 1 Unit Cost and Transaction Cost It does not own any factories; instead, the company buys its products from approximately 800 independent suppliers (H annual report, 2012).
H has own unique supply chain system. In order to reduce cost, it uses double supply chains. One is fast reaction chain to manage and control epidemic goods in Europe, primarily in Turkey, about 50 per cent of its products are produced here, and the process of production within no more than 4 weeks. The other is an efficient chain to manage and control production of basic style in Asia, primarily in China and Bangladesh. The process of production has long period, about 6 months. That is to say, one is European quick supply chain; the latter is Asian efficient one.
The important point is bout 30 per cent suppliers are based in China (Fay & Jobber, 2012). Therefore, the unit cost of H is lower than other competitor’s. In contrast, EZRA has its own 22 factories in Spain, in order to ensure “fast-fashion” concept, most goods are produced in Europe, with higher product cost. Consequently, H&M is able to keep lower price than its competitors in China. Compared with EZRA, the average price of H&M is lower 30 per cent to 50 per cent. Some prices of basic clothes are lower than Unique (Buoy-linen, 2011). Therefore, for the unit price, H&M has more competitive its competitors.