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H&M
CONTENTS
Industry Overview.................................................................................................. 2
PESTEL Framework.............................................................................................. 2
What political factors influence the industry?..................................................2
What economic factors influence the industry?...............................................2
What social factors influence the industry?.....................................................4
What technological factors influence the industry?.........................................5
What environmental factors influence the industry.........................................5
Conclusion: Which of these factors are most likely to be the key drivers for
change for theindustry? Is technology one of the key drivers?......................6
Five Forces FRamework....................................................................................... 6
What does the bargaining power of suppliers in the industry look like?..........6
What does the threat of new entrants within the industry look like?...............7
What does the bargaining power of customers in the industry look like?........7
What does the bargaining threat of substitutes within the industry look like? 7
What does the competitive rivalry within the industry look like?....................8
Top industry players............................................................................................ 8
Countries......................................................................................................... 8
Organizations.................................................................................................. 9
Companies..................................................................................................... 10
Industry information dissemination......................................................................11
How does the industry get information out to members & public.....................11
Business of Fashion....................................................................................... 11
Just-in-Style:.................................................................................................. 12
Past Industry Technology/IS/MIS...........................................................................13
What was trendy in 2013?................................................................................ 13
Mobile............................................................................................................ 13
Integration..................................................................................................... 13
More and more social.................................................................................... 14
Current industry technology trends......................................................................14
Trends............................................................................................................... 15
Are you on the list?........................................................................................ 15
Goodbye supermodels................................................................................... 15
SHOP in, shop out.......................................................................................... 15
Why is this happening?..................................................................................... 16
Future industry technology trends and forecasts.................................................16
Top 6 Tech Trends in the Fashion Industry.........................................................16
Smartphone commerce................................................................................. 16
Wearable Technology..................................................................................... 17
3d Printing..................................................................................................... 17
Fashion shows as tech events.......................................................................17
Designing for online...................................................................................... 18
Tech in the physical space............................................................................. 18
INDUSTRY OVERVIEW
PESTEL FRAMEWORK
WHAT POLITICAL FACTORS INFLUENCE THE INDUSTRY?
The political and legal climate is a very important factor to evaluate when looking
at the success of the apparel industry globally. Governmental barriers to trade,
minimum wages, protectionist policies, bureaucracy and corruption are some of
the various factors that affect the apparel industry. Government barriers to trade,
as present in the EU for manufacturers outside of the EU can negatively affect the
prices of the retailers. For examples, retailers entering from outside of the EU
have to pay a tariff and thus increase their prices on this market which can in
turn affect their marketability and success. Similarly, the US offers more
favorable conditions to American retailers and imposes tariffs on European
retailers. High minimum wages can also pose problems to the apparel industry
as this would mean higher cost of labour and higher prices on the clothes. A trend
in the countries (like Cambodia) that have started posing stricter rules and
regulations on working conditions and wages have suffered because companies
have stopped operating in them and chosen to move to other countries with less
strict rules (Haiti, Bangladesh). Another political factor would be high levels of
corruption and a dysfunctional bureaucracy. These can hinder the companys
development, legal status and profitability. A slow decision-making process due to
the bureaucracy can be expensive and dysfunctional. Finally, poor working
conditions and child labor can lead to protest, as the Bangladesh 2013 garment
workers protest. The protest in Bangladesh shut a lot of factories which led to a
loss of hundreds of dollars for the manufacturers.
Bulgaria on one hand has an advantage since legally its law is part of the EU
AQUIS legislation which ensures favorable conditions for doing business in
Bulgaria and could serves as a stimulus for companies to invest in the country.
Furthermore, the labor legislation in Bulgaria is favorable for employers. Bulgaria
ranks 48 on Rigidity of employment index from 140 countries worldwide and only
4 EU member states have better value of that indicator (World Economic Forum,
2011).This low rigidity of employment stimulates the investments in the country,
especially in time of economic crisis. Corruption on the other hand and a
relevantly inefficient government are main barriers in doing business in Bulgaria
(World Economic Forum, 2011) and they negatively impact the investment
climate in Bulgaria. Also, the conservative traditional approach to governance
rather than modern eGovernance,with 70% online availability and interactivity of
public services (supply side), Bulgaria is on the bottom of the eGovernment
implementation. Onlyfour countriesin the EU have worse level of the indicators
than Bulgaria. (Eurostat, 2011) The ineffective eGovernment is a barrier to
further investments in Bulgaria.
WHAT ECONOMIC FACTORS INFLUENCE THE INDUSTRY?
One of the first industries that would be impacted negatively due to an economic
downturn would be the apparel industry. As the 2008 economic crisis came about
one of the first things that people cut on their shopping lists was clothes. Overall
theglobal garment trade fell by 0.5%, there was a decline in retail sales in order
volumes and factory closures and job losses in exporting countries. In Europe The two largest fast-fashion retailers Inditex (Zara) and H&M reported drops
ofabout 15% in their 2009 first quarter profits, however both rebounded in April.
Inditexs sales rose 9%between early May and June, whereas H&Ms April same
store sales rose 8%. So an economic downturn can have a large negative impact
on the apparel industry. Another factor that affects globally the apparel industry
is wage rates. As some countries introduce minimal wages some fashion brands
might not be able to produce their clothes and accessories at the needed
expenses because of the higher labor costs. A trend has been apparent in the
recent years, countries like Cambodia, who are promoting compliance with the
law and minimum wages, have been punished by retailers for their decisions by
having less orders there, when the countries with the lowest-wages like Haiti
and Bangladesh who are doing nothing to ensurerespect for labor rights are
being rewarded by increasing orders. (REPORT: The apparel industry and the
economic crisis: How is the crisis affecting apparel production andgarment
workers? by the Maquila Solidarity Network) Other economic factors that might
influence the apparel industry would be unemployment, credit availability and
the market trends which all are interconnected and often depend on the general
financial health of the given market since when the economy is booming, people
are buying, there is high-skilled personnel available and there are favorable credit
terms while in an economic downturn, there is usually high unemployment of lowskilled personnel and lower purchasing capacity on the side of the buyer so
slower business growth or even a decrease.
In Bulgaria, there are a few important economic factors. On one hand, Bulgaria is
a good place to for outsourcing since it has been a member of the European
Union since 2007 and offers a way to enter the European market. Bulgaria has
the lowest tax levels compared to other EU countries and provides favorable
investment conditions. The average effective tax rates (EATR) are the lowest in
the EU (8.8%) compared to considerably higher the EATR (26.3%) in EU15 and in
the Member States referred to as the EU+12 (17.4%). Bulgaria also has a stable
(fixed) exchange rate to the Euro which minimizes the risk of currency exchange
rates but still Bulgaria is not a member of the Euro Area. In addition, Bulgaria has
the lowest labor cost in the EU of 3.8 Euro per hour (Eurostat, 2014). On one hand
the relevantly cheap labor is attractive for the investors. On the other hand, the
low level of salaries is one of the factors stimulating the brain drain form the
country.
Some of the negative economic factors that can affect the apparel industry in
Bulgaria is Bulgarias low nominal GDP - around 52 billion Euro for 2014. The low
GDP and the low wages affect the purchasing power of Bulgarians and there is a
higher demand for cheaper goods. Furthermore, the disparities across the
municipalities affect the demand. Despite the recent reforms enacted to improve
the business start-up conditions and progress in the area of paying taxes,
Bulgaria's world rankings still lag behind the best performers in the EU and world
comparisons in Doing Business. In the WB Doing Business Report the country
ranking worsened (from 44 in 2010 to 51 in 2011) (The World Bank, 2011).
office there and outsourcing some of the companys services. Furthermore, the
social attitudes towards work or imported good or leisure time can also affect the
product the company offers or the style of work it practices. For example, certain
countries might have an understanding that they should buy only local products
and thus not buy the companys imported products. Or maybe the lifestyle and
work ethic are very different from those adopted in the companys headquarters
which is something of course that could pose a possible problem. Culture is also
essential, for example, the clothing manufacturer needs to create styles that
appeal to those of different cultures, especially if those cultural groups represent
large enough segments of its market. Also, an aging population may pose a
problem for both the designers and the company. The lack of young skillful labor
might be a problem as well as the different demands for clothing of the raging
population. There might be an increase the demand for larger jeans and pants
sizes, such as relaxed or loser-fitting styles. Similarly, obesity levels in developed
countries so designers need to design larger models and develop special sections
in their stores.
In Bulgaria, a major problem is aging and decreasing population. The
demographic projections for Bulgaria show that the population will decrease from
7.4 million projected for 2015 to 5.9 million projected in 2050 (Eurostat, 2011).
The decreasing and agingpopulation will have a negative impact as it will
decrease the market size for the apparel industry and there will be less young
high-skilled specialists who can work for companies of this industry or purchase
their products. Brain drain can also be considered a major barrier to the
Bulgarian market. Bulgaria ranks 127 out of 142 countries worldwide. (World
Economic Forum, 2011). This again decreases the high-skilled population and
makes Bulgaria a not so attractive destination for investment. Finally urbanization
is a major trend in Bulgaria. Around one-third of the population lives in the seven
biggest cities. Official data claims 1.3 mm people (17.5% of population) live in the
capital city of Sofia but many people do not change their address registration
when they come to live in the city. In the last 10 years the number of people
officially living in Sofia has increased by 10.3%.Urbanization is explained by the
considerable difference in living standards and working conditions between urban
and rural areas. For an apparel business this could have two sides - the country
side could be used for building factories and using the low wages and the high
unemployment to gain a competitive advantage, while the cities would provide
with the market since the cities have the people with the purchasing power.
1http://improject2012.blogspot.com/2012/03/porters-five-forcesanalysis.html
2http://www.investopedia.com/features/industryhandbook/retail.asp
down-stream parts fot he textile chain and other national and international
professional associations. Providing an extensive range of services the
Association of the Austrian Clothing Industry strengthens the
competitiveness of its member companies. Members of the association of
the Austrian Clothing Industry are also related industries like the bedding
industry, industrial laundries and dry cleaners, industrial manufacturers of
buttons and flags as well as automotive textile companies.
Association of Textile Clothing and Leather Industry (ATOK): the foremost
enterprise association in the Czech Republics textile, apparel and leather
sector the mouthpiece of Czech producers towards the countrys public
and government institutions and organizations abroad and important
platform for dialogue and formulation of social attitudes and needs of
Czech textile manufacturers.
Apparel British Columbia Association: is a self-sustaining, member-driven
association with the mandate to enhance and strengthen the viability of
the British Columbia apparel industry in a competitive and global
environment through advocacy, marketing, education, mentorship, liaison
and the setting of ethical standards.
Clothing Manufacturers Association of India (CMAI): CMAI of India is the
oldest and one of the most representative association of the Apparel
Industry in India. With a Membership of over 20 000 Manufacturers and
Retailers. The Association has branches in Pune / Bangalore / New Delhi.
Established over 40 years ago, The Clothing Manufacturers Association of
India has been acting as catalyst of change, collaborating with the
Government in matters of policy that impacts the future of the Apparel
Industry. It has been making representations in matters of Sales Tax,
Octroi, Entry Tax, VAR etc. for the Domestic Sector and in matters relating
to Export Policy, procedures etc. for the Export Sector. The CMAI also acts
as a Guide for its Members on meeting various Government Regulations.
CONTANCE: The Confederation of National Associations of Tanners and
Dressers of the European Community (COTANCE) is the representative
body of the European Leather Industry. It is a non-profit organization
established in order to promote the interests of the European tanning
industry at international level. Apart from representing European tanners
and dressers, it also has the mission of promoting European leather both in
the European and international markets. COTANCE is the only qualified
interlocutor representing the views of the European Tanning Industry. It has
gained a wide recognition both internally and externally as the reference
body for the European leather industry. COTANCEs activities and policies
focus on promoting the economic growth and sustainable development of
the European tanning and clothing industry.
Bulgarian Association of Apparel and Textile Producers and Exporters
(BAATPE): business to business web site for the apparel industry of
Bulgaria. Associated with Italian web site ItalianModa.com: Promotes
Bulgarian apparel and Textile Exports.
COMPANIES
H&M - Hennes & Mauritz AB (H&M) is a Swedish multinational retailclothing company, known for its fast-fashion clothing for men, women,
teenagers and children. H&M exists in 55 countries with 3,500 stores
and as of 2013 employed around 116,000 people. The branding
consultancy Interbrand ranked the company as the twenty-first mostvaluable global brand in 2009 and 2010,[63] making it the highestranked retailer in the survey. Its worth is estimated at $1216 billion.
The full company name Hennes & Mauritz was rebranded to H&M to
simplify worldwide perception of the brand.
Zara - Zara is a Spanish clothing and accessories retailer based in
Arteixo, Galicia, and founded in 1975 by Amancio Ortega and Rosala
Mera. Zara is a vertically integrated retailer. Unlike similar apparel
retailers, Zara controls most of the steps on the supply-chain,
designing, manufacturing, and distributing its products. There are over
2000 Zara stores located across 88 countries. Some Zara stores
operate as Lefties stores instead of Zara, a brand for low-cost fashion.
Calvin Klein - The company is headquartered in Midtown Manhattan,
New York City and is currently owned by Phillips-Van Heusen. The most
visible brand names in the Calvin Klein portfolio include: Calvin Klein
Collection (black label, upscale top-end designer line) Calvin Klein,
Calvin Klein Sport, Calvin Klein Jeans, Calvin Klein Home, The Khaki
Collection, Calvin Klein Golf, Calvin Klein Underwear, CK one Lifestyle
brand, Calvin Klein Watches + Jewelry.
http://www.businessoffashion.com/
http://www.economist.com/topics/textile-and-clothing-industry
http://www.textile-platform.eu/
http://www.just-style.com/insights/
https://www.fitnyc.edu/6829.asp
BUSINESS OF FASHION
JUST-IN-STYLE:
Just-style.com is the online news, insight and research portal for the apparel and
textile industry.
Since 1999, just-style has provided independent, authoritative and forwardthinking textile industry information. The media identifies and evaluates the
clothing industry's major milestones and trends, and is recognized by the apparel
sector as the essential business tool for clothing professionals worldwide. Apparel
and textile executives can pay a membership fee and receive exclusive apparel
and textile content. Also, the website offers paid research reports about the
apparel and textile industry. Just-in-style also offers extensive information on the
new technologies that emerge in the clothing industry and have specific rubrics
dedicated to the largest clothing giants like H&M, Nike, GAP, Zara, etc.
consumers will make more purchases via their mobile phone than their credit
card in 2013.
INTEGRATION
Founder of the direct-to-consumer shoe merchant Sole Society Brett Markinson
tells FORBES the emerging direct-to-consumer E-commerce model recently
being discussed as the Next Big Thing is only the beginning of the evolution
pushing haute couture into the digital age. Building and distributing a successful
brand in the Internet era is about addressing the new behaviors of an evolving
customer base by leveraging the changing landscape and its new dynamics, he
says.
Markinson believes the discussion has to shift from e-commerce vs. offline
commerce to integrated commerce. The consumer does not distinguish. They
want to buy cute, on-trend products at great values wherever they happen to be.
They want to engage with cool brands that understand their interests and
proclivities. The DNA of the web must be an intimate part of the fashion brands of
the future.
Those retailers who find a way to integrate will have a killer brand. Says
Markinson, One needs to be where the customer is, with both your messaging
and your product. If you havent already noticed, consumers today are both
online and offline, and sometimes bothonline while shopping offline. Online they
are sharing, friend validating, researching, learning and developing a point of
view. Offline there is touching, brand comparing and brand associating. All of this
drives the brand of the future. Finding the formula to leverage that online/offline
dynamic is critical.
MORE AND MORE SOCIAL
RichRelevance, a company that powers personalized e-commerce experiences
released some interesting findings about social medias role in retail. Namely,
traffic from Pinterest has doubled in the last year while Facebook saw its share
decline to just 90% (from 95% in 2011).
Rich Relevances chief marketing officer Diane Kegley tells FORBES, We believe
that social is going to have an increasing impact in 2013. We feel that the role of
social media is to generate awareness, not direct sales. While traffic referred from
social networks is low less than .5% according to our data it has grown 30%
year-over-year.
Kegley notes that retailers are getting smarter about how to use the social
channels to generate customer delight. She points out how Target recently
awarded gift cards to a number of customers who were tweeting about them over
the Thanksgiving holiday weekend. Social media is one element in [retailers]
arsenal of developing brand awareness across multiple channels. All of these
elements, including social media, shape or form the way that a consumer hears
about a brand or offering. This contributes not only to awareness, but actual
product decisions.3
CURRENT INDUSTRY TECHNOLOGY TRENDS
TRENDS
Todays media landscape is constantly changing: new cultural influences appear,
innovative technologies changes the way people behave and emerging platforms
make marketing richer and brand experience more inclusive. Here are some
current sightings on whats happening right now in how fashion brands and
retailers starts to embrace digital solutions.4
ARE YOU ON THE LIST?
The macro trend of recognizing loyal consumers and giving back is clear in
several fashion marketing activities.
Aside from offering quality in products, many brands also create impact to the
offerings. Instead of giving the VIP treatment to supermodels & celebrities, focus
are on the actual shoppers. If you treat your fans well, the rest will follow. There
are a clear trend in lots of brands that are offering exclusive access and limited
edition for fans only, thus making them strong ambassadors.
Example: YSL Devoted to Fans. Net-a-porter secret sale for Facebook fans only
GOODBYE SUPERMODELS
The macro trend of using consumers as influencers are also becoming clear in the
fashion industry as consumers are even making their way up on the runways. The
term Idolism will soon be obsolete in describing someones once fanatic
worship of hot shots celebrities. No longer she will be dominated nor intimidated,
she is now her own fashion stylist, designer, and journalist. Fashion brands have
to be aware to stay agile in their marketing strategies as trends is now under the
stewardship of consumers. With easy access to social media platforms, everyone
can be a model and fans have fans too.
Example: Choo247 shoes. Free People display consumers wearing items using
Instagram API
SHOP IN, SHOP OUT
As physical and digital retail space converge the shopping experience finds more
places. Now with the all-pervasive SCREEN CULTURE, everything from bus stops
to TV programs can be an outlet, as consumers armed with smartphones or
3http://www.forbes.com/sites/lydiadishman/2012/12/17/three-importantretail-trends-for-2013/
4http://morgenland.se/current-trends-within-fashion-retail/
way you present and market your brand, and the other has more to do with the
visual aspects of the product itself.
As a direct result of an ever-increasing amount of virtual browsing, visually
impactful prints and richly textured fabrics are coming to the forefront of
emerging fashion - and for good reason. 3D printing and software tools provide
tech-savvy designers the room to run wild with creativity when it comes to colors,
patterns, and daring new perspectives. Plus, retailers are also able to use
technology to collect data metrics and interact and observe shoppers on social
channels as a means of reading public sentiment and identifying emerging
trends. This allows them to make strategic adjustments for greater consumer
success.5
TECH IN THE PHYSICAL SPACE
From proximity marketing, to contactless checkout and everything in between, instore shopping is being revolutionized through innovations that are both creative
and functional. By adding technological elements and capabilities to the physical
location, retailers can cultivate a more satisfying experience that meets the
heightened expectations of modern shoppers.
Features such as virtual fitting rooms where you can "try on" fashions without
ever undressing, visual signage social media tickers that tally "likes" of individual
articles of clothing, and scannable QR codes that trigger detailed product
information and carefully crafted marketing displays on handheld devices are just
a few ways retailers are using tech to engage shoppers in brick and mortar
locations.
5http://apparel.edgl.com/news/top-6-tech-trends-in-the-fashionindustry94135