HM Marketing Plan UK

Marketing Plan for Hennes & Mauritz, UK

Marketing Plan HENNES & MAURITZ

United Kingdom 2011

MĀRCIS TRAUTMANIS A4040416

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Table of Contents 1.Executive summary.............................................................................................. 3 2.Current Marketing Situation................................................................................... 3 2.1.Current Market Situation................................................................................. 3 2.2.SWOT Analysis...............................................................................................4 2.3.Macro Environment - PESTEL analysis............................................................... 5 2.4.Porter's 5 forces.............................................................................................5 3.Objectives and Issues........................................................................................... 6 3.1.Issues.......................................................................................................... 6 3.2.Objectives..................................................................................................... 6 3.2.1.Short Term 2012..................................................................................... 6 3.2.2.Middle Term 2013 - 2014..........................................................................8 3.2.3.Long term to 2015................................................................................... 8 4.Target market, customer analysis & positioning........................................................8 4.1.Segmentation................................................................................................ 8 4.2.Targeting...................................................................................................... 9 4.3.Positioning.................................................................................................... 9 5.Marketing strategy................................................................................................9 5.1.Strategic focus...............................................................................................9 5.2.Product MIX.................................................................................................10 5.2.1.Product Development............................................................................. 10 5.2.2.Market extension................................................................................... 10 5.3.Marketing MIX............................................................................................. 10 5.3.1.Product.................................................................................................10 Generally company has to follow the latest trends and optimize time from the moment of purchase till arrival into the store..................................................... 10 5.3.2.Pricing.................................................................................................. 10 5.3.3.Promotion............................................................................................. 10 5.4.Distribution................................................................................................. 11 5.5.Marketing communications............................................................................ 11 6.Marketing program..............................................................................................11 7.Financial Plans....................................................................................................11 7.1.Resource requirements................................................................................. 11 8.Implementation&Control...................................................................................... 12 8.1.Implementation........................................................................................... 12 9.Bibliography....................................................................................................... 13 10.Appendices.......................................................................................................15 10.1.Appendix Nr 1. General figures..................................................................... 15 10.2.Appendix Nr. 2 SWOT-analyses..................................................................... 16 10.3.Appendix Nr 3. PESTEL-analyses...................................................................19 10.3.1.Political............................................................................................... 19 10.3.2.Economical..........................................................................................19 10.3.3.Social/Demographic Trends...................................................................19 10.3.4.Technical.............................................................................................19 10.3.5.Environmental..................................................................................... 19 10.3.6.Legislation...........................................................................................20 10.4.Appendix Nr. 4 UK Population by age ............................................................ 21 10.5.Appendix Nr. 5 Loyalty Cards program........................................................... 22 10.6.Appendix Nr 6. Marketing program................................................................23 10.7.Appendix Nr 7. Control and Measures ........................................................... 25 10.8.Appendix Nr. 8 Forecasting and Budgeting.....................................................26


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1. Executive summary This marketing plan is made according to latest trends and availiable information about Clothing and footwear Retail in United Kingdom. It provides insights into the apparel retail business in UK market and gives recommendations on short - term marketing strategy for company H&M Hennes & Mauritz AB. Internet retailing in Clothing and Footwear Retail market in UK has become extremely important and as well as economical downturn it has lead to the number of outlets declined by 2% in 2010. In addition some of independents struggled to compete with supermarkets and value chains. Also footwear chains continue to struggle facing major competition from the footwear departments of clothing stores. The majority of consumers want to spend money on cheap products or on high quality purchases which for them be as a long-term investment. To be competitive in UK market Company will have to keep running Low-price strategy meanwhile cultivating brand awareness and loyalty of the costumers. H&M's Marketing strategy has been really successful so far and company should keep going the same way improving its distribution chains and investing heavily in marketing

2. Current Marketing Situation 2.1. Current Market Situation

Clothing still remains essential for all consumers even during the downturn which now has ended in the UK. Therefore clothing market has remain crowded as many retailers have survived the recession and competition has grown as those who still are operating in the market have to compete to survive. According to National Statistics Consumers Trends report 2011, consumer spending on clothing has increased by 12,5% between 2006-2010 despite the economical turndown and it was estimated that market was worth 39.77 bn in 2010 accordingly as well as that it's going to grow slightly between 2011 – 2015 reaching increase by 6.2%. (Key Note, 2011) . Clothing and footwear specialists still are facing strong as incomes was under the threat due to rising food inflation caused by economical aspects. Lately consumers are more likely to update their wardrobes more regularly but at lower overall cost using discount shops and supermarkets, however despite this many high-end retailers still are meeting their planned sales expectations. Currently company is one of 17 largest Clothing retailers within the UK with the turnover of £ 651 million and 190 stores in 2010. Stores are mainly based in city centre locations also company has a strong presence in the shopping centers as well. The collections including everything from modern basic clothing to high fashion reflected by international trends. When they create a new collection the mission is to satisfy people with different kind of taste and demand (Key Note, 2011). H&M owns 2.3 % of UK apparel market ranking in 7 th position (Euromonitor International, 2011).


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2.2. SWOT Analysis Detailed SWOT-analyses is presented in Appendix Nr. 2 SWOT-analyses. Strengths Well established and known brand around the world Low Pricing strategy Being a Multi Brand company Strong liquidity Position (One Source, 2011) Weaknesses Companies strong focus is to keep prices low Absence of fully owned Quality control Issues (Opens Source, 2011) Opportunities Interactive - transactional WEB site COS – Brand Footwear specialist Beauty, Make-up and skin care products Focus on Accessories New design launches New stores expansion A mobile phone applications Aging of society Catalogue by post


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Threats UK population gets older The UK market saturation for new stores Sales Cannibalization Private Labels The Rise of value added tax Rising Cotton Price Intense competition Changing consumer preferences Negative fame 2.3. Macro Environment - PESTEL analysis PESTEL-analysis including Political, Economical, Social/Demographical Trends, Technical, Environmental and Legislation factors could been seen in Appendix Nr 3. PESTEL-analyses. 2.4. Porter's 5 forces Euromonitor International (Clothing and Footwear Specialist Retailers – United Kingdom, May, 2011) claims that H&M's key competitors in Clothing and footwear retail by Value share are Next, Primark Stores, Arcadia Group, TK Maxx, Matalan and New Look Retailer (Appendix Nr. 1, table Nr. 2) TK Maxx, Arcadia Group, and New Look Retailer are operating with different highstreet style brands like Burton, Dorothy Perkins, Topshop, Topman, Calvin Klein, Bjorn Borg, Quicksilver as well as discounted famous designer brands as Kenzo, Moschino, Chloe, Jean Pual Gaultier, Farah and others. Infamous brands are availiable in those shops as well. Price for above mentioned offerings is availiable starting from mid-level consumer and higher. Generally those companies show strategy where various brands are united under one roof to create bigger and stronger competition. Likewise Matalan is trying to follow above mentioned strategy offering famous brands for even lower prices in various out of town location shops. However the famous brands covers just insignificant part of their offer. The second largest UK retailer Primark (Associated British Foods Ltd.) offers its own brand as well as few private labels as Denim Co, Backswing and Cedarwood State. This rival has gained its significant market share thanks to unique combination of fast fashion and lean operations which results in low pricing and under mid-level quality strategy. Market leader Next who owns 8.1 % of the market share and 154 Next stores across UK like H&M is representing and selling its own brand, although through their online store is possible to buy even more: famous brands as G Star, Diesel, Nike, Miss sixty, Puma and even electrical and home-ware products as well as flowers. MĀRCIS TRAUTMANIS A4040416

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Byers in the clothing low to mid level retail business has a significant power as they are extremely price sensitive. Majority always are looking for latest fashion trends for best price leaving their loyalty far behind. H&M offers the the latest fashion trends for affordable price providing the quality therefore there are just a few companies who can offer the same for the same price. Some of major competitors like Next or Primark are close to offer the same although it's noticeable that H&M still has one of the most fashionable offers in the particular market segment. Apparently majority of consumers are extremely price sensitive and are choosing less fashionable design for lower price. In addition Key Notes survey states that customers are following “Fast-Fashion” Phenomena as they are more conscious about wearing the latest trends rather than investing their funds in more expensive and durable items. Nowadays customers choose discount and lowed-priced high-street retailers. Availability to latest technologies, distribution chains and fashion trends has led the market players to be highly competitive. H&M has to improve collaboration within distribution chains as this would allow to fulfill stocks regularly satisfying growing customer needs for added value in the form of excellent customer service. In addition H&M has to think about more closer communication with their costumers, improvement of service quality in their shops and introduction of loyalty or rewards cards program allowing gather data and reached specific targeted customer groups. According to Key Note the Supermarkets/Grocery stores have increased their share reaching about 25% of clothing market as consumers have become more cautious about unnecessary spending for expensive goods and turn to cheaper alternatives (Key Note, 2011). 3. Objectives and Issues 3.1. Issues Over dependance on vendors – this means that company has no assurances of continued supply which is leading to insufficient in-stock positions. Company depends on its key vendors which are subjects to risks, including financial liquidity, inclement weather, natural disasters, labor disputes and general economic and political conditions, which may limit their ability to provide company with merchandise in time leading to increase of operational costs and unnecessary litigation. Company has to enhance customer loyalty. There is no Loyalty program like rewards cards which company could use for creating a better database to enhance the communication with its regular target audience engaging them in deeper relationships with the brand. Customers doesn't associate themselves with the brand their loyalty is with the price not with the brand. Cooperation with the well known designers is insufficient. In this fast paced environment consumers want to be as close as possible to latest fashion trends and celebrities therefore to attract the consumers company should create an instant demand for clothes made in collaboration with famous designers thereby offering an “affordable dream” for almost everyone. H&M mostly attracts customers from 0-14 and 15-29, company must think how to attract older target groups 30-44 thus gaining bigger market share as they are the real spenders on fashion and latest trends. MĀRCIS TRAUTMANIS A4040416

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3.2. Objectives 3.2.1. Short Term 2012

 Achieve total revenue growth within UK at least 10% resulting in £ 716.43 million. Following company's annual growth figures Appendix Nr. 3, table Nr. 3. annual total revenue growth in 2010 was 7% which is connected with large investments in stocks and new store development. With the increase of demand and population as well as with estimations that market should grow during forthcoming years this is one of the Companies core objectives. Increase the market share up to 3% within Clothing and footwear retail business in UK Now H&M operates with 2.3 percent of the market share ir means that it has to increase by 0,7%. Regarding the positive trends mentioned in PESTEL-analysis and above will be a challenge to realize in the mature market. By the end of year, achieve 5% of sales through the Internet resulting in £ 35,8 million. Key Notes states that as online shopping has become popular and UK market is 3 rd largest after US and Japan therefore company should put a lot of effort to increase sales through online channel. These goals will be achieved by establishing growth in specific sectors and realization of following marketing activities: A 10 % sales growth in Beauty, Make-up and skin care products sector Location of beauty products are near the tills, especially nail varnishes, which results in fast-moment sales decisions and are really profitable. A 15 % growth in footwear sector. According to Company's annual report footwear sector gas grown during last years thanks to positive cooperation with famous shoe designer Jimmy Choo. To increase interest and achieve sales growth in this particular sector, start collaboration with famous Italian footwear designer Cesare Paciotti. A 15 % growth in Accessories sector. Accessories is an element of “fast fashion”. Consumers use the items to update their looks without overspending on new clothes. Assess market potential and rationalize stores. As online shopping become more and more popular company has to asses market and re-plan store quantity to avoid sales cannibalism. Organize Marketing Online Competition “Best Outfit” in different age categories. This contest will help to increase interest and promote sales through transactional website, as participants will have to create special outfit using special internet tools availiable online. In the beginning of 2012 launch Loyalty cards program. MĀRCIS TRAUTMANIS A4040416

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The main reason to implant Loyalty Cards Program is to gather customer data to find out their habits, shopping trends and frequency as well as to reach the target groups directly avoiding any interferences. Loyalty cards program and benefits could be found on appendix. Nr 5. Customer Loyalty cards program (CLC). Start collaboration with one very famous British show. Assuming that British people watch a lot of TV Shows it could be worth to cooperate with “X Factor” dressing up the participants even the jury with clothes and accessories made by H&M. Thus the wide range of different age-segments could be reached showing that H&M isn't only for teenagers and young people. Launch new collection “X-Factor by H&M” This collection will include items specially designed for the show by H&M's in-house designers Launch New sports Collection ”London Olympics 2012” As in 2012 in August, Summer Olympic Games take place in London, H&M should launch sports apparels collection made specially for Olympic games, thus encouraging locals and especially tourists from all over the world engage with the brand and increase sales. 3.2.2. Middle Term 2013 - 2014

Launch both new woman and man collection for age group 30 – 45 in 2013 Although H&M claims that they create a wide and varied range for everyone who loves fashion, whatever their age sound people, 30+ more often chooses brands more suitable for their age. Hennes & Mauritz reaches the 6th place in clothes and footwear retailing in 2013 Assuming on apparels industry annual growth and execution of all 2012 marketing objectives H&M could catch its closest rival New Look Retailers Ltd who sells different well known brands by 2013. 3.2.3. Long term to 2015

Store Expansion New store expansion should be well planed to avoid sales cannibalization Brand repositioning As rises in income could be uneven with a split in the middle. The result will be a decrease of a number of middle income costumers which are one of the major M&H's target groups. (Key Note, 2011) Continuos stuff training Train the entire staff to understand, appreciate, and reinforce their role in marketing the firm.


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4. Target market, customer analysis & positioning 4.1. Segmentation H&M manages to meet the needs of many different segments which and claims that they have create a wide and varied product range for everyone who loves fashion, whatever their age is. It is not true as poorly are covered segments starting from 30 years and up. These consumers frequently chooses Zara or other H&M rivals. Company has segmented their customers using demographic/socio economic and behavioral segmentation: New borns 0-6M, parents must have at least medium incomes; Baby girls and boys 2-18M, parents must have at least medium income;s Girls and boys 18M – 8Y, parents must have at least medium incomes; Girls and boys 9Y – 14+, parents must have at least medium incomes; Teenagers 15 – 19, parents must have at least medium incomes; Man and woman 20-29, these are students and professionals, who like to follow latest high-street fashion trends with at least lower medium incomes. Man and woman 30+ with lat least lower medium incomes.

4.2. Targeting Company uses and should continue to use differentiated marketing strategy where they have different products to target different segments and different groups. Mainly company is targeting the audience by dividing them into very convenient groupings as women, man, teenagers, children and future parents regardless to its gender, age, beliefs or ethnicity and has offerings satisfying each group. Moreover its customers has been splitted into 2 distinct categories practical and fashionable and trendy consumers. Keeping in mind these 2 groups company stocks their stores with clothes of distinct categories so that none returns unsatisfied. (http://niranjanchatterjee.wordpress.com/) 4.3. Positioning Hennes & Mauritz Brand values are: latest fashion trends fashion designers and celebrities affordable price good quality innovations Costumers should buy this brand because it is cheap and they get high-fashion clothes that make them to a trendy persons. The clothing has good quality for price affordable to almost everyone. H&M tells us that it is easy to follow fashion trends without big investments. MĀRCIS TRAUTMANIS A4040416

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5. Marketing strategy 5.1. Strategic focus Due to H&M has gained their market share offering the lowest product price to value ratio, it's obvious that generally company is running under Cost leadership strategy. As additional characteristics which proves that Cost leadership strategy have been used are control over supply chain to ensure low costs and achieving of low direct and indirect operational costs. However we can notice the presence of Differentiation Strategy in form of heavy investments on advertising and PR. 5.2. Product MIX 5.2.1. Product Development Company has extremely large range of products as clothing and footwear, accessories and cosmetics. At the moment there is no need to develop new type of products as the market still hasn't reached its saturation point. The company's main objective is to keep up with latest fashion trends assuring customers with best products. 5.2.2. Market extension

Company has to penetrate new and expand in the existing mature markets with existing product range strengthening its brand core values and conquering trust of new customers. 5.3. Marketing MIX 5.3.1. Product Generally company has to follow the latest trends and optimize time from the moment of purchase till arrival into the store. Company needs to focus on sustainability and improvement on production processes as well as follow the quality of materials used in production e.i. Company doesn't own any factories but has global responsibility ensuring that all products are made under good working conditions and with the least possible impact on the environment. A few scandals about using chemicals which are dangerous for flora and fauna as well as for humans, has damaged companies image, even some protests has been held. 5.3.2. Pricing Company still holds excellent pricing strategy e.i. attractive and affordable low price level, which still remains the “key” of their incredible success. H&M offers the best price for the quality. Products are priced competitively and costumers know that they will get fashionable dresses and accessories at vastly affordable prices. 5.3.3. Promotion

Company should follow their existing strategy promoting their brand, affordable prices in combination with latest fashionable looks as well as collaboration with famous designers e.g. Starting from 17th of November, 2011 in Flagship stores around the world MĀRCIS TRAUTMANIS A4040416

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and on online as well new collection made by Donatella Versace for H&M will be available. This is not the case about new products, this is a case about creating an attention and awareness about the brand and its values. For creating maximum brand awareness H&M should use all accessible communication channels including advertising, public relations, personal selling and sales promotions. 5.4. Distribution Euromonitor states that Uk market still holds large potential for store network expansion. Significant number of new stores should be open over 2011/2012 in this market. Uk market still hasn't reached the saturation point when there is possible threats of beginning of cannibalization. However company should be aware that any new stores that H&M opens can take away sales from existing ones that's why the location of rival stores should be planned very carefully. A multi channel strategy with following channels included is recommended: H&M Flagship stores; Shops in supermarkets; Transactional online shop Catalogues 5.5. Marketing communications During many years company has created strong brand awareness, therefore it's essential to continue communication on the ongoing way delivering “look and feel” message. It is strongly recommended communicate with audience in 2 different ways: Public relations – promoting good will between itself and public e.i. Participating in charity, engaging with Greenpeace, supporting hunger relief in Africa etc. Active Marketing – active operations like, sales promotions, advertisements in media and etc. E - Commerce - communication through transactional WEB site, direct mails, social media like Facebook and Twitter and so on. Above mentioned activities will help H&M support created brand awareness and strengthen its positions in the market. 6. Marketing program To make clear understanding about implementing and monitoring of following marketing activities in 2012 they will be rolled laid out by month and sorted by themes. See Appendix Nr. 6. Marketing program.


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7. Financial Plans 7.1. Resource requirements Company's total marketing budget for year 2012 is going to be £ 22 140 000 which is 3,4% from Companies total Revenue in year 2010. Board of H&M has decided to invest heavily in marketing this year, 20% from Neto profit as Olympic Games 2012 will be held in London in August offering company a unique opportunity create to rise awareness of the brand. Company expects that ROI of 47.06% will be reached as well as growth of total revenue by at least 10%. There are 3 large projects where company is going to invest around 60% of Marketing budget: Customers Loyalty Cards Program, Olympic Games 2012 and collaboration with famous British show “X-Factor”. 8. Implementation&Control 8.1. Implementation There is a mix-match of different activities across al year round. One projects starts in May and lasts till December other starts in May and last till September e.i. projects overlaps with each other therefore strong supervision is essential. It's strongly recommended that projects are managed separately by different executives. Marketing department should be organized by function where different marketing activities are headed by a functional specialist. At the moment in marketing department work 9 managers and general manager. It is essential to hire 2 more employes who have knowledge and experience to manage Loyalty programs Thus managers should be headed to different projects and they will be supervised by general menager. Persons

Projects

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Marketing Campaign “Summer 2012” then Christmas Marketing Campaign

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Development and support of E-communities

2 new employes

Project “Customer Loyalty Cards Program”

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Online competition “Best Online Outfit”

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Olympic Games 2012

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Project “X-Factor”

Outsourcing

Marketing survey about brand awareness

Layout of control and measure of Company's Marketing activities as well as contingency plans could be found in Appendix Nr. 7 Control and Measures.


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9. Bibliography About.hm.2011.Nine month report 2011.[online].[Acessed 2 November 2011].Available from World Wide Web: About.hm.2011.Annual Report Part 1. H&M in Words and pictures 2010.[online]. [Acessed 2 November 2011].Available from World Wide Web: About.hm.2011.Annual Report Part 1. H&M in figures 2010.[online].[Acessed 2 November 2011].Available from World Wide Web: About.hm.com.2009.H&M engages with Greenpeace.[online].[Acessed November 2011].Available from World Wide Web: About.hm.com.2010.Projects and cooperation.[online].[Acessed 5 November 2011]. Business.un.org.2011.H&M and UNICEF Partnership.[online].[Acessed 1 November 2011].Available from World Wide Web: Euromonitor International. 2011. H&M Hennes & Mauritz AB in Retailing (World). Euromonitor International.2011.Clothing and Footwear Specialist Retailers – United Kingdom. Hannah Corr.2011.High street giant H&M pledges.[online].[Acessed 4 November 2011]. Available from World Wide Web Harrods.com.2011.Harrods Rewards..[online].[Acessed 4 November 2011]. Available from World Wide Web IMF. 2011.Weak and Bumpy Global Recovery Ahead. [online]. [Accessed 2 November 2011]. Available from World Wide Web: Key Note. 2011. Market Report 2011. Clothing Retailing. Leonie_NDT.2009.Jimmy Choo is designing for H&M.[online].[Acessed 3 November 2011].Available from World Wide Web:


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Niranjanchatterjee.2009.H&M – A study of the company and its marketing techniques[online].[Acessed 7 November 2011].Available from World Wide Web: One Source. 2011. H&M Hennes & Mauritz AB. Sully.2011.Viktor & Rolf shake hands with H&M for artistic business.[online].[Acessed 4 November 2011]. Available from World Wide Web: Taxi Network.2011.H&M in Cooperation with the Sims 2.[online].[Acessed 2 November 2011].Available from World Wide Web: Unicef.2009.International partnerships: H&M.[online].[Acessed 5 November 2011].Available from World Wide Web:


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10. Appendices 10.1. Appendix Nr 1. General figures

Table Nr. 1

Clothing and footwear Retailers company Shares by Value 2006 - 2010

Source: Euromonitor International from official statistics, trade associations, trade press, company research, trade interviews, trade sources Table Nr. 2

Key Ratios H&M group Global Scope, SEK m

Table Nr. 3 MĀRCIS TRAUTMANIS A4040416

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10.2. Appendix Nr. 2 SWOT-analyses Strengths Well established and known brand around the world and within United Kingdom Company has generated impressional publicity cooperating with the famous fashion houses as Sonia Rykiel, Roberto Cavalli and LANVIN, as well as recently made agreement with Versace allows consumers feel that they can buy ready-towear famous designer clothes for really affordable price. Jimmy Choo cooperation with H&M where he designed and his collection of Women's and Men's shoes. H&M in cooperation with SIMS2 has created a computer game with Fashion pack included where player has to be a fashion designer creating own clothes and organizing own fashion shows. Company has used well known models and actresses like Gisele Bundchen and Reese Witherspoon in their advertising campaigns. Low Pricing strategy would be a key asset to continuous growth of the company. Despite growing raw material costs, prices in H&M shops has remained in the same level during few last years. Being a Multi - Brand company, although other H&M brands aren't so popular in the UK they helps company to maintain some additional revenue. It helps to reach varied target groups creating interest in various age groups. Strong liquidity Position (One Source, H&M Hennes&Mauritz AB, 2011) Weaknesses Companies strong focus is to keep prices low, therefore mostly all products which doesn't fit in category “Made in collaboration with the Stars” are lower quality, but reachable for very attractive price. The existing issue is that consumers in United Kingdom due to economical weakness have started to show the willingness to have better quality for higher price to have more long lasting products. Therefore company's rivals selling higher quality middle-priced products could entice potential and existing customers. Absence of fully owned factories - H&M almost as one of its rivals GAP, what doesn't own their factories at all. 70% have been outsourced from China opposite Inditex who owns 65% of their factories accordingly outsources just 35%. In this case their vertical distribution channel doesn't work as well as Inditex's and in addition monitoring those outsourcing operations takes a lot of time and anergy what could be invested differently. This is also the reason which causes selling lower quality products, as stated above. Quality control Issues due to large network of vendors. (Opens Source, H&M Hennes&Mauritz AB, 2011)


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Opportunities Interactive - transactional WEB site which offers a unique feature which gives to H&M really competitive advantage that allows consumers to mix and match different items of closing on a model so consumers can create and save the outfits what they like, even create new styles. Company owns COS Brand which offers apparels for customers with middle un upper middle incomes Footwear sales in addition to clothes collections offering everything fashionable under the one roof

to look

Beauty, Make-up and skin care products Focus on Accessories as an element of “fast fashion” which is they use the items to up date their looks without overspending. Fast New design launches New stores expansion A mobile phone applications - H&M has invested heavily to made mobile phone applications for Apple and Android what allows users to browse company's online catalogue furthermore after shaking the phone receive the secret discount coupon what afterwards they can use in the shop. Aging of society – company should seek for possibilities to attract older segment using different brand strategy. Catalogue by post Threats UK population gets older The UK market saturation for new stores – As Key Note states UK apparels market is close to stores saturation point, so Company has to asses the situation and take appropriate decisions. Sales Cannibalization - Growth of online purchases could result in sales cannibalization for existing company's stores. People has started to buy clothes online what decreases store profatibility. Private Labels – Grocery Retail Stores and their apparel business has become real threat for H&M as the growing private label potential across the United Kingdom has reached 25% of market share. The Rise of value added tax – the VAT has risen from 17,5% to 22% in the January of 2011. This affects company's profit, because as they use low-pricing strategy this price increase has to be partly absorbed by Company


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Rising Cotton Price Intense competition – lately the smaller companies have been acquired by the major players thus gaining the market share and greater brand recognition Changing consumer preferences – most of the products are ordered a few months in advance before they get into the shop's shelves. Due to ever-changing fashion trends the product might be out of fashion even before it has been offered to customers thus affecting the performance of the company as the product must be sold at lower prices. (One Source, H&M Hennes&Mauritz AB, 2011) Negative fame - as 100 % of H&M's production has been outsourced from overseas manufacturers, which sometimes use child labour, offer poor working conditions as well pay less than the minimums wage.(Key Note, 2011) Furthermore till 20th of September 2011 H&M was using detox chemicals in their production that when broken down into NP (nonylphenol) is known to change the gender of fish and causes hormone disruptions in humans who consume contaminated fish and water. (http://www.theecologist.org) Sales may suffer when the information is publicized in the media.


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10.3. Appendix Nr 3. PESTEL-analyses 10.3.1.

Political

This factor is really essential nowadays, as the political situation in Europe Union as well as around the world are certainly unstable and there are no clear predictions what is going to happen within the United Kingdom during forthcoming years. 10.3.2.

Economical

VAT increase from 17,5% to 22% in 2011 had a direct affect to retail clothes final value as well as surge in cotton prices which reached an 18 year high this year due to a global shortage where farmers reduced the crops to boost the price artificially In Pakistan, which are one of the world's largest cotton suppliers, floods destroyed many crops decreasing the supply. In addition China's internal consumption led to the shortage as well, as the country are using more cotton than is being produced there. It's worth to mention weak pound and increasing costs of transport which will add extra expenses for retailers leading to increasing final price for consumers. (Key Note, Clothing Market Report, 2011). The GDP is also expected to grow slightly during forthcoming years with growth peaking in 2014 on 2.4%. The inflation is expected to increase by 3 % each year which will increase the costs even higher.(Key Note, Clothing Market Report, 2011) Key Note claimed that unemployment is going to rise slightly in 2012 to 1.54 million, but will began to decrease starting from 2013 to around 1.43 million claimants, which generally will give positive effect as people make purchases with their disposable incomes which are higher among people who are employed. 10.3.3.

Social/Demographic Trends

By the end of 2010 UK resident population was 62,2 million, but by 2014 it seems to be around 63,9 million claims Key Note, which gives aparels's retailers a well-grounded hope of growing business. (see Appendix Nr. 4, UK Pupulation by age). It is expected that population of UK in 2033 will reach 71,623 this increase is due to an aging demographic as people are living for longer. 10.3.4.

Technical

Manufacturers all around the globe mostly in Asia and India are continuing upgrading and expanding their operations as all of them want to win business with potential buyers who are outsourcing the production. Manufacturers are installing new technology, increasing capacity and improving efficiency. 10.3.5.

Environmental

Throughout 2010 all major players of the market have taken steps to “go green”. Many sectors of the clothing industry have changed considerably. They are segregating waste, encouraging recycling and building Greener factories. Some of them have started to use natural and LED lighting, reducing electrical waste and harnessing the wind power. The new scheme “Clean by Design” designed by Natural Resources Defense Council (NRDC) which urges the companies to ensure that energy wastage, pollution and water MĀRCIS TRAUTMANIS A4040416

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use is at minimum at their factories already has been used by global retailers and brands like H&M,GAP, LEVI, Walmart, Nike and others. 10.3.6.

Legislation

Generally the clothing industry is affected by legislation regarding health and safety, employment and environmental protection as well as by recycling and waste disposal. Employees of the industry are significant workforce which is a affected by laws relating to workers, including time directive and minimum wage legislation as well.


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10.4. Appendix Nr. 4 UK Population by age


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10.5. Appendix Nr. 5 Loyalty Cards program In this appendix is stated basic idea of H&M Customer Loyalty Cards project, benefits and rules. It will be possible to earn points for every pound you spend in-store and online on HM.com, no matter how you choose to pay. For every 200 points you have earned you will receive £1 to spend on whatever you want in-store. Earned points are going to be converted to e-money automatically once a year in May the 1st. It is easy to enroll for a H&M Loyalty Card. Once your registration online is complete we will email your Loyalty card number and you can begin shopping online now. We will send you your Loyalty card within 2 days after submitting or ask for you Loyalty Card in any H&M shop, fill the blank and receive it immediately. After receiving your Loyalty card number, simply log on to HM.com and the 15% discount will be deducted automatically from your next 5 purchased items on the same day. Earn 2 points for every £1 spent Be first to by “Collections made in collaboration with stars” H&M Loyalty exclusive discount days Earn double Loyalty points on specially selected days You will enjoy an exclusive discount on your purchases at H&M on specially selected days throughout the year. Simply present your Loyalty card when you pay. We will let you know by e-mail about special double points days where you can earn even more Loyalty points on your purchases at H&M. Online purchases above £ 150.00 will be granted with free delivery within the UK. (www.harrods.com)


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10.6. Appendix Nr 6. Marketing program January Fabrication of “Customer Loyalty Cards” (CLC) Preparation of Marketing campaign for launching “CLC” Preparation of necessary IT systems for successful running of CLC program Stuff trainings for successful launching of CLC program. Online Competition “Best outfit for Baby boys 2-18M” Develop and support of e-communities via social media Face Book, Twitter. February Starting Marketing campaign for CLC Launching CLC Preparation of Marketing campaign about cooperation with X-Factor Online competition “Best outfit for Baby girls 2-18M” Develop and support of e-communities via social media Face Book, Twitter. March Starting cooperation with “X-Factor Preparation of marketing campaign “Summer 2012” First CLC program data check collection and reviews Online competition “Best outfit for boys 18M-8Y” Develop and support of e-communities via social media Face Book, Twitter. April Launch of marketing campaign “Summer 2012” Special Easter sales promotion for CLC holders Online competition “Best outfit for girls 18M-8Y” Develop and support of e-communities via social media Face Book, Twitter. May Marketing survey about brand awareness, especially within age group 30-44 Online competition “Best outfit for boys 9Y-14+” Develop and support of e-communities via social media Face Book, Twitter. June Preparation of Marketing campaign for new collection “London Olympics 2012” Online competition “Best outfit for girls 9Y-14+” Develop and support of e-communities via social media Face Book, Twitter. July Launching marketing campaign “London Olympics 2012” Online competition “Best outfit for Teenegers boys 15-19” MĀRCIS TRAUTMANIS A4040416

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Develop and support existing community via social media Face Book, Twitter. August Launching collection “London Olympics 2012” Special Sales promotion for CLC holders Online competition “Best outfit for Teenagers girls 15-19” Develop and support of e-communities via social media Face Book, Twitter. September Preparation of launching new product line “X-Factor” in November Preparation of marketing campaign for launching “X-Factor” collection Online competition “Best outfit for Men” Develop and support of e-communities via social media Face Book, Twitter October Launching of marketing campaign for “X-Factor” collection Online competition “Best outfit for Women” Develop and support of e-communities via social media Face Book, Twitter. November Launching of new collection “X-Factor” Organizing event Awards Ceremony for online contest “Best Online Outfit” Preparation of Christmas Sales marketing campaign Develop and support of e-communities via social media Face Book, Twitter. December Launching Christmas Sales Marketing campaign Launching event Awards Ceremony for online contest “Best Online Outfit” with participation of contestants from “X-Factor” Develop and support of e-communities via social media Face Book, Twitter


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10.7. Appendix Nr 7. Control and Measures Marketing Activity Loyalty Cards Program

Best Online Outfit

Summer 2012 X-Factor Olympic games 2012

Development of ECommunities

Control measures

Contingency Plans

- Monthly sales growth starting from March

- Sales figures from previous periods

If lack of sales growth: additional marketing efforts

- Sales volume through online shop - Repeated visits in WEB store - growth of new WEB store visits - total growth of WEB store visits per month

- Sales volume from previous periods - figures from the same period last year - figures form previous period - figures from previous period

Independent marketing survey

- Sales figures

- planned sales figures

Sales of colection

- Market research about brand awareness - planned sales figures

- Figures from previous survey - planned sales figures

- sales figures - total number of new followers on Twitter - total number of “Like” in FaceBook

Christmas Campaign - sales growth Marketing survey about brand awareness

Comparison Base

- survey results


- planned sales figures - figures from previous periods - figures from previous periods

Sales of collection in other markets Additional marketing efforts

- figures from previous period - previous survey results

Marketing strategy audit by 3rd party

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10.8. Appendix Nr. 8 Forecasting and Budgeting

Marketing Budget Calculation

Amount £ m

Budget by Marketing Activity

Amount £ m

Total revenue/turnover Net profit

651.30 110.72

Project “Customer Loyalty Cards Program”

3.07

Marketing budget % from total revenue % from net profit

22.14 3.40% 20.00%

Online competition “Best Online Outfit”

1.13

Marketing campaign “Summer 2012”

0.87

Project “Olympic Games 2012”

5.43

Development and support of Ecommunities

2.18

Project “X-Factor”

4.24

Marketing survey about brand awareness

0.60

Christmas campaign

2.55

Return on Investment (ROI) Estimated turnover after Marketing activities Estimate profit after Marketing activities Net profit ROI

Amount £ m 716.43 143.29 32.57 47.06%

Annual growth Annual Turnover growth Annual Net profit growth


% 10.00% 29.41%

TOTAL £m Extra unexpected expenses 10% TOTAL £m

20.07 2.07 22.14

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HM Marketing Plan UK

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