A Comparative Study on Marketing Plan: H&M vs. Forever 21
The study focuses on two high street retail-clothing companies, Sweden’s H&M and the American company, Forever 21. It establishes how they are dominating the current retail sector in the world scenario by analysing their marketing plans. The study also makes a comparison between the two companies by understanding their strategies and tactics including their advertising gimmicks, target market and to what extent they are product focused. For this, secondary data in the form of articles available on online websites, newspapers and blogs are written by experts are used. It was also found that both these companies have come under a lot of heat for violation of labour laws, copyright infringement and other legal issues. Based on how they are handling these controversies and other factors, the study concluded why H&M will arguably survive this race of fast fashion.
Marketing plan, H&M, Forever 21
The paper concentrates on a comparative study of two retail-clothing companies, competing in the same market, targeting the same consumers and working under the same principle of fast fashion, i.e. the philosophy of quick manufacturing at an affordable price.
The two companies under scrutiny are Hennes & Mauritz (H&M) and Forever 21. H&M was founded by Erling Persson who set up the first shop in Vasteras, Sweden in 1947. Persson, on a trip to the United States, was impressed by the glitzy clothing stores and decided to establish one in his own country. Since then, the Swedish retail giant has rapidly expanded. It currently operates in 62 countries and made a net income of 2.34 billion dollars in 2016. One of its main competitors, Forever 21, an American company boasts a rag-to-riches story. Founded by Korean immigrants and husband-wife duo, Do ‘Don’ Won Chang and wife Jin Sook in 1984, the company made a net income of 4 billion dollars in 2016. Despite having different start-up stories, both these companies are among the most successful retail-clothing companies of the 21st century.
To understand how these companies view themselves, the About Us section of their respective websites is given below:
“FOREVER 21 has seen some remarkable accomplishments over the past 30 years.
With a goal to become an $8 billion company by 2017 and open 600 stores in the next three years, it’ll be exciting to see the company achieve in three years what it initially took 30 years to do.”
There is a self-congratulatory note in the content. It can also be interpreted that the company is not shy about its goals and has explicitly announced that it wants to double the number of stores in the coming years.
“The H&M group is one of the world’s leading fashion companies – with the brands H&M and H&M Home, COS, & Other Stories, Monki, Weekday Cheap Monday and MARKET. Each with its own unique identity, all our brands are united by a passion for fashion and quality and the drive to dress customers in a sustainable way.”
H&M appeals more to the emotions of the people, announcing that its goal is to help customers find their unique style. At the same time, a closer scrutiny offers a different perspective; that the company is promoting its lesser known brands.
What routes these companies are following to reach their goals and the controversies surrounding them have been analysed below.
"The aim of marketing is to know and understand the customer so well the product or service fits him and sells itself." ~ Peter F. Drucker.
A marketing plan is a business document outlining the marketing strategies and tactics of a particular company. Tim Barry, recognized business expert, and founder of Palo Alto Software-defined five components of an ideal marketing plan in American Express, which is an open forum for interacting with the best business thinkers. However, for this paper, we have noted the first two and most important components of a good marketing plan. The first one, as Peter Drunker also rightly pointed out is to have a narrow target base, and with it, an analysis of the competition so as to make strategic and tactical decisions. The second component is being product focused. This means a company should continually strive to improve its products. There are various retail-clothing companies which use either or both these tactics. For instance, Inditex, the Spanish retail giant has identified its target base: teens and young adults and also has a feedback mechanism in place whereby managers at different stores provide a suggestion about customer behaviour. Inditex then uses this information to improve its designs to meet customer demands. While on the other hand, Anita Dongre, the Indian fashion designer had launched three different brands AND, Global Desi and an eponymous brand having identified different target markets. AND comprises of western wear, Global Desi comprises of Indian wear and the eponymous brand caters to brides. This way the designer could reach a larger consumer pool, at the same time, keep true to the core of having a narrow target base.
These two companies provide a glimpse as to how the two components are incorporated into their marketing plans. It can now be found whether the companies at hand are following these twin components of a good marketing plan
To write this research, secondary data has been used, which includes online websites like Business Insider, Success Story and Forbes. Other forms include articles from newspapers like Los Angeles Times and The Guardian and blogs like FashionUnited written by experts. The reason for specifically choosing H&M and Forever 21 for conducting this research is because these companies are two of the most successful retail-clothing companies earning annual net incomes in billions. They both follow vastly different marketing plans. The aim of this research paper is to determine which company will survive in the long run.
The focus of the brand is to launch new styles and quality products available at reasonable prices. At least 25% of the stock works on the principle of fast fashion, i.e. the philosophy of quick manufacturing at an affordable price.
H&M has a good marketing plan, with a carved out target market. The target market consists of people within the age group of 13-40; mostly middle-class, interested in purchasing quality merchandise at affordable rates. Recently, the company has introduced premium collections in collaboration with acclaimed designers to expand its target market and reach people from higher socio-economic backgrounds. This is because being a high-street brand, the company used to miss out on the exclusive circle of customers who only shop at luxury brands. Now with their premium collection like the recent BalmainxH&M collection and association with designers like Karl Lagerfeld, Roberto Cavalli, etc. the company is set out on a new path to grab a larger pool of customers.
To attract customers and keep customer loyalty, the company undertakes various schemes and promotional activities. One such scheme is the voucher system in which customers can exchange old clothes for a 15% discount on their next purchase. This discount has to be claimed within a certain number of days which again triggers more purchases. The company is also looking into a mobile service scheme under which customers receive SMS. These SMS are treated as coupons to be cashed in retail outlets. Recently, H&M offered a 20% discount on a one-time purchase provided customers signed on their website. In terms of promotional activities, H&M spends heavily on advertisements. They have regular commercials on television featuring the most sought-after models in collaboration with international agencies and style icons and also advertise in magazines like Vogue Netherlands, British GQ, etc. Besides this, they also engage customers in social media, occasionally tweeting about their latest collection.
The company’s expenditure on advertisements has paid off as it is now the second largest retail company in the world. It has left no stone unturned to keep a steady flow of customers. However, the company is not without its own legal issues. It has come under fire for social and environmental degradation. In a bid to address these issues and improve the quality of their products, H&M has published the Sustainable Report in 2016. As their website states: “Looking good should do good too. That’s what our sustainability work is all about. To make sure our customers wear our products with pride we have to be conscious in all our actions.” By 2020, it vows to use 100% sustainably sourced organic cotton.
Christopher Lee, Forever 21’s senior vice president in 2008 said that the goal is ‘to become a global retail conglomerate’. In 2016, much of this vision has become a reality. This could be achieved because Forever 21 works in a vastly different model from most retail clothing companies. Working on the fast fashion principle, there is a constant influx of new merchandise as the company delivers fast, and at affordable rates for quality products. To keep up with this, they have a host of merchant designers, unlike other retailers who have acclaimed ones.
‘They run lean and mean,’ said Debra Stevenson, president of Skyline Studios, a consulting firm in Los Angeles. ‘They have a lot of young people working for them, and they do understand their culture.’
The company clearly knows what it is doing. Their marketing tactics are also vastly different. They focus very little on advertising in the traditional sense, i.e. launching high-profile commercials and T.V ads, but instead prefer to invest in stores and rely on word-of-mouth to spread their brand. As Marketing Manager, Linda Chang says, ‘We’ve never done much traditional advertising, we thrive on grass roots marketing’. The company seeks to create a buzz with its social media presence. Its Facebook page boasts 6.5 million likes while Instagram and Twitter have also played a substantial role in increasing its visibility across the world. The company also has a dedicated channel on Youtube with 10,000 subscribers and 1 million views. Since the company does not spend much on advertisements in magazines and T.V, Youtube has been the forum to showcase their videos.
This is a smart tactic considering their customer base consists of the pool of cost-conscious people between the ages of 13-30 who are more into social media than reading magazines, or watching T.V commercials. In this way, they save millions on advertising every year since social media is free, and at the same time, reach the world. Having identified their core target group, the company has proceeded to introduce maternity wear, plus size wear, boots and accessories to broaden the target and increase sales. The ambitious growth plan continues. This time, the goal is to double the size, i.e. bring the store count to 1,200. To achieve this, Forever 21 has taken the next step by introducing F21 Red, which offers ultra-cheap clothes at bargain prices. However, Forever 21’s marketing plan lacks product focus, as the company takes no initiative to improve the quality of their products.
The company has a host of legal controversies surrounding it. While it has been charged with violating labour laws, the most prominent black spots are the copyright controversies. Also known as ‘design piracy’, the company is one of the most notorious copyists with around 50 lawsuits filed against them for ripping off designs from other retailers. The company was never found guilty on any of the occasions primarily because it has a systematic way of dealing with this. What the company does is that it settles lawsuits outside the courtroom, which makes it cheaper as it is widely believed that the company has separate funds to deal with such issues. This clearly suggests the company actively copies various designers to meet its express delivery.
H&M vs. Forever 21
With vastly different marketing plans and similar goals, both these companies are competing with each other for the same market share. In terms of prices, Forever 21 has cheaper options as compared to H&M, but H&M wins the bid for better quality products. In terms of the fast fashion concept, H&M is slower in producing newer designs and Forever 21, quick in response to customer demands, produces designs faster and has more options. Their stores are always stocked with new and trendy things. This can potentially harm H&M if other companies like Forever 21 continue to introduce new design every week. However, H&M has an edge with their celebrity lines which is prominently absent from Forever 21’s marketing plan. H&M partners up with fashion designers to design a limited collection and also have celebrities to exclusively promote their products.
On basis of this analysis, it can be concluded that H&M will survive in the long run. There are two important reasons that can be drawn from the analysis. While both companies have faced legal controversies, Forever 21’s blatant refusal to accept responsibility will ultimately hurt its reputation. Besides, the company continuously knocks off designs from the runway, selling the same design at very low prices thereby solidly affecting its own repute. It is also reported that the quality of the merchandise, especially the ones in the lower range, are of a sub-par level and starts fading after two-three washes. The company is surviving on the idea that people want more and more clothes. However, the new trend of minimalism propagated on social media websites and lifestyle blogs may adversely affect the company’s sales. There is a possibility that the next generation might start preferring quality over quantity, and this would make it even more difficult for Forever 21 to survive. On the other hand, H&M has a more sustainable marketing plan. Regarding its legal controversies, the company has taken note of its responsibility and subsequently, it had published The Sustainability Report in 2016. The company is vocal about its aim to make production sustainable. H&M definitely has better quality clothing than Forever 21, although it does match Forever 21’s variety. It is highly unlikely that H&M will be very affected by this minimalist trend. This can be concluded because the company has an edge with its celebrity lines which is manufactured in collaboration with famed designers. H&M also has its own team of celebrities for promoting the brand. This appeals to customers who see their favourite stars condoning this brand, and if minimalism is the trend, they would definitely go for the brand which has more credibility. Besides, the discrepancies in price margins between the two companies are not much either. Hence, H&M has a better chance of survival in the future. However, both the companies are at a threat from the new brands like Sephora and GAP cropping up and will have to compete aggressively to maintain their stake in the market share.
Which one do you prefer?
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© 2018 Priya Barua