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H&M is feeling the heat from fast fashion retailers at both ends: affordable (Shein) and aspirational (Zara).
The retailer’s shares fell 4% last week after the company’s June–August local currency sales missed analysts’ 5% growth expectation, Reuters reported.
Analysts told the publication that the figures were a consequence of H&M’s “midmarket” position, and being “squeezed on both sides” by the likes of Zara—whose parent, Inditex, saw a 40% rise in half year net profit, exceeding expectations last week—and Shein, which offers cheaper prices and a variety of trendy products.
On the other hand: But quality and low prices aren’t solely responsible for Zara and Shein’s success. This year, Zara has seen higher earnings thanks to larger stores, which in turn resulted in higher consumer engagement, Bloomberg reported.
The stores are also aesthetically pleasing, have new tech, and employ faster checkout processes. In 2022, Zara expanded 94 of its existing stores and plans to upsize more of its stores, including in London and Paris.
Meanwhile, despite criticism of its labor practices and dubious sustainability efforts, Shein has sought to shift its image by launching a resale program and an incubator program to help emerging designers.
Additionally, its recent partnership with Forever 21 means that fans of the brand in the US will soon be able to shop Shein products at physical locations, a strategy that will likely resonate with a chunk of its customers.
“Shein is seen as the trendiest of trendy fast fashion retailers with the latest styles and lowest prices, while Forever 21 has been aiming for a comeback, as it was the pioneer of fast fashion, but has been leapfrogged by competitors in recent years,” Erin Schmidt, an independent retail analyst, previously told Retail Brew. “Therefore, having Shein items in Forever 21 stores will help to drive more customers and traffic into the stores, which inevitably leads to increased overall store sales as consumers browse other areas of the store, too.”