H&M’s retail model derails
Swedish retailer H&M is facing a profits squeeze after the clothing purveyor was hit by declining sales in southern Europe.
H&M rose to prominence after introducing fast fashion, responding to trends and frequently renewing their ranges with cheap and cheerful products sourced from China.
This encouraged shoppers to update their wardrobes much more frequently but has led to environmental concerns over the volume of cotton garments being discarded in landfill.
That model is now coming unstuck owing to a steep rise in the price of cotton and wage inflation in Chinese factories.
This Far East reliance has proven doubly challenging for H&M as rising freight costs disproportionately affect their costs over stores, such as Zara, which source locally.
A refusal to increase costs in the face of these pressures has hit H&M’s profit margin and a slowdown in the opening of new stores.