November 2015 Edition of BEACON, A Monthly Newsletter by SIMCON.
Inside this issue:
About Us
Our Team
INDUSTRY ANALYSIS : Retail Industry
COMPANY ANALYSIS : Future Retail
BRAND ANALYSIS : H&M
Concept of the month: Simulation Advantage
2. VOLUME 03BEACON
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Contents
ABOUT US
OUR TEAM
INDUSTRY ANALYSIS
COMPANY ANALYSIS
BRAND ANALYSIS
CONCEPT OF THE MONTH:
SIMULATION ADVANTAGE
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OUR PRESENCE
ABOUT US
VISION
The SIMCON - SIMSREE consulting club is an
initiative started in 2012 for those students in
pursuit of excellence in management consulting
and strategic management. Aimed at creating
awareness among the students about consultancy
as a discipline, the club strives to maintain strong
relations with top consultancy firms and provide
platform to craft highly skilled & competent
consultants from SIMSREE. The club is a resource
for information about consulting and a place for
students to obtain real-world consulting experience.
SIMCON provides an avenue of interaction among
faculty, students and alumni through competitions,
live projects, guest lectures, and conclaves. For
this purpose the club has also been publishing its
monthlynewsletter– BEACON (BE A CONSULTANT)
and maintains a FACEBOOK PAGE where latest
news and development in the consulting industry
are posted.
MISSION
To create awareness amongst the students
about consulting industry & its latest trends.
To maintain strong relations with top
consultancy firms.
To provide platform to craft highly skilled &
competent consultants from SIMSREE.
To provide exposure to students via
competitions, live projects, guest lectures &
conclaves.
Contributions invited:
To make this feature a successful effort, we seek continued involvement and contribution from our readers, that is YOU. We
invite articles, research papers, and trivia on themes related to consulting. Be it industry news, consulting trends, a joke, a
cartoon or feedback, we are eager to hear from you. So go ahead, do your research, pen down your thoughts and mail your
entries to simcon.simsree@gmail.com.
Best Regards,
SIMCON - SIMSREE CONSULTING CLUB
4. VOLUME 03BEACON
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`
OUR TEAM
SANANDANDESHPANDE
NIKHILRAO
AMEYAMAHABAL
CHITRAWANI
DEEPESHJETHWANI
PRATHMESHINDANI
SUSHILGURAV
5. VOLUME 03BEACON
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OUR TEAM
ARPIT AGARWAL
ASHAYDHURI
HUZEFABODABHAIWALA
KARANCHOPRA
NAMANCHANDAK
PRACHIKORE
SARANGKULKARNI
YOGESHMOHATA
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Industry Overview
The retail industry in India is one of the fastest
growing industries in world. The retail market in India
is considered to have high market potential, moderate
political risk and low economic risk. As per a report by
AT Kearney in 2015, India is ranked eleventh on basis
of market potential of the retail industry globally.
According to the same report, India is ranked third
after China and Brazil in terms of net retail sales. As
a result, the sector has been attracting attention of
foreign investors.
Retail is one of the most dynamic and fast paced
industries due to the entry of several new players. As
per a report published by Boston Consulting Group
and Retailers Association of India, the retail market
in India is expected to nearly double to reach US$ 1
trillion by 2020 from the existing US$ 600 billion in
2015. The report adds that retail spending in top seven
cities in India was US$ 57.6 billion. It is also expected
that online retail will be at par with physical stores
in next five years. The online retail segment in India
is growing at an annual rate of 35% which is a good
sign for retail sector when growth of physical stores is
diminishing.
Market Size Over The Years
0
200
400
600
800
1000
1200
2020E20152012201020082006200420022000
204
238
278
321
368
424
518
600
1000
Market Size (US$ Billion)
Segments
Store Format
Retailing Based On Merchandise Offered
Retailing Based On Ownership
Independent retailer:
When a retail store is owned or operated by the same
person. A chain retailer or a corporate retail chain: A
chain retailer is one who owns has 2 or more outlets.
Franchises:
When franchiser and franchisee have a contract
between them which allow franchise owner to conduct
a business under famous name in return for certain
compensation.
Leased Department:
When a section in retail store is rented to another
party, it is called Leased Department.
Consumer co-operative:
When a retail institution is owned by customer who is
member of it, it is called Consumer co-operative.
Non-store Format
Non-store formats are the ones where end users are
served without meeting them in the physical store.
They are represented by catalogue retailing, e-tailing,
telemarketing, television home shopping, and vending
machine selling.
Service Based Retailing
Service retailers provide different services to
customers
e. g. Car rental, banks, service contracts
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Market Share
Unorganised retail penetration
Organised retail penetration
Organised Retail Penetration (2015)
92%
8%
Major Domestic Players
1. Future Retail
Future Retail was established in 1987 and is
involved in multi brand retail trade. The current
market capitalization of future retail is Rs.6473
crores. It has around 400 stores in 122 cities. The
stores are operated under various names such as
Big Bazaar, FBB, eZone, Foodhall and Hometown.
The company has operations in various areas such
as fashion, food, electronics, and homeware.
2. Reliance Retail
Setup in 2006, Reliance Retail operates
supermarkets, hypermarkets, convenience stores,
cashandcarrystoresandspecialtystores.Itsoutlets
offer food, groceries, electronics, farm implements,
home improvement and lifestyle. It has established
partnerships with many international brands such
as Diesel, Paul & Shark, Superdry, Thomas Pink,
Brooks Brothers, Grand Vision, Hamleys and
many others. It operates 1723 stores pan India
with about 11 million square feet of retail space.
3. Trent
Established in 1998, Trent is a part of the Tata
group and currently has a market capitalization
of Rs.5124 crores. It operates Westside (offers
clothes, footwear, accessories, furnishing and
artifacts), Star Bazaar (offers staple foods, health
and beauty products, beverages, fruits, vegetables,
dairy and non-vegetarian products), Landmark
(offers products in books and music category) and
Fashion Yatra (offers low cost fashion products).
The company is headquartered in Mumbai and has
pan-India operations.
4. Aditya Birla Retail
Aditya Birla Retail Limited, incorporated in
1988, is the retail arm of Aditya Birla Group. It
operates a chain of food and grocery retail outlets,
supermarkets and hypermarkets in India. Its
product offerings include bakery products, fruits
and vegetables, beauty concepts, fast moving
consumer goods, beverages, electronics, fitness
products, home decoration products, etc.
Recent M&A Deals In Indian Retail Industry
Acquirer
Name
Target
Name
Year Deal Type
Morgan
Stanley
Flipkart
June
2015
Private Eq-
uity
InnoVen-
Capital
Sportsbi-
zPrivate
Limited
July
2015
Private Eq-
uity
Kalyan
Jewellers
India Pvt
Ltd
Warburg
Pincus
Oct
2014
Private Eq-
uity
Celio
Future
Lifestyle
Fashions
Limited
Oct
2014
Private Eq-
uity
Flipkart Myntra.com
May
2014
Acquisition
Soft Bank Snapdeal
Oct
2014
Private Eq-
uity
Warburg
Pincus
Biba Appar-
els
Dec
2013
Private Eq-
uity
Hassan
Food Co
Bush Foods
Overseas
Pvt Ltd
Apr
2013
Acquisition
Trent Ltd
Landmark
Ltd
Feb
2013
Acquisition
Future
Venture
India Ltd
Big Apple
(conve-
nience
store)
Sep
2012
Acquisition
Peter En-
gland Ltd
Pantaloons
Retail India
Ltd
Sep
2012
Acquisition
Pantaloons
Retail In-
dia Ltd
R&R salons
May
2012
Private Eq-
uity
Phoenix
Mills Ltd
Classic
Housing
Projects Pvt
Ltd
Mar
2012
Acquisition
Flipkart
online ser-
vices Pvt
Ltd
eTree Mar-
keting Pvt
Ltd
Feb
2012
Acquisition
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Porter’s Five Force Analysis
1. Threat Of New Entrants – Medium
Entry into market for a firm in the retail industry
is moderately easy. But it is difficult for a newly
established firm to establish favorable contracts
and be profitable initially. It is very difficult for
a small firm to compete with chain stores which
have centralized buying. But if the new entrant has
financial capacity to compete with an established
firm, then it represents a strong threat as it would
employ substantial resources and aggressiveness
to gain market share.
2. Bargaining Power Of Suppliers – Low To Medium
There are a number of supplier in retail industry.
As a result, supplier tend to have very little control
when negotiating with major firms. However,
suppliers can affect the new entrants. Suppliers can
also threaten by competing directly with existing
firms by forward integration.
3. Bargaining Power Of Buyers – Low
Customers have very little bargaining power with
retail stores. These stores generally have fixed
prices and hence the buyer cannot negotiate on the
prices. However, if the buyer wants to buy in bulk,
then it is possible to bargain.
4. Threat Of Substitutes – Medium
Retailers generally offer a wide variety of products.
These products may also be available at some
other store. As a result, retailers who offer unique
products have a competitive advantage.
5. Intensity Of Rivalry – High
There are many firms competing for market share
in the retail industry. Entry of foreign firms and
e-retailers have intensified competition. The
growth in the retail market is slow and hence firms
have to fight against each other for market share.
As a result, there is cutthroat pricing competition
among the existing firms.
Growth Drivers
Rise In Internet Users
Though we are yet to achieve a good internet
penetration level, the user base in India is continuously
increasing at a high speed. This is encouraging more
and more companies to go online. It costs less as it
saves the space as well as manpower required for
physical stores.
Low Penetration
India is a country with low organized retail penetration
which stands at 8%. That means it has untapped
market of 92% which shows large growth potential for
retail businesses.
Rising Income Levels
Growing Indian economy has spurred consumption.
Indian economy which is currently growing at around
7.3% has increased disposable income. This rise in
disposable income has changed the consumer buying
behavior and in turn benefitted retail industry.
Government Policies
On Nov 12, 2015, Government allowed single brand
retailers with FDI to sell online through their own
online platforms. Also, this move will allow local
brands to leverage foreign investment. Though, the
rule that mandates single-brand retailers to locally
procure 30% of their goods sold in India over a span
of five years remains unchanged.
Demographics
The increase in young population is a promising
factor for retail industry. India is one of the youngest
consumer markets in the world. It is expected that
over 53% of the population will be under the age of 30
by 2020. Furthermore, this population will be more
dynamic than the previous generations because their
consumption is driven by wants rather than needs.
Road Ahead
The soaring e-commerce sector has brought revolution
in retail industry. There is a substantial increase in
number of smartphone users and also the number of
online purchases. With the help of that, these brands
canreachouttotheircustomersindifferentgeographic
segments. It will also save cost of real estate, as it is
important to be cost effective in this industry which
has a lot of competitors.
References
Fibre2Fashion,Dnb,Ibef,InvestIndia
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Company Overview
Future Retail is the flagship company of Kishore
Biyani’s Future Group, India’s retail pioneer catering
to the entire Indian consumption space. It is India’s
leading retailer, it inspires trust through quality
products, innovative offerings, and affordable prices
which help customers achieve a better quality of life
every day. It serves customers through over 10 million
squarefeetofretailspacein95citiesacrossthecountry.
Through multiple retail formats, it connects a
diverse and passionate community of Indian sellers,
buyers and businesses. Each year over 300 million
customers walk into Future Retail stores and choose
products and services supplied by over 30,000 large,
medium and small manufacturers and entrepreneurs
from across India.
Company operates multiple retail formats in the
hypermarket, supermarket and home segments of the
Indian consumer market including:
• Big Bazaar - A unique Indian hypermarket chain.
• Fashion at Big Bazaar - Affordable fashion
destination aimed to make India thoda aur stylish.
• Food Bazaar - A hitherto unseen blend of a typical
Indian bazaar and International supermarket
atmosphere.
• Foodhall – A premium lifestyle food destination.
• eZone–eZonebringstoyouthelatestinelectronics
at the lowest prices.
• Home Town – One-stop destination for every need
of the aspirational Indian home owner.
Management
Name Designation
Mr. Kishore Biyani Managing Director
Mr. Rakesh Biyani Joint Managing Director
Mr. S Doreswamy
Non-Executive Independent
Director
Mr. Anil Harish
Non-Executive Independent
Director
Mr. Bala Deshpande
Non-Executive Independent
Director
Mr. V.K. Chopra
Non-Executive Independent
Director
Mr. Vijay Biyani Executive Director
Evolution Over The Years
FutureGroupforaysintoM-CommercewiththeT24MobileApp.BhartiRetailjoinshands
withFutureRetail
2015
2014
Future Group partnered with the Fortune 500 Company and one of the largest online
shoppingdestinations,Amazon
BigBazaarandEzonewerevotedasoneoftheTop50MostTrustedBrandsinthecountry
intheBrandEquitySurvey2013conductedbyNielson.ThesurveyalsorevealedthatBig
Bazaaristhe4thMostTrustedServiceBrandofthecountry2014
FutureGroupenteredelitegourmetretailingwiththelaunchofitsfirstgourmetfoodchain
FoodhallinMumbaion26thMay2011
2011
BigBazaardonsanewlookwithafreshnewsection,Fashion@BigBazaar
Big Bazaar crosses the 100-store mark, marking one of the fastest expansions of the
hypermarketformatanywhereintheworld
2008
BigBazaarlaunchedIndia'smostpopularshoppingfestival:SabseSastaDinon26thJanuary
2006
FoodBazaar,thesupermarketchainislaunched.
2002 PantaloonRetailentersmodernretailwiththelaunchofthefirst8000-sq.ft.storePantaloons
inKolkata.
1997 InitialPublicOffer(IPO)ofsharesbytheCompany
1992
Company'snamechangedtoPantaloonFashions(India)Limited
1991
ThecompanyisincorporatedunderthenameofManzWearPrivateLtd.
Pantaloons,oneofIndia'sfirstformaltrouserbrands,islaunched.
1987
2014
2011
2008
2006
2002
1997
1992
1991
1987
2015
Shareholding Pattern
Nbanks Mutual Fund
Financial Institutions
General Public
Foreign Institutions
Other Companies
Promoters
Shareholding Pattern
52%
20%
20%
4%
2% 2%
Key Financials
The company has been showing growth trend during
the financial year under review. During the year the
company has recorded growth through increase in
presence in various cities. Income from operations
for the financial year 2014-15, for the year under
review was at Rs. 10,341.66 Crore, which was at Rs.
11,577.44 Crore (on 12 months ended March 2014
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basis Rs.9,241.16 Crore) during the financial period
of 2013-14.
EBIDTA excluding exceptional items, stood at Rs.
1,142.76 Crore during the financial year 2014-15,
which was at Rs. 1067.50 Crore (on 12 months ended
March 2014 basis Rs. 887.11 Crore) in the previous
financial period. PAT for the financial year under
review was Rs. 74.06 Crore, which was at Rs. 2.81
Crore (on 12 months ended March 2014 basis Rs. 7.71
Crore) for the preceding financial period.
During the financial year 2014-15, the Company is
operating through 11.36 million square feet of retail
space, spread over pan India basis.
0
80
160
240
320
400
Consolidated
Standalone
Mar' 15Mar' 14Dec' 13Dec' 12Sep' 12
293.65
341.34
273.26
341.91
94.84
1.18 2.81
158.29
74.06
Profit After Tax (Rs in Crore)
Future Retail's value formats continue to see strong
growth compared to previous years. In year 2012-
2013 lifestyle, home retail same-store sales declined.
Home retail business in particular has continued to be
a drag on the overall growth, with sales declining for
four quarters.
Same-store sales growth at its lifestyle format, which
includes Central, Brand Factory and Planet Sports,
declined by 12.7%, sales at its home retail format,
which includes e-Zone consumer durables outlets
and Home Town, declined by 4.1% and sales at its
value retail formats Big Bazaar, Food Bazaar and FBB
(Fashion at Big Bazaar) outlets grew 8.1%. The results
are not really comparable since the results don't
include Pantaloons and Pantaloon Factory outlet
format, which were demerged in April.
0
6000
12000
18000
24000
30000
Consolidated
Standalone
Mar' 15Mar' 14Dec' 12Jun' 11Jun' 10
Net Sales (Rs in Crore)
6316
4101
6987
11577
10341
9369
12225
20186
13897
11057
0
4
8
12
16
20
Consolidated
Standalone
Mar' 15Mar' 14Dec' 12Jun' 11Jun' 10
Return on Capital Employed %
11.12
6.00
7.53 7.57
6.70
8.63
7.63
16.81
8.91
7.01
0
2
4
6
8
10
12
14
FY2015FY2014FY2012FY2011FY2010
EPS (Rs)
3.18
6.54
12.19
3.47
5.69
The liquidity ratios have decreased as compared to
last year which shows that the value of current assets
has become lesser as compared to the value of current
liabilities.
FRL’s average current ratio over the last 5 financial
years has been 1.58 times which indicates that the
Company has been maintaining sufficient cash to
meet its short term obligations.
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0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
Quick Ratio
Current Ratio
FY15FY14FY12FY11FY10
Liquidity Ratios
1.13
1.03
1.22
1.02
1.14
0.84 0.84 0.81
0.49
0.65
SWOT
• Wide Presence in India covering
almost all major cities and towns.
It has over 1,000 stores across 90
cities
• High brand equity
Presence of Online store
• Variety of products under single
window increasing the chances of
customer time and buying.
• Efficient ,cost conscious and
quality service
• Presence Only in India and
susceptible to foreign players.
• Future Debt Rating - total debt
amounts to 4200 Cr.
•Heavily crowded during festive/-
discount seasons. The customer
gets agitated as he has to go
through a long waitng time.
• Global expansion or tie-ups with
international brands
• Tapping new markets in the
country and addressing the needs
of people in other suburban towns.
• Evolving customer preference
from traditional retail stores and
outlet stores to these super and
hyper markets.
• New Products and Services can
be offered.
• Global players(for example
Walmart) trying to enter the
Indian market
• Low priced product could be
perceived as low quality product
• eg. fbb (fashion by big bazaar)
Strengths Weaknesses
Opportunities Threats
Competitor Analysis
Name Last Price
Market
Cap.
(Rs. cr.)
Sales
Turnover
Net
Profit
Total
Assets
Future
Retail
137.85 5,895.79 10,341.66 74.06 9,398.85
Trent 1,419.00 4,715.56 1,358.00 100.03 1,446.92
Shoppers
Stop
367.70 3,068.34 3,041.99 40.74 1,223.20
Kewal
Kiran
1,995.00 2,458.84 408.32 66.25 331.16
Panta-
loons
Fash
216.65 2,010.37 1,850.73 -228.14 1,581.20
Future
Life
75.00 1,421.39 3,134.10 18.55 2,719.12
V-Mart
Retail
447.90 808.67 720.50 37.37 235.09
Trent Ltd.
Trent Ltd, a Tata Group company, is one of the oldest
retail players with presence in the lifestyle and value
retailing business. The company operates in many
formats namely Westside, Star Bazaar, a hypermarket
chain, Landmark, books and music chain, and others
including Sisley, Fashion Yatra, Zara and Treasury. The
company has tied up with global retailers like Tesco
and Inditex to further the growth of its format stores
Star Bazaar and Zara respectively.
Shopper’s Stop
Shoppers Stop is the pioneer of pan-nation one-stop
retail outlets. The total area of operations of Shoppers
Stop, (50 departmental stores in FY12) and its various
formats total to 4.6 m sq feet. While the group
primarily caters to the lifestyle retailing segment, it has
forayed into specialty retailing and through associates
it has ventured into formats like large hypermarkets,
entertainment zones, F&B concepts and airport
retailing. Its list of stores includes the flagship Shoppers
Stop, Home Stop, book store Crossword, HyperCITY,
Mothercare and others.
Kewal Kiran
Incorporated in 1981, Kewal Kiran Clothing Limited
today is amongst the few large branded apparel
manufacturers in India. With 5 units, an annual
capacity of 25 lakh pieces, over 800 employees,
the latest technologies in jeans manufacturing, the
company ability to innovate in manufacturing enables
it to quickly go from design to market. Its list of brands
is: Killer, Lawman, Easies, Integriti, K-lounge.
Future Outlook
The Board of Directors of the Company has approved
the composite scheme of arrangement for the
consolidation of the retail and retail infrastructure
businesses of Bharti Retail Limited (BRL) and the
Company. This will be achieved by way of two
simultaneous demergers i.e. the FRL Demerger and
the BRL Demerger as part of the composite scheme
of arrangement. Both the Companies will be under
control of the Future Group.The Company continues
to explore possibilities to monetise its non–core retail
investments which will help in improving liquidity
and net worth position of the Company.
References
Future Retail, Equitymaster, MoneyControl
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H&M offers customers inspiring shopping experiences
in 61 markets, as well as through a growing shop
online. The store that opened in Västerås in Sweden in
1947 has become a global fashion company. Expansion
is long-term while maintaining quality, sustainability
and high profitability.
The H&M Group offers fashion from the H&M, COS,
Monki, Weekday, Cheap Monday and & Other Stories
brands, along with home interiors at H&M Home.
H&M History
was open, or the equivalent of 5,000 pairs of jeans
and 10,000 tops sold. The store opened its doors to
2,500 eager fans who had queued up outside overnight
to be among the first to get their hands on H&M's
merchandise.
H&M made in one single day what a smaller store like
Puma or Adidas would make in one year. Brands in
the vicinity, too, benefitted from the opening of the
H&M store, which occupies 25,000 square feet. My
Square food court and US coffee chain Starbucks
logged their highest daily sales. Starbucks generated
sales of Rs 4.75 lakh.
H&M Brand Portfolio
H&M STP Analysis
Segmentation Strategy
These are approaches to subdivision of a market
or population into segments with defined similar
characteristics. Demographics and psychographic
segmentation are used for H&M to reach all their
customers. H&M is spread throughout the world.
This means that the company targets many religions,
culture and lifestyle. Therefore, their marketing has to
be done differently in different areas.
1. Segments by class: H&M strategy is offering high
fashion at low prices, typically targeting working
class, lower middle class and students.
2. Segments by class/home: The most popular segment
is women aging between 15 and 30 years, either
2015
2014
2014
2011
2008
2006
2002
1997
1992
1991
1987
1947
1964
1968
1974
1976
1977
1980s
1990s
2004
2007
2009-
2010
2011-
2012
2013
The first store opens inVästerås, Sweden, selling women’s Clothing.The store is called
Hennes.
The first store outside Sweden opens in Norway.
Founder Erling Persson buys MauritzWidforss, a hunting and fishing equipment store.
Sales of men’s and children’s clothing begin.The name is changed to Hennes & Mauritz.
H&M is listed on the Stockholm Stock Exchange.
The first store outside Scandinavia opens in London, in the UK.
Impuls stores, focused on teenagers, are launched. Sales of cosmetics begin.
Stores open in Germany and the Netherlands. H&M acquires the mail order company Rowells.
Progress continues in Europe with the opening of the first store in France in 1998. Newspaper
and magazine advertising is complemented by outdoor advertising featuring famous models.
In 1998 H&M online shopping begins. In 2000The first US store opens onFifth Avenue in New
York.
H&M initiates designer collaborations starting with Karl Lagerfeld. More collaborations follow
with Stella McCartney,Viktor & Rolf, Madonna, Roberto Cavalli, Comme des Garçons, Matthew
Williamson, Jimmy Choo, Sonia Rykiel, Lanvin,Versace, Marni, David Beckham, Anna Dello
Russo, Maison Martin Margiela, Isabel Marant and AlexanderWang.
The first Asian stores open in Hong Kong and Shanghai. In the same year, the new concept store
COS is launched. In 2008 H&M opens its first Japanese store inTokyo and acquires fashion firm
Fabric Scandinavien AB, which comprises the brandsWeekday, Monki and Cheap Monday.
The first H&M stores in Russia open. Beijing also gets its first store.Weekday and Monki open in
Germany.The first H&M stores in South Korea andTurkey open. Israel becomes a new franchise
market. Online shopping starts in the UK. H&M becomes the world’s largest consumer of organic
cotton and continues to increase its use of sustainable materials in the following years.
H&M opens in Romania, Croatia and Singapore, and via franchise in Morocco and Jordan. COS
opens in Sweden, and Monki and Cheap Monday in the UK.The H&M Incentive Program – a
reward and recognition programme for all employees – starts. COS and Monki launch online
shopping in 18 markets. H&M opens in Bulgaria, Latvia, Malaysia, Mexico, andThailand.
The first H&M store in the southern hemisphere opens in Chile. H&M also opens in Estonia,
Lithuania and Serbia. Indonesia becomes a new franchise market. H&M introduces online
shopping in the US.
H&M In India - 2015
Hennes & Mauritz clocked more than Rs 1.75 crore
in sales on the opening day of its first store in India,
almost double what its largest rival Zara sold on its
inaugural day five years ago at the same location,
Select CityWalk mall in New Delhi.
This translates into an average billing of about Rs
27,000 every minute during the 11 hours the store
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still living at home, in student dorms, or in their
first house in urban regions
3. Segments by age: The most popular segment is
women aging between 15 and 30 years commonly
known as generation Y, ambitious with high
buying power.
4. Segments by family life: Typical college to graduate
females life at home single, on their own in dorms
or in their first home, either single or as a young
couple without children.
Influences:Cultural,social,personalandpsychological
influences result in a lifestyle and personality. This
group is looking for affordable fashion and typically
shop at more than one store. They are fashionable
consumers whose shopping as a social activity
providing pleasure in their daily lives. They buy clothes
each season, want to follow trends and are very up-to-
date.
According to Maslow’s hierarchy of needs, they would
fit perfectly in the social part: belongingness/love
Decision making: A consumer follows the "consumer
decision-making process". Step one on the process is
to recognize a need, step two (if needed) to search for
internal or external additional information about the
product or service. Then the consumer evaluates the
new information to make the decision to purchase,
or not. In H&M's case the typical costumers are
following something similar to the decision making
progress: "routine response behavior". Which means
the consumer is frequently buying a low-cost product
or service with little search and decision time. This
process can be compared to the impulse shopping
many H&M consumers do because of their ongoing
sales and over all low prices
Targeting Strategy
The selection of potential customers to whom a
business wishes to sell products or services. The target
customers of H&M belong to the group of fashionable
and trendy consumers who see shopping as a social
activity provide pleasure in their daily life, who wants
to follow the trends without investing a lot of money.
The target market for H&M is for younger people.
Even though H&M offers clothing and accessories for
all ages, their target market is women. Women usually
shop more for them, but also buy all their children's
clothing and often their husbands as well. With their
low prices H&M targets woman in the lower middle
class and working class, this is a concentrated targeting
strategy. Because their focus is to sell a fashionable
product for a low price they target married to single
woman, mothers and daughters. Many single young
women who always want to stay on top of the fashion
trends are constantly upgrading their closets with
H&Ms new affordable items. The consumers are
not highly brand loyal; rather they shop at multiple
retailers in search for the perfect fashion pieces. They
shop anywhere from four to six stores on average.
Customer attractiveness is high, customer loyalty is
low. According to dancehall dilemma theory, these are
targets for conversion, attractive enough to be worth
chasing.
Positioning Strategy
Is a marketing strategy that aims to make a brand
occupy a distinct position, relative to competing
brands, in the mind of the customers? H&M is a
retailer that is looking to provide consumers with
fashionable, high-quality clothing at the best price
possible. They offer “fast-fashion” clothing, in other
words from runway to racks in record time, and sell
European influenced clothing in the American market.
The company is the second largest clothing retailer in
the world, the largest in Europe and actively engages
in E-retailing. H&M is also economically, socially, and
environmentally sustainable
Social Media Marketing By H&M
Facebook
H&M has attracted more than 14m fans to its
Facebook page and posts several updates a day
except on weekends. Most of the updates focus solely
on promoting its products, but in among the blog
standard "buy these trousers" posts there are some
really neat promotional ideas. For example, the retailer
clearly does a lot of blogger outreach and often links
to third-party blog posts and articles on its H&M Life
site. Similarly, H&M has run several competitions
recently that require fans to submit their own photos
for a chance to win, which is a great way to encourage
engagement that is relevant to the brand and more
meaningful than just asking for a ‘like’ or re tweet.For
example they asked entrants to post photos of their
best ‘bike style image’ on Instagram using the hashtag
#HMBikeStyle for the chance to win clothes from the
H&M Brick Lane Bikes collection.
Twitter
H&M has created separate Twitter feeds for each of
the local markets in which it operates, but each one
uses the same background and header image so the
branding is obviously closely controlled. The feeds
appear to be equally poor at responding to other users,
with each tending to churn out marketing messages
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rather than answering queries or @mentions. Looking
at the main corporate account for example, it tweets
a number of product images, links to blogs and
competition promos each day, but generally responds
tofewerthan10@mentions.Andmostoftheresponses
tend to simply be messages directing the query to the
dedicated customer service feed.
One noteworthy Twitter campaign by H&M recently
was a Q&A with brand ambassador David Beckham.
The footballer responded to around 30 questions
from fans using the hashtag #AskBeckham, including
queries about his fashion mistakes, plans for the future
and his favorite goal. This is a great use of Twitter as
it gives fans a unique opportunity to speak to a global
celebrity, though it obviously required H&M to spend
millions on sponsorship.
Google+
H&M has more than 2.5m fans for its G+ page, which
it updates on a daily basis, however as with most
brands engagement remains relatively low.Though
the imagery used is always eye-catching the posts
generally only attract a few hundred +1s and tens of
comments.
H&M Co-Branding
H&M initiated its collaboration with designers
with Karl Lagerfeld in 2004 and collaborations in
subsequent years include Stella McCartney, Viktor &
Rolf, Primadonna SpA, Roberto Cavali, Comme Des
Garçons, Matthew Williamson, Jimmy Choo, Sonia
Rykiel, Lanvin, Versace, and Marni.
H&M co-brands receive a high media exposure and
co-branded items become most sought-after. The
whole collection of Marni for H&M was sold out by
lunchtime of the first day of opening in London in
March 2012. By collaborating with a luxury designer
fashion brand, a fast fashion brand like H&M can
increase its brand equity as well as its brand image.
Collaborations between fast fashion and designer
fashion brands, which is recognized as ‘fast fashion co-
branding’, has shown an incredible market response
across countries as it can create a win-win situation for
the brands involved.Co-branding between two brands
isaboutmakingajointeffortsuchascreatingmarketing
synergy to appeal to brand loyalists and consumers
new to either brand. This is particularly important for
the fashion industry because a brand name or logo
provides a key function for business operations and is
an important means to attract consumers for building
a relationship with the brand.Consumer perceptions
of luxury brands can vary among consumers, but
consumption of luxury products appears to have
a strong social function. The social dimension
of luxury value perception refers to the perceived
utility that consumers acquire by consuming products
or services recognized within their own social groups..
Fast fashion brands are driven by consumers’ desire for
newness of which products are quickly changing and
available only for a short time frame. Fast fashion co-
brands are then positioned to combine the strategies
adopted by their parent brands. Fast fashion co-brands
usually available in the form of a limited collection,
which will be discontinued after a short period of time
and they emphasize trendiness and newness like fast
fashion brands/products
H&M Campaign To Promote Sustainability
Initiatives
H&M is running its first campaign to promote its
clothes recycling scheme as the retailer looks to raise
awareness of its sustainability efforts and encourage
more shoppers to donate unwanted items of
clothingThe ads, which run in The Evening Standard
and Metro, focus on H&M’s “Conscious” range of
sustainableclothes,aswellashighlightingitscollection
service which offers customers a £5 discount voucher
for every bag of clothes they take into stores.
References
H&M, Economic Times
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Simulation Advantage
Experimentation is used to develop and test new
products and services by companies all over the
world. There are many challenges in applying
traditional approaches to experimentation. Cost and
time constraints can saddle the organization with an
unreasonable burden of complexity. Market-facing
tests and pilots can jeopardize a company’s brand and
reputation.
To get rid of these problems, a increasing number
of companies are using many new approaches and
technologies to broaden the scope and impact of
experimentation in their businesses. By doing so they
are creating a “simulation advantage” of achieving
superior “economics of experimentation.” In other
words, these companies are able to generate, test, and
replicate a larger number of innovative ideas more
quickly, at lower cost, and with less risk than their
rivals can.
Techniques For Capturing Simulation
Advantage
Generate And Implement Ideas At Greater Speed
And Lower Cost
Companies are finding new ways to collaborate
among employees and customers to generate a
continuous stream of rich new ideas. Royal Dutch
Shell’s GameChanger unit uses an online collaboration
portal, workshops, and relationships with universities
to gather ideas from contributors both inside and
outside the company. Shell professionals review the
ideas and grant the best ones up to $25,000 in initial
funding for development into investment proposals.
These proposals are then assessed by project-specific
panels, which can allocate more substantial funding
from set-aside budgets. Till now they have evaluated
more than 3,000 ideas. Around 70 percent of the ideas
chosen for development involve at least one individual
from outside Shell. These projects have generated
a large volume of patents, most of which have been
picked up for further development in R&D and some
have also spun off into successful businesses or licenses
to other companies. Royal Dutch Shell estimates that
it has invested $250 million in GameChanger projects
to date.
Process Of Experimentation Needs To Be Made
Faster And Less Expensive
By creating “virtual worlds” for testing product and
ideas, companies have decreased their costs of physical
prototyping and testing. Such environments make it
possible to set up, modify, expand, and rapidly execute
experiments at much lower cost. Kimberly-Clark,
for example are using a 3-D virtual store to gauge
consumer reactions to new products, shelf layouts,
and packaging. This has considerably reduced their
cost of testing new ideas before they scale up.
Increase The Volume Of Experiments
Virtual worlds provide companies greater insights
by increasing the number of variables tested or by
running more tests in parallel. Amazon.com is able
to test numerous page variants on different groups
of consumers and track their resulting behaviour. If
the impact of a potential new feature is statistically
significant, Amazon promptly incorporates it into its
mainstream model.
Reduce The Cost Of Failure
This risk can be reduced by switching to online
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testing or soft launches in friendly communities.
The European telecommunications company Orange
uses its online platform to interact with its customers
at multiple points in the development process using
a suite of methodologies, including co creation
workshops, surveys, and usability testing. This enables
it to modify its products according to the needs of its
customers.
Enhance Predictive Power
Virtual experimentation can help companies capture
a broader range of behavioural data with greater
accuracy. These kind of experiments improve the
accuracy of predictions by providing a view of
customer behaviour not just at the point of purchase
but before and after as well. The predictive value of
experimentation can also be improved through the
use of prediction markets, which collect, collate, and
track many individual predictions of success.
Accelerate Learning And Scale-Up
Simulation advantage can help cmpanies to scale up
and deploy successful experiments more quickly and
comprehensively than their competitors. Wal-Mart,
tests different layouts in its own stores as a regular part
ofitsoperatingmodel.Trafficpatternsandsalesimpact
are measured for each layout, and the most successful
designs are implemented across the country.
An Integrated Approach To Experimentation
Establishing a simulation advantage requires not only
the application of individual techniques and tools but
also an integration of different levers and behaviours.
Developing And Promoting A Culture Of
Experimentation
Simulation-advantaged companies share a number of
cultural characteristics:
• Appreciation of the necessity of having an
experimental approach
• Embracing creative dissatisfaction with the status
quo
• Providing incentives that encourage
experimentation and remove barriers that
discourage it
• Measuring the effectiveness and economics of
experimentation rigorously
• Accepting failure as a necessary part of the
learning process
• Promote collaboration among employees and
other individuals from outside the organization
• Cultivate statistical literacy and a hunger for
information
Reference:
BCG