By Anna Ringstrom
STOCKHOLM — Budget fashion retailer Hennes & Mauritz launched an e-commerce operation in the U.S. on Thursday, taking on rivals in the world’s biggest online market.
The initiative is highly anticipated and follows successive delays. But retail experts say H&M may struggle to make the kind of profits from U.S. e-commerce enjoyed by pricier rivals.
H&M has prospered in the United States without a big online presence and is mindful of the likely impact on profit margins of the high shipping and return costs associated with such a vast country.
However, with more and more shoppers buying clothes from home, the Swedish firm is speeding up its online roll-out to capture a slice of the growing market.
H&M has grown fast in recent years in the U.S., its second-biggest market, but has twice pulled back from announced dates for the online launch, blaming unexpected complexities in setting up an operation well-integrated with its stores.
Meanwhile, its main rival Inditex and others such as online e-store ASOS have expanded in the market, while Amazon (AMZN) is pushing further into apparel after eBay (EBAY) prospered with its fashion offering.
“You don’t want to lose out on being the port of call for younger shoppers. So H&M should really get in there,” Planet Retail consultant Isabel Cavill said.
Apparel has become one of the fastest-growing online retail segments. H&M has e-stores in eight European countries and says they are now as profitable as its bricks-and-mortar shops.
In North America, a quarter of clothing sales will take place on the Internet in 2030, up from 7 percent in 2011, Goldman Sachs (GS) predicts. Researcher Euromonitor International sees the U.S. online apparel market more than doubling in a decade to $41 billion in 2017.
“Generations of shoppers are growing up for whom the multi-channel is a basic expectation,” said Kantar Retail consultant Bryan Roberts.
Mind the Returns
H&M has been struggling to work out a viable logistics model in the country, where many shoppers expect free deliveries.
“H&M is low-price, quite low-margin and makes it work by selling very high volumes. An issue with that is very high costs for shipping and, most significantly, returns. It’s a particular problem in the U.S.,” Conlumino consultant Neil Saunders said.
Up to half of fashion items sold online are returned. At H&M, a shopper may well buy up to three times as many items than at Zara or ASOS. Analysts place average prices at Zara at least 40 percent above H&M’s, with ASOS in between.
H&M’s U.S. online store offers free shipping but charges for returns. Items bought online cannot be returned in stores.
“I’m particularly surprised by the lack of multichannel. …read more
Source: FULL ARTICLE at DailyFinance