Swedish fast-fashion company H&M is betting on developing its store network and applying advanced artificial intelligence technologies to restore its market position and fend off the growing threat from digital platforms like Shein and Temu that have captured significant market shares.
Article contents:
- Introduction
- New digital strategy
- Market competition
- Artificial intelligence implementation
- Store optimization
- Market share analysis
- Future plans
- Future challenges
- Conclusion
- Frequently asked questions
Introduction
H&M, one of the giants of the fast-fashion industry, is facing a major challenge from emerging digital platforms that sell exclusively online. Facing this challenge, the Swedish company is placing its bet on integrating artificial intelligence technologies with the development of its store network to create an integrated shopping experience combining the digital and physical worlds.
New digital strategy
Elin Svanström, chief digital information officer at H&M, affirms that “blurring the lines between digital and physical shopping and enhancing both channels is our main competitive advantage.” She adds: “Despite the emergence of new players with different business models, we stick to our own model.” This strategy reflects the company’s belief in the importance of the physical experience in the sales process.
Market competition
Competition in the fast-fashion industry is intensifying with the rise of low-cost digital platforms such as Shein and Temu, threatening the dominance previously enjoyed by Sweden’s H&M and Spain’s Inditex, owner of brands like Zara and Massimo Dutti. According to data from research firm GlobalData, Shein has surpassed both H&M and Zara in global apparel market share since the COVID-19 pandemic.
Artificial intelligence implementation
H&M says it is deploying artificial intelligence to enhance its operations and improve the customer experience when shopping across its physical and digital channels. The group has applied predictive artificial intelligence for several years and is exploring the use of generative artificial intelligence and AI agents. The company tracks consumer data regarding fashion trends, style preferences, and sizes to learn which products sell best in different markets and transfers the data to stores with the goal of providing a better consumer experience.
Store optimization
H&M is focusing on optimizing its stores, renovating some flagship locations, and closing others. At the end of February, the group had about 4,200 stores globally, down from more than 5,000 stores five years ago at the start of the pandemic. Svanström says: “We want to make sure we have the best stores in the best locations. We need to step up efforts in major cities and empower the physical experience of our brand.”
H&M’s share of the global apparel market fell to 1.1% last year from 1.2% in 2019, before the pandemic, according to GlobalData. In contrast, Zara’s market share grew to 1.3% from 1% over the same period. However, Shein expanded rapidly to surpass European fast-fashion giants with a market share of 1.5% in 2024, up from 0.1% five years ago, according to GlobalData.
Future plans
Svanström affirms that “our digital channel was essential for us during the pandemic to stay in business, but we sell physical products and they need a physical experience one way or another, so the store network will continue to be very important for us.” The company also relies on artificial intelligence to manage supply chains, pricing, and marketing, among other tasks.
Future challenges
Current global conditions require a rapid response to rebalance inventory and understand how demand changes, says Svanström. She adds: “We need to be able to respond to trends and we can do that best by having access to live product data.” This challenge requires the company to develop advanced analytical capabilities and fast-response systems.
Conclusion
H&M’s strategy represents an interesting model in how traditional companies adapt to new digital challenges. By combining advanced artificial intelligence technologies with improving the physical store experience, the company is trying to create a unique competitive advantage. The success of this strategy will determine the company’s future in an increasingly complex competitive market.
Frequently asked questions
1. How does H&M use artificial intelligence in its operations?
H&M uses artificial intelligence to track fashion trends and customer preferences, manage supply chains, handle pricing and marketing, and improve product distribution across various stores.
2. What challenges does H&M face from digital competitors?
H&M faces fierce competition from platforms like Shein and Temu, which offer lower prices and operate exclusively online, leading to a decline in its market share from 1.2% to 1.1%.
3. What is H&M’s strategy to counter these challenges?
H&M focuses on integrating digital and physical commerce, improving store locations, and using artificial intelligence to enhance the customer experience and optimize operational processes.
