H&M Selling Out Stores Faster Than They Can Build Them

H&M announced today it will delay the opening of 20 new stores this year given the construction slump.  The limited building of new malls, especially in Europe, has made it difficult to find prime locations at reasonable rents for new stores.  After The Gap and Spain’s Inditex Group (Zara), H&M is the world’s third largest apparel chain. However, unlike The Gap, H&M derives much of its profit from opening new stores in emerging markets.

If you really think about it- there is an element of poetic justice here.  Fashion industry executives would like nothing better than to slow down the fashion calendar- just ask Donna Karan.  However, it has been argued that if the consumer is all powerful and demands new merchandise constantly, retailers have no choice but to speed up their supply chain accordingly.  Well, who would have guessed that after all, the consumer really doesn’t hold unlimited control  in his greedy, insatiable hands– unless they can?

If you really analyze this, the consumer is working against himself in a way.  Follow me- money constricts resulting in the consumer to stop spending, thereby reducing funds available for construction, which in turn, stalls new real estate developments required to open new stores.  Indeed, a big problem for which the solution is likely to be even more complicated.

While H&M figures out how to best open new stores in South America, where construction is still booming, but represents a whole other set of logistical challenges in that the seasons are opposite than those of North America, it is picking up some business by finally offering e-commerce.  Having launched online collection and catalog sales in the UK earlier this month, operations have expanded to eight countries and the retailer is hoping to reach more by the end of this year.

So my questions for all of you are, is this a case of the economy reminding the global fashion industry that there are certain limits to how fast the fashion cycle can turn?  Do we need brick and mortar stores, or is virtual commerce enough?  I know you have opinions- so let me hear ’em!

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