Buy Or Sell: H&M Bettting Everything on AI to Beat SHEIN's Fast Fashion Dominance
Can AI save H&M from Shein's explosive growth? H&M invests heavily in predictive and generative AI to compete as Shein leapfrogs to 1.5% market share. Expert analysis reveals why AI alone won't solve H&M's fast fashion problem. Brought to you by A&M Consumer and Retail Group, Mirakl, Simbe, Infios, Clear Demand, and Ocampo Capital.
For the full episode, head here: https://youtu.be/vjOmUkH_Vhw?si=9f8KlsQw8yUdPqan
#shein #h&m #fastfashion
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Transcript
H and M is betting on AI to upgrade stores and to face off against online rivals, according to the Wall Street Journal.
Speaker A:H and M is betting on upgrading a slimmed down store network to regain ground lost to rivals that sell purely online and hopes that artificial intelligence will smooth out the integration of its digital operations with its physical Footprint.
Speaker A: % in: Speaker A:Zara's market share grew to 1.3% from 1% during the same time period.
Speaker A: % in: Speaker A:H&M has been applying predictive AI for several years and is exploring the use of generative AI and AI agents.
Speaker A:It tracks consumer data around fashion trends, style preferences and sizes to learn which products sell best in different markets and transfers data to stores with the aim of delivering better consumer experience, it said.
Speaker A:The company also relies on AI for supply chain management, pricing and marketing, among other tasks.
Speaker A:Brooks, we're going to you first here.
Speaker A:Will the focus on AI and better store operations be enough for H and M to stave off the threat of Shein and Temu?
Speaker B:Oh hey, and I just counted you said AI 12 times in what you.
Speaker A:Just oh my God.
Speaker B:Or maybe it was 13 times.
Speaker A:Now I'm reading the Wall Street Journal article.
Speaker A:Brooks, I take no responsibility for that.
Speaker A:But yes, I agree with you.
Speaker A:Go ahead.
Speaker B:Look, I think it's hard to say no to more AI.
Speaker B:I mean I'm not going to buck that trend.
Speaker A:Yeah.
Speaker B:And I'm going to say that fast fashion has a lot more to gain than most.
Speaker B:I mean H and M is going to benefit a lot here.
Speaker B:So I like the push.
Speaker B:Think about the opportunity with AI, particularly in apparel returns.
Speaker B:You're talking to somebody who spends a lot of time in A and M.
Speaker B:And you know what I'm doing in.
Speaker B:Sorry, in HM H&M.
Speaker B:Yeah, I said A and M both.
Speaker C:You spent time with both.
Speaker B:I spent a lot of time in H and M returning my wife's online apparel purchases.
Speaker B:And anything that you can do to make that a more efficient process, reduce the number of returns.
Speaker B:That's got big, big return on investment for H and M.
Speaker B:Right?
Speaker A:Yeah.
Speaker A:Bryson, what about you?
Speaker A:What are your thoughts here?
Speaker A:Do you think that this is a smart investment and will this keep them in the the competent competition against Sheen and teu.
Speaker D:So I think it's the right move.
Speaker D:You know, it's hard to argue that it's not right.
Speaker D:It's going to help them, you know, really zero in on better understanding their customers.
Speaker D:Aligning assortment.
Speaker D:The bigger question, is this going to be enough to stave off Temu and the threat of Sheen?
Speaker D:No.
Speaker D:Yeah, it's not.
Speaker D:I think what you have to recognize here is that, you know, it is the right move, it is the right play, but just in taking this approach, they're essentially going to narrow their assortment and their offerings for the customers, right?
Speaker D:Yeah, it's going to be the right products, but it kind of, you know, flies contrary to the unlock that digital has in the sense of the expanded assortment.
Speaker D:Right.
Speaker D:So everything for everybody.
Speaker D:And, you know, couple that with Sheen and Temu's low cost, you know, high velocity model, it's, you know, creating an uneven playing field in that regard.
Speaker D:It will drive efficiencies, but, you know, it's, you know, potentially going to fall short of customer expectations with respect to assortment.
Speaker D:And then, you know, we have to also take into account that just as H and M is now making this investment, we could argue that Sheen and Temu have arguably been executing AI and probably doing so at a greater scale than that of H and M.
Speaker D:So it becomes a way to narrow the gap.
Speaker D:I don't think it becomes a point of differentiation.
Speaker D:It is a must have and a must do, but it's not going to be enough to stave off their continued growth.
Speaker A:Okay, I.
Speaker A:Chris, you.
Speaker A:You're nodding along.
Speaker A:Are you in agreement here?
Speaker C:Yeah.
Speaker C:Unlike the last headline, I vociferously agree with Bryson on this one.
Speaker C:I think it's the right move.
Speaker C:You know, improving productivity is always a good thing to do, but it's not going to do a darn thing to stave off, you know, the growth threat from the online competitors, you know, because if you look at it like improving stores is exactly about that.
Speaker C:It's about improving, you know, things on the margin.
Speaker C:It isn't transformative, nor does it insulate you from the channel threat.
Speaker C:So, you know, and I would actually go a step further here, like where I think it, it brings up questions about how the leadership at H and M is really thinking about this.
Speaker C:Because if this is what they're talking about, I wonder.
Speaker C:I don't think they've got enough dry powder in their keg.
Speaker C:And the reason I say that too is because I look at their soho store in New York, it's a very reduced assortment as well.
Speaker C:That plays on this idea that you can put less products in your store.
Speaker C:And I just don't think at their margins they can afford to do that in a way that they're going to be able to compete against their current business model.
Speaker C:Then you throw in the threat of Sheehan and Teemu as well.
Speaker C:I just think it's, it's, it's going to be a hard game to play.
Speaker C:And so I think the, I think the leadership needs to come up with some more ideas here pretty quick is my, is my take on this one.
Speaker A:What else would you do?
Speaker A:I mean, what would you have them do to really stay competitive that they aren't doing?
Speaker A:Because I think that's my question here.
Speaker A:Like, I think they are.
Speaker A:This is the right move for H and M to be focused on to stay competitive as a business entity.
Speaker A:But what would you say that they should be focusing more on, Chris, to, to stay more competitive or to put them in a better place against Shein and Timu?
Speaker C:Yeah, I think because you have this.
Speaker C:I think this is very similar to what happened with E Commerce back in the day.
Speaker C:I mean, you have stores, so stores are still going to be a valuable asset in terms of how you and reach your consumer.
Speaker C:So I think then you have to meet the table stakes game on the production side and the fast fashion that you can produce digitally.
Speaker C:So I would actually be trying to emulate what Temu and Sheen are doing with the factories that you're working with and, and giving the customers the same options to have those small runs of batch or those small runs of products sent to them on demand.
Speaker C:That's, that's what I would be doing.
Speaker C:I would be trying to fortify my position, you know, similar to how people ultimately fortified their position on E Commerce back in the day.
Speaker A:Yeah, I think, I think there's a couple of things that we have to take into account here.
Speaker A:I think, you know, the, the soho store, the H and M store is a lab store for H and M.
Speaker A:I don't think that you, you know, they are, they tested fair point.
Speaker C:They haven't said that out yet.
Speaker A:That they're rolling that they've already rolled out like the RFID programming and that kind of thing.
Speaker A:Like they've already rolled that out to other stores.
Speaker A:They're not consolidating.
Speaker A:I think that was more for a lab perspective to like test on a smaller batch of product.
Speaker A:But I think something that's really important to hit on is that.
Speaker A:And Chris, you mentioned this like 85% of shopping is still conducted in stores.
Speaker A:And H and M, I think, is smartly investing here in making sure overall else that if I do want fast fashion, I can get it that same day.
Speaker A:And that they know they're investing in things like generative AI and agentic AI so that they can quickly provide that information to me as a consumer.
Speaker A:So if I need a tank top, I don't have to wait two weeks for it to come from Shein and Tebu.
Speaker A:I know I can go to my local store within five miles.
Speaker A:They have sizes small, extra small and medium.
Speaker A:And I can choose from any of them.
Speaker A:Like, that's what I think is really important about what H and M is doing here.
Speaker A:And I think they deserve a little bit of credit for being like that place that confidently knows that where their products are, where their stock is, what's trending, and how they can put that at the forefront of their stores to still operate that model efficiently.
Speaker A:I do think that there is probably some programming that needs to happen, though, to your point, Chris, where they can still stand to compete for some other items that will take a little bit longer to get to consumers.
Speaker A:But as long as this de minimis exception is removed, like, and the products cost the same and they're still taking two weeks to come from she and her team, who.
Speaker A:I think that this is a really smart play from H and M.
Speaker A:But I'll give you.
Speaker A:I'll give you the last word, Chris.
Speaker A:Go for it.
Speaker C:Oh, no, I don't think so.
Speaker C:I mean, I think I agree with everything you said.
Speaker C:I just think it feels like it's more of a stop the bleed approach.
Speaker C:And I think even this, even the volume numbers that you're quoting in the stores, and maybe Bryson and Brooks know this better than me.
Speaker C:I have a feeling fast fashions, you know, bleed or impact on store volume is greater than say, the online impact of, say, grocery or a comparative business too.
Speaker C:But.
Speaker C:But yeah, that's just my take.
Speaker C:I think, you know, you're.
Speaker C:I think you're dead right.
Speaker C:It's something they have to do.
Speaker C:But like the, the basic tea that I need right today, they're gonna always gonna keep that business.
Speaker C:It's all the other businesses that are getting siphoned off or all the other, you know, customer interactions that are getting siphoned off over time based on the exponential growth of this.
Speaker C:And it's not just.
Speaker C:It's not just us.
Speaker C:Us and de minimis either.
Speaker C:As we learned at Shop Talk Europe.
Speaker C:I mean, this thing is big in Europe too.
Speaker A:Yeah.
