H&M keeps expanding amidst fast-fashion's slowdown globally

H&M launched its latest store in Vietnam's central city of Danang

At noon on November 28, the latest H&M store will be officially launched at Vincom Plaza Ngo Quyen in Danang city.

Discussing with VIR the reason behind selecting the city for its latest store in Vietnam, Fredrik Famm, country manager of H&M Southeast Asia, said that the area is a promising market for fashion. “This is a major economic and tourism hub in Vietnam and is part of the vibrant and fast-growing retail market in the country.”

Famm also said that a lot of people have to travel to Ho Chi Minh City and Hanoi to buy H&M clothes which is inconvenient. However, the presence of a new H&M store will solve their difficulties.

Similar to Hanoi and Ho Chi Minh City, the central Vietnamese city is expected to welcome more H&M stores in the future. “We also drew up a plan to open many H&M stores in Danang in the future.”

This is the eighth H&M store in Vietnam, as the Swedish brand has opened eight stores within two years – a surprising speed for any retail brand. Regarding the expansion, Famm also said the number is still small against other markets. He also cited Germany which has a population of more than 80 million and is home to 500 H&M stores, but Vietnam only has eight stores for about 100 million people.

“Therefore, we hope to keep expanding in Vietnam in the coming times and make H&M the fashion brand of choice for all shoppers in Vietnam,” said Famm.

H&M’s expansion strategy in Vietnam was drawn up while the global fast-fashion market is showing signs of slowing down. The recent bankruptcy of Forever 21 and Topshop are the most telling examples of the fall of the fast-fashion trend.

H&M, and also Zara, of course, has been suffering from the crisis. According to newswire Bloomberg, Zara’s turnover in 2017dropped significantly, reporting the lowest profitability during the past ten years.

Specifically, Zara’s gross margin narrowed to 53.6 per cent in the 12 months through January due to the USD exchange rate. Sales in the second half of 2017 increased to 5 per cent, the lowest rate over the past three years.

Similarly, H&M on March 27 also announced low global revenue, with high inventory of $4 billion, equivalent to 17.6 per cent of its turnover in this year’s first quarter, while profit is at a 16-year low. As of this February, H&M’s net profit reduced by 44 per cent on-year, equivalent to $167.4 million.

CNN also quoted an H&M representative as saying on June 28, 2018, that the value of its unsold global inventory ballooned in the year’s first quarter to SEK36 billion ($4 billion), up 13 per cent on-year. H&M’s profit in the first half of 2018 fell by 28 per cent.