Old fashioned?H&M proves a new format to return to the catwalks

H&M executives say that's not enough anymore.

Sales have been stagnant for years, the company's shares have lost nearly two-thirds of their value since 2015, and nimbler competitors have adapted more quickly to rapidly changing apparel retail.

Lee:H&M overcomes its inventory problems that led it to cut prices.

Now, in a converted pilot store in Stockholm, the birthplace of H&M, the chain founded in 1947 is testing new concepts that mark a break with its past and partly replicate some tactics already deployed by rivals to attract shoppers. .

The H&M store in the upmarket Karlaplan neighborhood of the Swedish capital offers a more select range of clothing - displayed on ventilated shelves and on tables with differentiated colors - as well as cafés and events that can only be attended with invitation.

H&M planned the design and selection with wealthy local customers in mind, making a notable shift, adapting to local tastes and media rather than trying to offer relatively standard selections in all of its stores .

"It's a visually appealing store and I also find the collection appealing. I'm more inclined to go here than the other stores," said Josefin Klegard, 38, over sparkling wine at a club member event Loyalty venue where a pop-up beauty salon has been set up and H&M designers chatting about the latest trends.

At Karlaplan, there is a large concentration of clothing from H&M's most exclusive lines, such as "Trend" and "Premium Quality", which is generally only available online.

Swedish H&M's website sells "Premium Quality" leather jackets for 3,499 kroner (about 340 euros), well above most jackets H&M sells, which are priced well below 1,000 crowns.

"We have to raise the whole quality bar: have fewer items and a nicer presentation of the products," said CEO Karl-Johan Persson, grandson of the H&M founder.

Lee:In this store in Sydney, clothes are not bought, they are borrowed.

"It's quite a task, to be able to sell more with less, and to do it in a profitable way," he said.

Slow sales

After decades of rapid expansion, H&M had 4,801 stores in 69 countries at the end of May, making it the world's second-biggest fashion retailer after Spain's Inditex, which owns the Zara brand.

But more than two years of stagnant sales have left H&M with $4.1 billion worth of unsold inventory.

Read:In 2020 Inditex plans to conquer the world... online.

The recovery in H&M's third-quarter sales suggests it may have stopped the bleeding, but analysts suspect the improvement was mainly due to price cuts to get rid of unsold clothing, at the expense of cost effectiveness.

Full Q3 figures will be released on September 27.

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H&M, controlled by the Persson family, finally acknowledged in January that it had a problem for a time with its H&M-branded stores, which make up the bulk of its business.

Company executives admit to neglecting the health of H&M stores as they focused on developing online sales and eight new, mostly high-end brands such as COS and ARKET, despite the fact that the H&M brand represents more than 90% of sales.

It was the crowds and disorder at the H&M store in New York's Times Square that turned 21-year-old student Nicole Archie off, who now prefers online stores like Boohoo and Fashion Nova.

Lee:This 11-year-old girl beats racism with her clothing line.

"I remember the line was so long that I went to sit on a bench near the shoes," he said. "There were tangled cords all over the floor."

These situations allowed competitors to steal market share from H&M, as customers began to seek out so-called 'destination stores' (which have a unique charm that attracts customers beyond the prices offered), with more attractive designs and other things to do besides shopping.

Inditex has closed smaller Zara outlets to focus on large, upscale stores in major shopping areas that are well integrated with its website, enabling it to maintain strong sales growth.

Nordstrom's American department stores have opened in small Los Angeles neighborhoods, offering everything from bag repairs to juice bars and manicures.

US retailer Abercrombie & Fitch has closed unprofitable locations and is investing in smaller but more open stores, with larger fitting rooms featuring phone chargers and adjustable lighting.

'Luxury Brand'

The pilot store in Stockholm shows that H&M is finally getting the message.

"After talking to customers, we wanted to create a warmer, more personal feeling," says Anna Tillberg, director of Laboratory, H&M's innovation department, which is developing the new concept.

H&M invites local loyalty club members to yoga classes and cocktails in a store that has been renovated with hardwood floors, lush greenery, wide aisles, a cafeteria and spacious fitting rooms.

"It's a complete game changer. It's like a concept store. It's much better now. There's no trash, no plastic, no packaging anywhere," Mathilda Moncetti, 27, said at a recent event. "The interior looks like it's from a luxury brand."

Sitting by the store's coffee machine, Daniel Claesson, H&M's head of online and business development, says the modernization has increased both in-store sales and customer footfall. H&M declined to give figures.

"We've learned a lot," he said. "We've seen evidence here of the results of being more relevant to the customer that we have here."

In addition to the new store concept, H&M also plans to adapt the collections to local tastes in many more stores.

The company, which leases its store space, is closing underperforming stores more quickly than usual, sometimes swapping out the cheap brand for one of the better-performing ones. It has also converted some regular H&M stores into discount stores.

But some investors fear it is too late for all these changes.

Norwegian investment fund Odin Fonder has sold all of its H&M shares, saying it was not sure Persson was the best person to run the chain at this time of major industry transformation.

"We think you need to close at least 1,000 stores and renovate at least as many," the fund said.