Analysis and Evaluation of H&M’s Market Success

Does the Company Educate its Consumers or Does it Serve a Unique Market Segment?
ABSTRACT
In the current retailing market, Hennes and Mauritz AB (H&M) remains a unique phenomenon in part due to the observable difference in the behavior of the company’s customers. This study evaluates two theories attempting to explain the deviation in H&M customers’ behaviour-patterns. The first theory suggests that the customers’ behaviour is attitude-bound and learned-taught through the customer-company interaction. The second theory argues that H&M customers belong to a genuinely unique market segment. The researcher surveyed 160 shoppers at H&M and one of the department stores and used a grounded-theory approach to analyse the data. The results substantiated the first theory claiming that shopping behaviours were taught and learned. The study had an important practical value. However, its results were subject to l reliability and validity threats; thus, further research would be required to confirm the findings.

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I. INTRODUCTION
The issues of consumer relationships have been the focus of marketing research inquiries for at least a century. In the last decade, with the discovery of organizational core competences, relationship knowledge experienced a new wave of research interest and was named among the leading “strategic powers” of an organization (Hamel & Prahalad 1994, pp. 3-5; Bergenhenegouwen et al. 1986, p. 29). Hennes and Mauritz AB (H&M) stands out in its respective market largely because of the company’s unique and innovative approach to serving its customers. Moreover, the company is frequently cited for its ability to create customer needs rather than address the existing market requests (Kumar 1997, p. 834).
As an intangible attribute of the company’s market activities, the company’s relationship knowledge is invisible to the observer; therefore, H&M customer relations cannot be analysed directly (Petts 1997, p. 551). However, it is possible to explore this attribute indirectly through its effect on H&M consumers. Thus, the goal of this study was to investigate H&M consumers’ shopping-behaviour patterns and to compare them to the behaviour of department-store shoppers. The outcomes of the comparison were expected to explain the foundation of H&M’s consumer-relationship strategy as aimed at changing their consumers’ behaviour or at serving a pre-defined market segment.
To introduce the reader to the topic, the second chapter of this paper offers an overview of the company as well as a summary of the relevant theories. The third chapter describes the methodology utilized in the study. Chapters IV and V present and discuss the findings while the conclusion overviews the process to evaluate the practical and theoretical utility of the presented research.
II. LITERATURE REVIEW
Company overview
H&M is a clothing retailer with its operations primarily set in Europe, North America, and Asia (Datamonitor 2006, p. 4). The company is headquartered in Stockholm, Sweden and employs 68,000 workers in more than 1,500 outlets worldwide (Datamonitor 2006, p. 4). H&M’s strategic approach is to offer designer clothes to general population at affordable prices; the company works with such brand names as Stella McCartney, Karl Lagerfeld, and Roberto Cavalli (Capell & Beucke 2005, p. 16; Kroll 2004, p. 71; Zimmerman 2009, p. D1).
H&M builds its strengths by operating through complementary retail channels – stores, Internet, and catalogues – in several geographic locations and by offering a balanced product mix, which appeals to a number of customer audiences (Datamonitor 2006, p. 5). However, currently, the company faces the threat of decreasing retail sales in Eurozone amplified by strong competition from Target and Wal-Mart (Datamonitor 2006, pp. 6-7).
H&M Consumer Relations
According to Kumar, the new age of retailing is characterized by the changing relationships between retailers and their customers (1997, pp. 834-835). More specifically, H&M belongs to a group of retailers, which learned how to drive the market by driving the consumers’ behaviours instead of being driven by them (Kumar 1997, p. 834). Kumar argues that by adopting EDLP (everyday low pricing) strategy, H&M teaches fashion buyers to not wait for department-store sales but rather buy H&M low-price brand-name products (1997, p. 834).
Raugust expands the discussion to claim that, in addition to the prices, H&M changes customers’ behaviour by creating a thrilling shopping experience (2004, p. S10). The company renews its store inventory daily; therefore, even the customers who come to the store every day can expect to discover new deals on each shopping trip (Raugust 2004, p. S10). Thus, H&M manages to keep their stores intriguing for its customers and to make them return more often than they would otherwise.
Both media and empirical research observe behaviourist differences in H&M consumers. However, potentially, there are two explanations for the mentioned deviation. First, as suggested by Kumar, H&M strategy might persuade the consumers to adopt new behaviours. Second, H&M customers might belong to a different consumer segment characterized by unique behaviours; they choose H&M because it is a better fit for their needs. Currently, there is no research that reliably supports one or the other hypothesis.
Shopping-Behaviour Theories
According to Smith and Lux, “current knowledge of how consumers behave in the market place predominantly consists of unrelated still photos depicting consumers at isolated times and places” (1993, p. 607). Bass and Talarzyk argue that there are strong causal relationships between attitudes, brand preference, and purchasing behaviour (1972, p. 93). Therefore, the attitudinal trends might serve as the link between the consumers’ past, present, and forecasted behaviours and be the key to explaining these behaviours. Moreover, if attitude modification is proven to affect the behaviour then H&M is, in fact, able to transform its consumers’ behaviours by altering their attitudes toward shopping.
In contrast with Bass and Talarzyk, Bower and Christensen claim that by offering new “disruptive” approach to shopping, companies like H&M create value proposition for a different and less-demanding group of consumers (1995, p. 43). These consumers feel over-served by the traditional department store; they cannot adopt mainstream shopping behaviours and, thus, prefer not to shop at all (Christensen & Raynor 2003, pp. 10-12). By creating the environment in which shopping is simpler but more exciting, H&M bring these unique group of consumers back to the market (Christensen & Raynor 2003, pp. 10-12).
There is one key difference between the attitude-bounded behaviour theory and the disruptive-technology theory. The former claims that consumers change their behaviour as related to one area of their activities – e.g. apparel shopping – while adhering to mainstream behaviours in other areas: e.g. grocery or house-ware shopping (Kumar 1997, p. 834). Contrary to that, the disruptive-technology theory argues that consumers attracted by H&M belong to a genially different segment and display the same behaviourist patterns regardless of the product/service, for which they shop (Christensen & Raynor 2003, pp. 10-12). The empirical support of one or the other claim will establish the validity of the respective theory.
Study Problem Statement
The problem addressed in this study is the lack of theoretical consensus on the deviations in the behaviour of H&M customers. The researcher believes that this study has significant implications in the field of management as it investigates the validity of Kumar’s argument (1997, p. 834). The study explores whether H&M teaches its customers to adopt new attitudes and behaviours or whether Kumar’s observation is a market illusion and H&M is attracting consumers characterized by existing shopping-behaviour patterns. If proven right, either of the hypotheses would influence both the theory and practice of strategic marketing in the retail sector.
III. METHOD
Purpose Statement
The purpose of this study was to explore if the shopping behaviour of H&M customers is different from the behaviour of department store customers when shopping for goods other than clothes.
Research Questions
1. Does the shopping behaviour of H&M customers differ from the behaviour of department-store consumers when shopping for beauty products?
2. Does the shopping behaviour of H&M customers differ from the behaviour of department-store consumers when shopping for home décor and house-wear?
3. Does the shopping behaviour of H&M customers differ from the behaviour of department-store consumers when shopping for clothes?
4. Does the shopping behaviour of H&M customers differ from the behaviour of department-store consumers when shopping for grocery and food?
Study Design, Procedures, and Timelines
The data collection for this study was performed with a help of a paper-based survey. The researcher approached potential respondents while they were shopping at H&M and a selected department store and invited them to participate in the survey. Those who agreed were given the survey, a pen, and the necessary instructions. While attempting to increase the likelihood of the respondents taking the survey, the researcher used an attractive design for the questionnaire (Robson 1993, pp. 5-15). The data collection stage of the study lasted for one week: March 9-15, 2009. It was followed by two weeks of data coding and four more weeks of data analysis.
The choice in favour of a paper-based face-to-face survey was dictated by two factors. First, the populations were physically available for a face-to-face survey while the access to the populations’ contact information would be restricted (Alreck & Settle 2004, pp. 15-22). Second, this method was highly effective in terms of the outcome for the monetary and time inputs (Miles & Huberman 1994, p. 28).
Population and Sample
The population under study was all the consumers, who shopped at H&M regardless of the frequency of their shopping trips or the amount spent on purchases. The population was inclusive of both genders and all age groups. The shoppers at one selected department store served as a control population for the purposes of comparative analysis of the studied population’s behaviour patterns.
This study was categorized as marketing rather than empirical; therefore, the size of the sample was estimated at 160 participants. This number allowed the researcher to expect a liberal degree of confidence at 80% and a relatively large sampling error of 10% (Birchall, http://www.marketresearchworld.net/index.php?option=com_content&task=view&id=23&Itemid=1).
The researcher chose a convenience sampling technique: the participants of the study were recruited among the volunteers, who shopped at H&M and the department store during the week of March 9-15 and who agreed to take the survey (Miles & Huberman 1994, p. 28). By selecting the research sites – H&M and the department store – the researcher attempted to ensure that the participants had the experience relevant to the study: they had shopped at both stores at least once (Creswell 2007, p. 128).
Data Collection Instrument
All the participants of the study were offered to take the same questionnaire regardless of their shopping destination. The questionnaire consisted of two parts: theme questions and demographic questions. There were four themes: shopping for cloth, beauty products, grocery, and housekeeping products. The instrument had two identical questions for each theme: 1) how often do you shop for a theme product during an average month and 2) on average, what amount do you spend on a shopping trip. The answers to the first question were measured on a four-point Likert-type scale: 1 (once or twice a month), 2 (once a week), 3 (two-three times a week), 4 (every day). The second question was open-ended.
The group of demographic questions inquired on the respondents’ gender, age, employment status, and combined household income. The respondents’ gender was defined as male or female. The questions about age and household income were open-ended. The employment-status question had six possible answers: employed part-time, employed full-time, unemployed, retired, student, and housekeeper.
Study Limitations
Despite of the researcher’s desire to conduct an extensive investigation, the study had to remain within a realistic framework established by its purposes as well as external forces. The problem of access to the population affected the study’s data collection activities by limiting the variability of research sites (Homan 2001, p. 329). The data was collected at one H&M outlet and one department store, which permitted the surveying of their customers (Wanat 2008, p. 195).
In addition, the research was limited by internal boundaries set by the researcher (Counelis 2000, p. 58). Considering the resources assigned to this study, the researcher limited the geographic location of the research populations to one specific city and the period of data collection to one week.
Ethical Concerns
Several ethical concerns had to be addressed as the study progressed. First, the author had to ensure the anonymity of the participants (American Psychologist 1992, p. 1598). Any unfavourable remarks might have resulted in the disruption of the customer’s relationships with H&M or the participating department store. Therefore, the researcher restrained from collecting any identifiable information and reported the data in aggregate (American Psychologist 1992, p. 1598).
Next, the author had to preserve the confidentiality of the participating department store to prevent the negative effect of the consumers’ statements and the findings of the study on the store’s business reputation (American Psychologist 1992, pp. 1599-1600). The author omitted the name of the store throughout the study report
The next ethical area was the voluntary participation in the study (American Psychologist 1992, pp. 1599-1600). To ensure the participants’ voluntarism, prior to giving the respondents the questionnaire, the researcher explained to them their right to refuse to answer any question or to exit the study at any point (American Psychologist 1992, pp. 1599-1600).
Finally, the study was based on the assumption that H&M was a successful retailer and the goal of the researcher was to confirm that assumption. Nevertheless, the researcher strived to provide unbiased data, which could be reliably applied in the field of marketing and management (Onwuegbuzie 2000, p.21).
IV. FINDINGS
The goal of the study was to contribute to reducing the theoretical gap in understanding consumer behaviour. The aims and expected outcomes of the study justified the researcher’s choice to analyse the data from the grounded theory perspective (Creswell 2007, p. 10). This approach is used to explore large groups of people and to develop an abstract framework, which can be expanded into a theory (Creswell 2007, p. 10).
The data analysis was performed as a series of t-tests comparing H&M and department store shoppers in each theme question separately (Field 2005, p. 125). The relationships between the respondents’ demographics and their shopping behaviour were analysed through three types of correlations: for both respondents groups together, H&M consumers separately, and department store consumers separately (Field 2005, p. 107).
There were no statistically significant difference between H&M and department store consumers on their behaviour related to shopping for grocery/food and home décor. However, the behaviour of these two groups was statistically significantly different when they shopped for clothes and beauty products (pThere were no statistically significant correlation between the respondents’ demographics and their shopping behaviour for any of the groups. Therefore, it is reasonable to conclude that the difference in shopping behaviour was not due to demographic differences within the groups of respondents.
Overall, H&M customers had proven to deviate from the mainstream shopping behaviours when they shop for clothes and beauty products but they continue to adhere to the traditional behaviours when shopping for other types of goods. Considering similar roles of beauty products and clothes in peoples’ life, the findings support Kumar’s theory that shopping behaviour can be taught to the consumers by their retailers.
V. DISCUSSION
This research is subject to several threats to reliability and validity. First, by choosing to study a convenience sample and by limiting the number/location of sites, the researcher introduced a selection bias (Onwuegbuzie 2000, p.17). This threat is induced by convenience and volunteer samples, which members might not be representative of the overall populations (Onwuegbuzie 2000, p.17).
Related to the selection bias, the convenience sample causes low generalizability of the findings (Onwuegbuzie 2000, p.30). This threat is common to most of the studies and is often a trade-off for the freedom from researcher bias (Onwuegbuzie 2000, p.30).
Next, the results might be affected by the matching bias (Onwuegbuzie 2000, p.22). The researcher chose the study and control populations based on the assumption of existing similarities between the two. However, this assumption might be wrong; and the populations could be genuinely different.
Finally, the study could be a subject to temporal validity in a case if the consumers’ preference of H&M was due to the effect of economic downturn (Onwuegbuzie 2000, p.31). To evaluate this threat, the researcher would need to replicate the study after the current recession is over.
Despite the threats listed above, this study has a practical utility because it contributes to bridging the theoretical gap in understanding the deviations of H&M consumers’ behaviour (Kumar 1997, p. 834). However, to “result in an actual addition to the field of knowledge”, the study has to be replicated on a different (random) sample and in a more favourable economic context (Gordon & Brown 2004, p. 3).
VI. CONCLUSION
In conclusion, effective relationships with the customers are a strong competitive advantage of a retailer because they allow a company to obtain first-hand information about the changes in the consumers’ needs. They help the company modify its offer in a timely manner and more successfully than its uninformed competitors. The outcomes of this study confirm the theory suggesting that the company could be an active agent in its relationships with the customers. Moreover, it can educate its customers and induce their behaviour-change instead of passively reacting to the change that happens naturally. This is a revolutionary thought, which can transform the balance of powers in retailing and lead to dramatic changes in the field of strategic marketing. However, even though this study confirms the hypothesis, suggested by the theory, the research findings are subject to several threats challenging their validity. Therefore, there is a need to conduct a longitudinal study and replicate the survey several times with several different populations. If this series of surveys produces positive outcomes, the theory can be transformed into practical models applicable to strategic marketing.
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