Presentation by National University of Singapore - Winners of CBS Case Competition 2011

H&M:
Bolder.Bigger.
Be8er

Caroline
Ng

Candice
Lim

Peh
Che
Min

Tobias
Chen

F . O . C . A . L

H&M’S Identity: Our winning proposition
Analysis Stage Runway Backstage Implementation Conclusion

Objec+ve

Winning Proposition

1. “Sustainable growth with High Impact strategic
initiatives whilst keeping things Simple”

2. 10-15% growth in number of stores per year

Affordable Chic Fast Fashion Inclusive

Challenges Ahead

Key
Issues
1

Stagnating growth in Europe
1. Prioritizing growth options
2

Diverse consumer preferences
2. Maximizing shareholder’s value
3

Intense Competition
3. Managing
Challenges cost to support growth
4

Increase in raw material prices

5

Talent attraction & retention

Criteria to evaluate growth options

Degree of High Impact Growth
Competition
Complexity (x2) Potential

• imple
S • ales
S • uture potential
F • imilarity
S
• ongruent with
C • mpact on brand
I • calability
S • lustering effect
C
core business & • xpertise
E • ost-benefit
C • conomies of
E
expertise analysis scale
• ost effective
C

Evaluating Growth Opportunities

Degree of High Impact Growth
Growth Options Complexity (x2) Potential
Competition

Improve day to
day performance

Expand online
channels

Geographic
expansion

Expand product
category (Home)

Brand Expansion

Favorable
Unfavorable

Recommendations:Project Runway

Managing
Set the Stage Strut the Runway
Backstage

1. Increase no. 1. Geographic 1. Secure new
of customers Expansion suppliers
- Focus on male -Asia Pacific -South East Asia
segment 2. Online Channel 2. H&M’s talents
2. Increase sales -Advertise on - Increase efficiency
per customer ‘taobao’ of sales people
- Increase - H&M online - Management
accessories segment wardrobe associate programme

Recommendations: Project Runway

Managing
Backstage

1. Increase no. of 1. Geographic 1. Secure new
customers Expansion suppliers
2. Increase sales - Store on Taobao - Increase efficiency
per customer Mall of sales people
accessories segment wardrobe iphone app associate programme

Recommendations: Project Runway

Managing
Backstage

1. Increase no. 1. Geographic 1. Secure new
of customers Expansion suppliers
2. Increase sales -Advertise on - Increase efficiency
per customer ‘taobao’ of sales people
accessories segment wardrobe associate programme

H&M: Project Runway
Managing
Backstage

Backstage
–
Make
it
Happen


Grow existing segments

Increase number of Increase sales per
customers customer

Backstage
–
Make
it
Happen


Increase number of Increase sales per
customers customer

H&M MEN H&M ACCESSORIES
1. Greater Variety of Designs
1. The Fashion
Fraternity
2. Integration with Apparel
2. Guest
Designers

CAGR: 3% (2005-2010)
CAGR: 4.6% (2010 Inc.)
Market Value 322.3Bn USD

SeAng
the
Stage
–
H&M
MEN

1
2

H&M’s Men Accessories

Purchasing Behaviour Process

Need
Look Good
Recognition

Information
Online Self- reliant
Search

Evaluation of
Creatures of Habit Comfort, Price, Quality
Alternatives

Purchase
Brick & Mortar Rationalization
Decision

Purchase
Less reliance on information sharing
Evaluation

SeAng
the
Stage
–
H&M
MEN

1
2


1
2
3

Increase
Male consumer Cater personal
Need advertising to
preferences
Recognition
Look Good space for men
men
Information
Search

Financial risks
Evaluation of Market Size Acceptance
Alternatives

Purchase
Pilot Testing: Flagship stores in Beijing & Shanghai
Decision

Purchase
Evaluation

SeAng
the
Stage
–
H&M
MEN

1
2


Shanghai & Beijing

The Fashion Fraternity Internet/Mobile: Chinese
Information ‘ ’ forums
Search

Personal
Space

SeAng
the
Stage
–
H&M
MEN

1
2


Shanghai & Beijing

Search

Personal
Space

Newly Affluent middle class
Trendy males seeking fashion tips

SeAng
the
Stage
–
H&M
MEN

1
2


Shanghai & Beijing

Search

Baidu: Year 2010
Personal
• hina: 64.02 billion
C
Space
queries
• AP and PDA based
W
mobile search
• xclusive forums for
E
males – ‘ ’

SeAng
the
Stage
–
H&M
MEN

1
2


Brick & Mortar

Information
Search
Key
Takeaways

1. Pilot
market
in
Shanghai
&
Beijing
–
12
months

2. Personal
Interna>onal
roll-‐out
of
improved
H&M
man
in
year
2012

Beijing Shanghai
Space
3. Target
60
stores
by
Year
2013

Personal
Entertain

Music
(Fuᶔball)/

Lounge
Magazines

SeAng
the
Stage
–
H&M
MEN

1
2


H&M ACCESSORIES

HELPING
YOU
FIND…

SeAng
the
Stage
–
H&M
MEN

1
2


H&M ACCESSORIES

Sales
/sqm

0.5%
to
Grp
revenues

SeAng
the
Stage
–
H&M
MEN

1
2


Integrating accessories with apparel
Do it your way

SeAng
the
Stage
–
H&M
MEN

1
2


Integrating accessories with apparel

Trend,
Modern,

Classic,
Everyday

Mamma,
Divided,
&

denim,
L.U.G.G

Strengthen
exis+ng
forts
while
expanding
new
markets


250
new
stores
in
2011

Aggressive
pursuit
of
Increase
dominance
in

Asia-‐Paciﬁc
W
Europe
and
N
America

Iden+fying
KEY
new
markets


Growth
Posi>ve

Untapped
markets
Market
Size
Ease
of
Entry

Poten>al

Compe>>on

Spillovers

Asia-‐Paciﬁc

Middle
East

&
Africa

Eastern
Europe

South
America

Favorable
Unfavorable

Where
to
expand
in
2011


Growth
Posi>ve

Emerging
markets
Market
Size
Ease
of
Entry

Poten>al

Compe>>on

Spillovers

Asia-‐Paciﬁc

Middle
East

High
sales

&
Africa

Ranked
3rd
in
value
sales
behind
North
America
and
Europe

Eastern
Europe
High
CAGR

CAGR
of
13%
from
2010-‐2013E

South
America

Dominant
Chinese
market

Favorable
71%
of
total
Asiapac
sales

Unfavorable

Source:
Euromonitor

Where
to
expand
in
2011


Growth
Posi>ve

Emerging
markets
Market
Size
Ease
of
Entry

Poten>al

Compe>>on

Spillovers

Asia-‐Paciﬁc
Aggressive
greenﬁeld
expansion
–
large
poten>al,
large
growth

Middle
East

Franchise
mode
–
cultural
and
legal
constraints

&
Africa

Eastern
Europe
Sizeable
market
near
H&M
stronghold

South
America
Lucra>ve
market
to
enter
in
the
future

Favorable
Unfavorable

Strengthen
exis+ng
forts
while
expanding
new
markets


Western
Europe:

45%

N
America:

15%
Eastern
Europe:

10%
Asia-‐Paciﬁc:

25%

MENA:

S
America
10%

250
new
stores
in
2011

Asiapac:
Focus
on
China


North
Asia
Southeast
Asia

1 China,
Japan,

South
Korea,
Taiwan

2 Singapore,

Indonesia,
Malaysia

Source:
Euromonitor

Much
poten+al
for
growth
in
China


CF
Market
Share
(USD
billions)
in
2009

Germany
71.252

Large
poten+al

China
169
for
growth
in

Chinese
market

0
50
100
150
200

Source:
Euromonitor,
H&M

Domina+ng
the
Chinese
stage


42
stores,

concentrated
in

Eastern
China

Source:
H&M

Domina+ng
the
Chinese
stage


4.5%
popula>on

4%
of
GDP

44.5%
popula>on

32%
of
GDP
42
stores,

concentrated
in

51%
popula>on
Eastern
China

64%
of
GDP

Source:
Ogilvy

Opportuni+es
for
growth
in
2nd
and
3rd
+er
ci+es


Rapidly
emerging

middle
class
in
2nd

and
3rd
>er
ci>es

42
stores,

concentrated
in

Eastern
China

Source:
Ogilvy

Eﬀec+ve
way
to
reach
out
to
Chinese
masses


Source:
Ogilvy

Leveraging
on
the
Chinese
e-‐commerce
trend


Eﬃcient
expansion
via
Taobao.com


Cri+cal
mass

• 370
million
users

• 50
million
unique
visitors
daily

Eﬃcient
expansion

• Low
capital
investment

• Aggregated
distribu>on
centers

Eﬃcient
expansion
via
Taobao.com


Cri+cal
mass

UNIQLO
SUCCESS
STORY

• 2
million
RMB
sales
daily

• Exceeded
retail
store
sales
in
just
4
days

Eﬃcient
expansion

H&M
on
Taobao
Mall


Maximising
the
m-‐commerce
plaform


The
current
The
poten+al

H&M
applica+on
In
m-‐commerce

Smartphone

Basic

penetra+on

features

M-‐shopping

Limited
takeup

geographic

reach
Poten+al
in

mobile

Source:
Forrester
Research,

ABI
Research,
Modus
Associates

Maximising
the
m-‐commerce
plaform


The
current
The
poten+al

H&M
applica+on
inm-‐commerce

Basic

features

My
Limited
Wardrobe
geographic

reach

H&M:
cheap
chic,
24/7,
everywhere


Brand
Saliency

Network
Eﬀect

New
Retail
Channel

My
Wardrobe

Increasing
visibility
24/7,
on-‐the-‐go


Brand
Saliency

Network
Eﬀect

New
Retail
Channel

My
Wardrobe
• Create
your
oueit
using
H&M

Catalogue
items

• May
also
use
your
personal

items

Increasing
visibility
24/7,
on-‐the-‐go


Brand
Saliency

#
02
out
of
107
oueits

Network
Eﬀect

New
Retail
Channel

• Create
your
oueit
using
H&M

Catalogue
items

• May
also
use
your
personal

items

My
Buy
it.
Wardrobe
Keep
it.

Increasing
visibility
24/7,
on-‐the-‐go


Brand
Saliency

#
02
out
of
107
oueits

Network
Eﬀect

New
Retail
Channel

My
Buy
it.
Wardrobe
Keep
it.

Leveraging
on
network
effects


Brand
Saliency
#
02
out
of
107
oueits

Network
Effect

New
Retail
Channel

• Average
of
220
friends

My
• Photo
album

Buy
it.
Wardrobe
Keep
it.

• Newsfeed
(and
no>fica>ons)

• Wall
post

Complementary
revenue
stream


Brand
Saliency
#
02
out
of
107
oueits

Network
Eﬀect

New
Retail
Channel

Average
of
150%
increase
in

sales
voume

My
Buy
it.
Wardrobe
Keep
it.

Source:
BCG

Increasing
visibility
24/7,
on-‐the-‐go


Brand
Saliency
#
02
out
of
107
oueits

Network
Eﬀect

New
Retail
Channel

Increased
purchase
frequency

• Average
of
220
friends

• Photo
album
likely
to
buy

40%
more

• Newsfeed
(and
no>ﬁca>ons)

• Wall
Larger
purchase
sizes

post

20%
higher
expenditure
My
Buy
it.
Wardrobe
Keep
it.

Case
study:

Source:
Informa>onWeek

Backstage
–
Make
it
Happen


Limiting Agents
1

Cost of Production
2

Speed to Market
3

Human Resources

Backstage
–
Reducing
Costs


(1) Soaring Cotton Prices

Source: International Monetary Fund

Backstage
–
Reducing
Costs


(2) Rising Cost of Production in China

Labor Cost

Rental Cost

Other Fixed Cost

Affordable Fashion?

Backstage
–
Reducing
Costs


NhonTrach Industrial Park,
Dong Nai Province
• Established Textile Cluster
• Heavy FDI Investments
• Developed infrastructure
• Proximity to Saigon
• Proximity to Ports

Backstage
–
Increasing
Speed
to
Market


NhonTrach as production
base for Asia Pacific
• entralised Production
C
• Shipping cost offset by
production cost savings
• Boosts speed to market

Backstage
–
Overcoming
Manpower
Constraints


Salespersons
 Need to keep up with rapid expansion of physical stores

1
2

↑
Number
of
↑
Revenue
/

Salespersons
Salesperson

Managers

Management Associate Programs
• Targets Business students
• Accelerated program, job rotations,
international experience

Financials


Assumptions
 WACC of 11.2%
 Base growth rate of Sales Revenue (without Runway) at12% per annum
 COGS at 30% of Sales Revenue in 2011, decreases by 0.5% per
annum until 2016, constant thereafter
 Selling expenses at 34% of Sales Revenue in 2011, 35% in 2012~14,
decrease by 0.5% per annum until 33%, constant thereafter
 Aggregated Group tax rate of 25.3%
 Straight-line depreciation of capital expenditures over 5 years

Financials


SEK 23.5 Billion Incremental Profit in 2021

Break-even in 5 Years

Financials


Worst Case Base Case Best Case
SEK 28.4 Billion SEK 35.4 Billion SEK 44.3 Billion

Implementa+on
Timeline


Project
Runway

2011
2012
2013
2014
2015

Set.
Stage

1. Pilot
H&M
Man
project

in
Shanghai
and
Beijing

1
Pilot
Interna>onal
roll
out

2. Increase
accessories
2

market

Implementa+on
Timeline


Project
Runway

2011
2012
2013
2014
2015

Set.
Stage

1. Pilot
H&M
Man
project

in
Shanghai
and
Beijing

1
Interna>onal
roll
out

2. Increase
accessories

2

market

3
Interna>onal
expansion
with
a
focus
in
Asia
Paciﬁc

Strut
.
Runway

1. Geographic
expansion

4

2. H&M
applica>on

Implementa+on
Timeline


Project
Runway

2011
2012
2013
2014
2015

Set.
Stage

1. Pilot
H&M
Man
project

in
Shanghai
and
Beijing

1
Interna>onal
roll
out

2. Increase
accessories

2

market

3
Interna>onal
expansion
with
a
focus
in
Asia
Paciﬁc

Strut
.
Runway

4
Develop

1. Geographic
expansion

2. H&M
applica>on

Support functions ongoing through fiscal
Manage.
Backstage
years

1. Suppliers

2. Strengthen
HR

Conclusion


Sustainable
growth
with
High
Impact
strategic

Objec+ve

ini>a>ves
whilst
keeping
things
Simple

Priori>zing
Recrui>ng
and

Cri+cal
Issues
Managing
costs

growth
op>ons
retaining
talents

Recommenda+on
Set.
Stage
Strut.
Runway
Backstage

Sustainable

Beneﬁts
High
Impact

Simple

growth

Conclusion


Sustainable
growth
with
High
Impact
strategic

Objec+ve

ini>a>ves
whilst
keeping
things
Simple

Priori>zing
Recrui>ng
and

Cri+cal
Issues
Managing
costs

growth
op>ons
retaining
talents

Recommenda+on
Set.
Stage
Strut.
Runway
Backstage

Beneﬁts
NPV:
35.4bn
SEK
over
10
year

Complementary
Slides

Caroline
Ng

Candice
Lim

Peh
Che
Min

Tobias
Chen

F . O . C . A . L

Financials


Jus+ﬁca+on
for
Addi+onal
1.6%
CAGR


Equivalent of 1.6% of Sales Revenue in 2011

Prioritizing Options for Growth

• ncrease
sales
per
square
feet

I • Scheduling
to
maximize
impact

Op+on
1:

-‐
Fashion
credibility
(Guest
designers)
• Revenue
contribu>ons
unjus>fied

Day
to
day

-‐
DifferenCaCon

-‐
Cost
effecCve

performance

-‐
Untapped
segments

• ncrease
store
traffic

I

-‐Revenues

-‐
Brand
visibility

• onstant
‘fresh’
image

C
• 4/7
Shopping

2 • ntegra>on
of
online
channel

I
Op+on
2:
• reater
reach
to
target
segment

G • evenue
contribu>ons
unknown

R
Online
Channel
• ost
effec>ve

C • ack
points
of
differen>a>on

L
• hanging
lifestyle

C
• iral
marke>ng

V
• iversifica>on

D • ack
understanding
of
foreign
markets

L
Op+on
3:
• ncrease
revenues
fast

I • ight
>ming
to
enter
emerging
markets

R
Geographic
Expansion
• ncrease
brand
visibility

I important

• ompe>>ve
pressures
to
move
fast

C • onstrained
by
resources

C
• ew
collabora>ons
with
local
designers

N
• iversifica>on

D • ncompa>ble
with
brand
image

I
Op+on
4:
• ncrease
revenue
streams
in
lucra>ve
market

I • igh
risks
involved

H
Product
Category
(LT)
• everage
on
exis>ng
suppliers

L • upply
chain
complexity

S
• uild
H&M
lifestyle
concept

B • preading
resources
too
thin

S
• evenue
contribu>on
unjus>fied

R
• iversifica>on

D • igh
risks
involved,

H
Op+on
5:
• apture
apparel
market
segments

C • o
economies
of
scale

N
Brand
Expansion
(LT)
• rowth
Poten>al

G • ncrease
complexity;
resource
constraints

I
• annibaliza>on

C
• ffect
group
culture

A

Geographic Expansion: Where first?
Variables
Western
Eastern
North
South
MENA
Asia
Pacific

Europe
Europe
America
America

Market
Size
US$379bn
US$64bn
US$352bn
US$88.3bn
US41.5bn
China:
US
(Russia:
43.8bn)
(Brazil:
43%
of
total

US:
US$329bn
volume
sales
and

$169bn

nearly
55%
of
value
Japan:
US
sales
in
2008
–

lower
end
market)

$134bn

Australasia:

US$11bn

Growth
2.4%
8.9%
4.7%
4%
12%
9%

Poten+al
(Exp
increase)
5.1%
(Male)

Ease
of
• Easy
• Rela>vely
• Easy
• Difficult
• Difficult
• Rela>vely

Entry
• Familiar
easy
• Unfamiliar
• Unfamiliar
easy

market
• Familiar
market
market
• Familiar

market
• Sensi>ve
market
(P)

Compe++on
• Mature
• Emerging
• Mature
• Emerging
• Emerging
• Emerging

Note:
Clustering
is
market
market
market
market
market
market

good

• Stable
• Intense
• Stable
• Intense
• Less
• Intense

compe>>on
compe>>on
compe>>on

Posi+ve
-‐ve
+ve
(Russia)
+ve
+ve
-‐ve
+ve

Spillovers
(Brazil)
(Franchise)
(Singapore)

Total
Market
Value
in
2010:
€769.3bn

SeAng
the
Stage
–
H&M
MEN



Need
Look Good
Recognition

Information
Search

Evaluation of
Alternatives

Purchase
Decision

Purchase
Evaluation

SeAng
the
Stage
–
H&M
MEN



Need
Look Good
Recognition

Information
Search

Too
risky
to
increase
emphasis
on
Menswear

Evaluation of
Alternatives

PILOT
TESTING
in
CHINA

Purchase
Decision

Purchase
Evaluation

SeAng
the
Stage
–
H&M
MEN



Need
Recognition

Information The Fashion
Guest Designers
Search Fraternity

Evaluation of
Lock in loyalty
Alternatives

Purchase
iPhone Application
Decision

Purchase
Evaluation

SeAng
the
Stage
–
H&M
MEN


Information
The
Fashion
Fraternity

Search

To create a comfortable and pleasurable shopping
experience - for men only

Evaluation of
Alternatives Lounge Catalogues Assistance

Relaxing and What To Wear
Subtle, non-
Purchase unintimidating & Fashion
intruding
atmosphere Tips
Decision

SeAng
the
Stage
–
H&M
MEN


Information
The
Fashion
Fraternity

Search


Evaluation of

Purchase
Decision

SeAng
the
Stage
–
H&M
MEN


Information
Guest
Designers

Search

sales per customer x no. of customers

Evaluation of
Caters to both
Alternatives Global Prestige
genders

Fred

Perry

Purchase
Decision
Tom

Ford

SeAng
the
Stage
–
H&M
MEN


Information
Shi
shangyizhu

Search


Evaluation of

Purchase
Decision

SeAng
the
Stage
–
H&M
MEN


Information
iPhone
Application

Search

sales per customer x no. of customers

Evaluation of
Alternatives Sales channel Fashion advice

Purchase
Decision

Why men category?

• igh
CAGR

H
• ncreasing
market
share

I
• ncreasing
acceptance

I
• ncreasing
aﬄuence

I
• ncreasing
need
to
look
good
and

I
trendy

• o
strong
focus
at
the
moment

N
• hina/India:
Dominant
market

C
• xperien>al

E
• es>ng
area:male
shopping
habits

r

Why not the franchising model?

1.Interna>onal
brands
in
China
are
losing
control
and

ability
to
monitor
channels

2.
Franchisee
has
the
tendency
to
oﬀer
huge
discounts

when
inventory
builds
up

3.
Lack
of
compliance
with
brand
building
ac>vi>es
to

save
money

4.
Franchisee
do
not
see
brand
building
as
part
of
their

responsibility

5.
No
feedback
loop
on
job
informa>on,
supply
and

sales
rebate

Suits:
Jul
–
Jan
(Summer
sales)

Public
holiday:
Demand
will
spike

25
–
45
years
old

economic
basis
+
strong
pref
for
brand
–
300,000,000

ﬁrst
>er
ci>es
–
spill
over
to
second
>er
ci>es

3rd
>ers
and
4th
>ers
are
also
upcoming

shopping
is
a

leisure
and
past
>me…switch
shops
less
ouen

community
malls
are
doing
bever

price
focus
to
value
driven

Why not verticalization?

1.Interna>onal
brands
in
China
are
losing
control
and

ability
to
monitor
channels

2.
Franchisee
has
the
tendency
to
oﬀer
huge
discounts

when
inventory
builds
up

3.
Lack
of
compliance
with
brand
building
ac>vi>es
to

save
money

4.
Franchisee
do
not
see
brand
building
as
part
of
their

responsibility

5.
No
feedback
loop
on
job
informa>on,
supply
and

sales
rebate

Why not acquire?

1.
Lack
of
exper>se

2.
H&M
is
a
growing
business

3.
Risk
of
cannibaliza>on

4.
Risk
of
spreading
one’s
resources
too
thin

5.
Unable
to
support
too
many
brands

Why not Integrate?

1.
Lack
of
exper>se

2.
H&M
is
a
growing
business

3.
Risk
of
cannibaliza>on

4.
Risk
of
spreading
one’s
resources
too
thin

5.
Unable
to
support
too
many
brands

Value
Proposi+on


Sustainable
growth
with
High
Impact
strategic

Objec+ve

ini>a>ves
whilst
keeping
things
Simple

Priori>zing
Recrui>ng
and

Cri+cal
Issues
Managing
costs

growth
op>ons
retaining
talents

Recommenda+on
Set.
Stage
Strut.
Runway
Backstage

• Wet
Seal
Shows
The
Way

• Are
you
slowly,
cau+ously
sor+ng
out
how
to
engage
with
your
customers
in

social
networks?
By
Chris
Murphy
,

Informa+onWeek
September
25,
2010
12:00

AM

• Are
you
slowly,
cau>ously
sor>ng
out
how
to
engage
with
your
customers
in
social

networks?
Well,
if
your
customers
are
teenage
girls,
and
72%
of
them
are
on

Facebook
and
36%
of
them
have
a
smartphone,
you
don't
have
the
luxury
of
taking

your
sweet
>me.That's
why
teen-‐girls'
clothing
retailer
Wet
Seal
is
among
those

blazing
a
trail
in
marke>ng
with
Facebook.
One
lesson
it's
learned
is
that
girls
want

to
do
different
things
on
each
medium.
They
use
Wet
Seal's
site
to
create

oueits-‐-‐500,000
of
them-‐-‐but
they
prefer
to
share
oueits
with
friends
using

Facebook.
Girls
don't
use
their
iPhones
much
to
post
content,
but
they
viewed

750,000
oueits
a
week
on
the
retailer's
iPhone
app
in
the
back-‐to-‐school
season.

Here
are
some
hard
results
Wet
Seal
has
seen
with
its
integrated
Web,
social

networking,
and
iPhone
strategy:

• Girls
using
the
oueit
tool
are
40%
more
likely
to
buy,
and
they
spend
20%

more.Girls
using
a
"Shop
With
Friend"
feature,
accessed
through
Facebook
or
the

site,
have
a
2.5
>mes
higher
conversion
rate.

• Facebook
is
now
the
largest
marke>ng
base
for
store
traffic,
thanks
to
coupons
and

campaigns,
and
one
of
the
biggest
drivers
of
traffic
to
Wet
Seal's
Web

site.Facebook
also
is
a
gold
mine
for
the
customer-‐support
team.
"It's
one
of
the

primary
tools
they
use
to
know
if
there
are
problems
out
there,"
says
Wet
Seal

development
director
Shawn
Keim.
Wet
Seal
doesn't
erase
complaints
but
tries
to

resolve
problems
with
comments
on
Facebook,
so
people
see
issues
gezng
taken

care
of.

Smartphone
penetra+on

The
current

• 91%
of
all
US
consumers
own

H&M
applica+on
and
use
a
mobile
device

• 1.8
billion
smart-‐phones
in
use

Basic
features
globally
by
2013

• D,
sta>c
photo

2 M-‐shopping
takeup

• 8%
of
smartphone
users
say

4
Limited
geographic
reach
they
have
already,
or
soon
will,

do
mobile
shopping

• nly
works
when
near
certain

O
H&M
stores
Poten+al
in
mobile

• Mobile
marke>ng
spend
will

top
USD
1
billion
in
2011

Source:
Forrester
Research,

ABI
Research,
Modus
Associates

Taobao
Mall

• Levi’s
is
the
latest
interna>onal
brand
to
set
up
an
online
shop
in
China.
Well,
that

is
made
possible
through
Alibaba
Group’s
Taobao
Mall.
It’s
a
wise
choice
as
Taobao

is
China’s
largest
retail
website
with
more
than
370
million
users
and
receives
over

50
million
unique
visitors
each
day.In
Levi’s
new
online
store,
users
are
spoilt
for

choice
with
over
200
Levi’s
products
to
choose
from.
On
top
of
that,
Levi’s
will
also

introduce
exclusive
online-‐only
styles
on
Taobao,
a
bonus
to
keep
users
coming

back.Despite
in
early
stage,
Levis’s
effort
seems
to
be
paying
off
well.
Several

thousands
pair
of
jeans
were
already
sold
online,
according
to
Taobao’s
sta>s>cs.

Apparently,
Levi’s
isn’t
the
only
brand
that
has
entered
China’s
online
market

through
Taobao.“UNIQLO,
Adidas,
Procter
and
Gamble,
L’Oreal
Paris,
Lenovo,
Li

Ning
and
Revlon
have
all
launched
official
online
retail
storefronts
on
Taobao
Mall

as
part
of
their
e-‐commerce
strategy,”
a
Taobao
spokeswoman
told
Penn

Olson.“For
corporate
retailers,
Taobao
Mall
offers
the
infrastructure
for
complete

management
of
their
own
brand
and
online
retail
channel
while
providing
access

to
consumers
situated
in
second
and
third
>er
regions
across
China
in
addi>on
to

urban
centers
such
as
Shanghai
and
Beijing,”
she
added.Business-‐to-‐consumer

(B2C)
ecommerce
is
booming
in
China.
Last
quarter,
China
hit
a
new
high
with
a

total
of
64
million
B2C
orders.
Without
a
doubt,
a
large
number
of
orders
comes

from
Taobao.
If
you’re
a
retailer
and
looking
to
capture
the
Chinese
market,
Taobao

seems
like
a
good
place.

1) Eastern
Europe
&
Asia
Paciﬁc

2) Grow
by
10-‐15%
new
stores
(220-‐330
stores

in
following
12
mths)

Back-‐up:
Zara
opera>onal
eﬃciency

2010
Expansion

Region
No
of
new
%
of
total
new

stores
stores

Western
Europe
151
62.1%

Eastern
Europe
29
11.9%

Asia-‐Paciﬁc
26
10.3%

Middle
East
and
15

Africa
6.2%

North
America
22
9.1%

Variables
Western
Eastern
North
South
MENA
Asia
Pacific

Europe
Europe
America
America

Market
Size
US$379bn
US$64bn
US$352bn
US$88.3bn
US41.5bn
China:
US
(Russia:
43.8bn)
(Brazil:
43%
of
total

US:
US$329bn
volume
sales
and

$169bn

nearly
55%
of
value
Japan:
US
sales
in
2008
–

lower
end
market)

$134bn

Australasia:

US$11bn

Growth
2.4%
8.9%
4.7%
4%
12%
9%

Poten+al
(Exp
increase)
5.1%
(Male)

Ease
of
• Easy
• Rela>vely
• Easy
• Difficult
• Difficult
• Rela>vely

Entry
• Familiar
easy
• Unfamiliar
• Unfamiliar
easy

market
• Familiar
market
market
• Familiar

market
• Sensi>ve
market
(P)

Compe++on
• Mature
• Emerging
• Mature
• Emerging
• Emerging
• Emerging

Note:
Clustering
is
market
market
market
market
market
market

good

• Stable
• Intense
• Stable
• Intense
• Less
• Intense

compe>>on
compe>>on
compe>>on

Posi+ve
-‐ve
+ve
(Russia)
+ve
+ve
-‐ve
+ve

Spillovers
(Brazil)
(Franchise
(Singapore
-‐

model)
SEA)

Total
Market
Value
in
2010:
€769.3bn

M-‐commerce

a
complementary
revenue
stream

• 5th:
mul+-‐channel

• build
integrated
mul>-‐channel
plaeorms
(addressing
customers
via

diﬀerent
plaeorms
and
integra>ng
them)
call
centers,
web
&

mobile,
direct,
other,
catalog,
print/mail,
TV,
stores.

• Customers
touched
by
numerous
channels
will
spend
more
with
the

retailer:
Average
annual
spend
(USD):
260
-‐>
660
-‐>
1,620
from

single
channel
-‐>
dual
channel
-‐>
tri-‐channel
(store,
catalog,

internet)
also
creates
more
loyal
customers

• push
into
online
–
e-‐/m-‐commerce

• “Apparel,
accessories
and
footwear”
is
biggest
category
in
online

sales,
and
is
expected
to
con>nue
to
grow
at
high
rates
(2009-‐2013

CAGR:
11%,
forecasted
online
sales
for
USA,
$40.3
bn
in
2013)

• challenge
for
fashion
industry
–
need
to
deﬁne
equilibrium
between

brand
and
commercial
objec>ves

Where
to
expand
in
2011

Growth
Posi>ve

Emerging
markets
Market
Size
Ease
of
Entry

Poten>al

Compe>>on

Spillovers

Asia-‐Paciﬁc

Middle
East

&
Africa

Eastern
Europe

Franchise
to
MEA

South
America
Cultural
and
legal
constraints

Favorable
Unfavorable

Where
to
expand
in
2011

Growth
Posi>ve

Emerging
markets
Market
Size
Ease
of
Entry

Poten>al

Compe>>on

Spillovers

Asia-‐Paciﬁc

Move
to
medium
run
–

Middle
East

&
Africa
1.
compe>>on
is
intense

2.unfamiliar
market

Eastern
Europe

South
America

Favorable
Unfavorable

Eastern
Europe:
mid-‐price
on
the
rise

Value
Proposi>on
Focus
Forge
Implementa>on
Conclusion

Timely
opportunity

• Economic
crisis

• Increased
demand
for
middle-‐

market

Geographical
proximity

• Manufacturers
in
Turkey,

Morocco
and
Bangladesh

• Headquarters
in
Stockholm

Deﬁning
the
Tiers

First-‐Tier
Ci+es

Four
municipali>es:
Beijing,
Chongqing,
Shanghai,
Tianjin

Ci>es
with
total
retail
sales
of
more
than
RMB30bn,
annual
per
capita
income
of

RMB11,000
and
high
per
capita
retail
sales
as
propor>on
of
income:

10
provincial
capitals:
Changchun
(Jilin),
Chengdu
(Sichuan),
Guangzhou
(Guangdong),

Hangzhou
(Zhejiang),
Harbin
(Heilongjiang),
Jinan
(Shandong)
Nanjing,
(Jiangsu),

Shenyang
(Liaoning),
Wuhan
(Hubei),
Xi’an
(Shaanxi)

Four
leading
ci>es:
Dalian,
Qingdao,
Shenzhen,
Xiamen

Second-‐Tier
Ci+es

17
provincial
capitals:
Changsha
(Hunan),
Fuzhou
(Fujian),
Guiyang
(Guizhou),
Haikou

(Hainan),
Hefei
(Anhui),
Hohhot
(Inner
Mongolia),
Kunming
(Yunnan),
Lanzhou
(Gansu),

Lhasa
(Tibet),
Nanchang
(Jiangxi),
Nanning
(Guangxi),
Shijiazhuang
(Hebei),
Taiyuan

(Shanxi),
Urumqi
(Xinjiang),
Xining
(Qinghai),
Yinchuan
(Ningxia),
Zhengzhou
(Henan)

50
prefecture-‐level
ci>es,
including,
Ningbo,
Suzhou,
Wuxi,
Wenzhou,
Nantong,

Dongguan,
Zhanjiang

15
more
ci>es
with
popula>ons
of
between
500,000
and
2mn

Third-‐Tier
Ci+es

Approximately
200
county-‐level
ci>es

Fourth-‐Tier
Ci+es

Approximately
400
capitals
of
county
towns

Source:
Ogilvy

Presentation by National University of Singapore - Winners of CBS Case Competition 2011

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