H&M back on trend with AI, loyalty drive
Fashion group’s pilot projects bear fruit with sales rise, share boost
to the right stores in the right markets is one of the key projects we are working on,” Zeighami said. “For 2019 we have huge plans for growing that and hopefully, by the end of next year, covering globally.”
In the age of social media, fashion companies have less power to drive trends, which come and go much more quickly.
That poses a particular problem for H&M, which produces most of its garments in Asia, far from its major markets, making it less responsive than its rival Zara-owner Inditex which boasts it can get new designs to its stores within a week. Sportswear brand Adidas admitted last month it had been caught flat-footed when its suppliers failed to keep up with strong US demand for its mid-priced clothing ranges. H&M had seen stocks of unsold goods pile up in the past three years.
In the quarter through February, inventories grew to a total of 40 billion crowns ($4.3 billion), or 18.6 percent of sales, but H&M said they consisted of a higher share of clothes that are newer, thus less likely to be sold at marked-down prices.
It has said this is a sign its overhaul is working, and it expects a better offering and improvements in buying and logistics to help it reduce inventories to between 12 and 14 percent of sales by the end of 2022.
“Companies such as ours once dictated fashion in a certain way. Today, however, fashion is growing organically: You have influencers, you have communities,” Zeighami said.
Danske Bank analyst Daniel Schmidt said a small increase in gross margin and management promises of smaller markdowns for a third straight quarter suggests H&M’s profits have finally hit bottom.
“Even though stocks are high, their quality is probably better than we can see,” Schmidt said.
H&M CEO Karl-Johan Persson said last month investment in AI was already helping predict trends and allocate garments to stores.
Companies in a range of industries are touting AI as the answer to their most pressing business problems, but many experts caution it may not live up to the hype.
Zeighami said he prefers to call it “amplified intelligence” because he wants to mine data to help humans make better decisions.
At rival Zara, merchandising teams use data gleaned from stores, webpages and app to adapt their designs, in addition to insights from social media.