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The fashion industry needs to change, says Daniel Ervér, the new H&M Group CEO installed last week upon the abrupt departure of Helena Helmersson. Ervér, who’s spent 18 years at the company across a variety of roles, from store trainee to head of the H&M brand, worked closely with Helmersson — a rare example of an executive working to address the problems inherent in fashion’s business model head-on.
Now, Helmersson is out. But Ervér makes it clear he’s carrying her torch.
“We both shared a passion for sustainability. As a large player in the industry (owner of eight brands including H&M, Cos, Weekday, & Other Stories and Arket), we need to take a big responsibility in [its] change,” Ervér says, speaking from H&M’s New York showroom, where he’s visiting from Stockholm to celebrate the opening of the brand’s new SoHo store. “We will not be able to do it alone; we need to do it with competitors, with the government. But we can play a big role.”
Ervér is stepping in at a turbulent moment for the company. H&M Group reported in its fourth quarter earnings — coinciding with Helmersson’s departure — that sales fell 1 per cent in local currencies, and by 4 per cent between 1 December 2023 and 29 January 2024. Ervér’s apparent directives are to cut costs, grow revenue and compete more aggressively against Shein, whose mammoth presence looms large in retail. Shein’s annual revenue is estimated at $30 billion, surpassing H&M’s (and fellow competitor Zara’s) annual sales for the first time in 2023. H&M reported $22.5 billion for the year, a 6 per cent increase over 2022.
Rebranding fast fashion
Pressure to keep up with Shein — whose Western rise has been swift and startling to industry observers — is forcing fast fashion into a race to the bottom. Trend cycles are moving relentlessly, and clothing from Shein is priced so low that it defies ethical manufacturing logic, and is often considered disposable.
Can H&M be the anti-Shein and still grow? There are signs that might be in the subtext of its strategy. Ervér doesn’t shy away from the fast fashion label. He says it’s only a negative when customers buy clothing to wear once and then throw them out. “That’s not the fast fashion we want to be a part of. How do we make sure [pieces] have a second life?” Durability is a key objective; he did not comment on what happens to their clothes when they do reach their end of life. “We want to become faster. But we don’t want customers to use the garments fewer times. It’s part of a whole transformation.”
Ervér acknowledges that a 2024 priority is to grow the business, but he takes responsibility for doing so sustainably. “By taking market share, we make the industry better,” he says. That’s a bold claim, when sustainability advocates say that degrowth is the only way forward for companies to align with climate change goals set out in the Paris Agreement.
What will it take to get there?
That transformation will involve smarter trend prediction based on customer data and AI, as well as improved brand relevance. One of Ervér’s main initiatives as CEO is to bring H&M’s production closer to its points of distribution: a factory in Latin America to serve the US, one in Turkey to serve the EU and Asian manufacturers to serve the Asian market. This, he says, will help to cut the company’s overall emissions — H&M has set a target to cut absolute emissions by 56 per cent by 2030, and reach net zero by 2040 — and make the company more reactive; a strategy other fashion and footwear firms are investing in, too.
This approach to production is coupled with two other pillars of H&M’s sustainability strategy: transitioning its suppliers to clean energy in order to reduce CO2 emissions; and championing alternative materials. Under its Green Fashion Initiative, H&M makes funding available to sourcing partners for investing in the technology and processes required to reduce energy demand, increase their use of renewable electricity and replace fossil fuels. And through its New Growth and Ventures division, the company invests in materials startups including TreetoTextile (a company that regenerates cellulose into fibre), SRTX (a hosiery producer) and Kintra Fibers (a materials science company developing bio-based polyester) and uses them in collections to help promote scale.
Responsive manufacturing is something Zara and Shein have led on; H&M is now getting in the game. It’s using data and predictive AI to create clothing people will want to buy. Ervér is particularly proud of the company’s 300-person in-house design team for serving as a point of differentiation (it’s worth noting that Shein’s model sources from hundreds of external designers), but timing and placement are everything.
“We use data, customer insights and AI in our supply chain to make sure we don’t overproduce,” Ervér says. “A garment that has no demand is the worst one for the environment.”
It’s a theory that will be difficult to execute. Waste-free production isn’t something any brand of H&M’s size has been able to achieve — and overproduction is still rampant in the industry. Last autumn, the Or Foundation challenged fashion companies to share their production volumes in order to better visualise the size of the industry’s waste problem. H&M declines to share its production volumes citing competitive reasons, but Ervér adds that the company “works hard to avoid overproduction”.
A North Star in SoHo
To get an idea of the group’s North Star under new CEO Ervér, look to the H&M brand’s SoHo store, which opened this week in New York.
It’s smaller than the former H&M space, which closed in 2022. Each piece is intentionally placed: the company is changing up its store assortment strategy so that each location’s inventory reflects its local customers’ tastes and what they’re most likely to shop for. All clothes are equipped with RFID technology meant to help find and fetch specific pieces and sizes faster, letting associates ship orders directly from warehouses to customers’ homes, easily sniffing out if something’s out of stock.
It’s the first US store to feature an H&M Pre-Loved section — a curation of secondhand items from H&M and other brands — the fruit of years of effort training customers to donate used clothing to H&M via Sellpy, the secondhand e-commerce platform that the company acquired in 2019. The goal is to keep items in rotation for longer.
It’s a more grown-up iteration of H&M, heavily featuring the higher priced Studio collection. It’s part of the brand’s efforts to open stores in more relevant markets and close underperforming ones. H&M Group has 4,369 stores globally (around 3,800 are H&M brand stores), and in 2024, the company plans to open around 100 additional stores and close 160. Ervér sees physical stores as a key to its success. (Shein currently has no permanent US or European stores.)
For now, Ervér has a relatively singular outlook on the H&M brand as a microcosm of the entire group; he says he’s still getting to know the other brands in the portfolio. Credibility and relevance come up often when discussing the future, and Ervér says that will come down to getting the right product out at the right time, and reaching the “fashion aspirer” customer who’s less trend reactive but still savvy. Part of reaching both of those places is restraint. “You cannot do everything and be credible. That alone is a shift.” Collaborations, which H&M has become known for, will stay on the map; next up is a partnership with Heron Preston.
Recognition of the need for restraint brings to mind the parting statement from Helmersson, who alluded to the stress of the job on her way out. Was that because of the unrelenting pace? “I have tremendous respect for Helena’s position, and how she has led the H&M group,” Ervér says. “The last four years have been challenging for the industry: political crises, a pandemic, inflation, supply chain disruptions. She’s done a tremendous job in leading and guiding us.”
All of those things are still in play, including inflation, which has particularly gripped the all-important US market. (“We just have to keep in mind that customers’ wallets are tighter,” he says.)
Everything considered, this year is about one thing: “2023 has been about finding more stable ground and profitability. In 2024 our focus is on growing,” Ervér says. “It’s daunting and exciting.”
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