Due to the significant impact of the COVID-19 crisis, retail stores were forced to shut down resulting in loss of revenues.
H&M, one among the world’s second-biggest clothing retailer witnessed a downfall of 46 percent during the March sales due to the pandemic and expects to run a loss in its fiscal second quarter. With dramatic changes in the market, the retail store was forced to temporarily shut down.
However, with the boom of online shopping, H&M saw an opportunity to strengthen its business. They plan to revamp their entire business strategy with the help of technology. Talking of technology, artificial intelligence, and big data definitely strike our minds. Indeed, the company’s current aim is to win back customers with the help of AI and big data.
Therefore, instead of having the company stock stores with the same merchandise across the globe, they plan on utilizing big data to customize the products they sell in individual stores.
How AI and big data is helping H&M
With the boom of online shopping, the fashion giant thrives to make its online presence felt across the world. H&M is also looking forward to recovering from the pandemic and work toward a goal of becoming a climate-positive by the year 2040.
H&M: The changed business model
About 200 data scientists have started working together to gather every bit of information regarding the purchasing patterns and trends for each item in each of its stores. H&M is hoping to increase revenue and stakeholders’ trust by rightly investing in big data and analyzing customer’s needs at the local level.
The management team at H&M are developing a new AI business strategy to create value for their customers. Their core focus has now shifted to develop solutions to face the challenges they are facing. While managers along with the team members struggle to find new ideas and ways to generate value, big data came out to be their savior.
Like every traditional mortar and brick retail store, H&M had a team to watch out and keep track of figuring out what the customers want to exactly buy. Further on, the designers then started developing pieces that cater to the needs of the customers. Although this model turned out to be a failure, the retail store now uses algorithms to analyze the store receipts, returns, and even the loyalty cards.
The big game plan
Instead of using the same old model – one size fits all approach to creating designs for their customers. Their new strategy now tailors merchandise to local wants. According to their analysis, they have found out that the value of a customer simply meant a much more personal and high-quality experience. As such that the customers desired products have been made of high-quality along with fashion-forward styles.
The retail store has no plans on cutting down the merchandising team but rather equip them with tools and technologies to make better and informed decisions. With the help of big data, H&M hopes they can avoid huge price cuts and reduce the number of unsold goods – these were two concerns hampering the company’s profit.
Earlier an H&M store at Ostermalm, Stockholm majorly focused on selling basic clothing for men, women, and kids. Precisely, this store was one of the early adopters of technology. Using AI and big data, it was found that the store generally had customers who were women, and their products directed toward fashion-focused and they generally preferred floral skirts.
Further on, with the help of behavioral analysis, the store also found out most shoppers preferred items that were higher priced. So, the store now has $118 leather bags and $107 cashmere sweaters placed right next to the usual $6 T-shirts and $12 shorts. A coffee shop was also added along with a store that sells flowers since the data analyzed by them predicted that customers were likely happy to have services such as these while they’re shopping.
After strictly analyzing the customer purchase and return policy, the store concluded the data received and sold only the products that catered to the core market. With the help of this business strategy, H&M says their sales have significantly made improvements. In short, the store now sells products synced according to the taste of the local people.
Advanced predictions can easily be made using big data. The store now gathers data and predict trends within three to eight months in advance. Data generally gets collected after five billion visits to the store, extracted information from external sources, and online websites. The team analyzes data from different sources such as blog posts, search engines, and every other information found on the web. With all this information, the store can easily understand the trends and patterns in fashion according to which the products are produced.
Big data and AI have proven to be fruitful for the company. H&M now looks forward to driving the company by upgrading the skillsets of the employees. The company now believes they can increase the value by selling products that have tailored as per the customer requirement.