H&M bets on AI to upgrade stores, face off online rivals
H&M is betting on upgrading a slimmed-down store network to regain ground lost to rivals that sell purely online, and hopes artificial intelligence will smooth out the integration of its digital operations with its physical footprint.
'Blurring the lines between digital and physical shopping and strengthening both channels is our key competitive advantage," H&M Chief Digital Information Officer Ellen Svanstrom said in an interview. 'Although new players are emerging with different business models, we are sticking to our own."
The rise of low-cost online platforms such as Shein and Temu is heating up competition in the fast-fashion industry, threatening the dominance once held by Sweden's H&M and Spain's Inditex, owner of brands like Zara and Massimo Dutti.
Shein overtook H&M and Zara in the share of global apparel market since the Covid-19 pandemic, according to data provided by research firm GlobalData.
H&M's share of the global apparel market declined to 1.1% last year from 1.2% in 2019, before the pandemic, according to GlobalData. Zara's market share grew to 1.3% from 1% during the same period. But Shein expanded rapidly to leapfrog the European fast-fashion giants with a market share of 1.5% in 2024, up from 0.1% five years before, according to GlobalData.
'Our online channel was essential for us during the pandemic to stay in business, but we sell physical products and they need to be physically experienced in one way or another, so the store network will continue to be very important for us," H&M's Svanstrom said.
H&M has been focusing on optimizing its stores, refurbishing some key shops and closing others. At the end of February, the group had some 4,200 stores globally, down from more than 5,000 five years earlier, at the onset of the pandemic.
'We want to make sure that we have the best stores at the best locations," Svanstrom said. 'We need to double down on big cities and empower the physical experience of our brand."
H&M said it is deploying AI to strengthen its operations and improve customers' experience when shopping across its physical and digital channels.
The group has been applying predictive AI for several years and is exploring the use of generative AI and AI agents. It tracks consumer data around fashion trends, style preferences and sizes to learn which products sell best in different markets and transfers data to stores with the aim of delivering better consumer experience, it said. The company also relies on AI for supply-chain management, pricing and marketing, among other tasks.
The current global situation requires responsiveness in order to rebalance stock and understand how demand is shifting, Svanstrom said.
'We need to be able to react to trends and we can do that better by having access to live product data," the H&M executive said.
Write to Andrea Figueras at andrea.figueras@wsj.com
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