H&M to follow Zara's digital footprint with plans to shut down stores in exchange for online sales

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A view outside the H&M store in Times Square as New York City moved into Phase 2 of re-opening following restrictions imposed to curb the coronavirus pandemic on July 1, 2020. (Photo by Noam Galai/Getty Images)
A view outside the H&M store in Times Square as New York City moved into Phase 2 of re-opening following restrictions imposed to curb the coronavirus pandemic on July 1, 2020. (Photo by Noam Galai/Getty Images)
  • The Covid-19 pandemic has resulted in multiple store closures over the past couple of months.
  • South Africa saw Prada's final departure from Africa's richest square mile in May, while Zara's announcement of upcoming store closures around the world caused panic in the country.
  • Swedish retailer H&M now joins the list of fashion outlets making a shift to digital by means of multiple store closures. But much like Zara, this does not mark the end for the retailer. 

H&M is set to close hundreds of its stores - not because it’s doing terribly badly, but rather to transition to online sales. Last week, the world’s number two fashion retailer said third-quarter profits were doing better than expected – they fell less than it had been forecasted to just over $265 million.

But the Swedish firm says it is accelerating its shift to online selling that will see it closing 250 stores next year (or about five percent of its current net worth). Earlier in 2020, H&M saw sales halve, and posted a steep loss – a first in decades – but the retail chain has since bounced back from this year’s troubles.

And sales in September were only down five percent from 2019’s levels. Cost-cutting measures also paid off. Now, Chief Executive Helena Hellman, says the worst is over for the company.

READ MORE: Why we shouldn't panic about the planned closure of 1 000 Zara stores over the next 2 years 

We previously reported how Inditex aims to focus on its online business and large stores in prime shopping areas by closing around 1000 of its smaller Zara stores around the world. As a result, it expects virtual sales to account for more than a quarter (25 percent) of business by 2022. 

Do H&M and Zara's gradual digital transitions, therefore, mean we're already at the doorstep of a future where hand-to-hanger shopping as we know it, will eventually become antiquated? Possibly.

The way we shop for clothes has also already been altered by the pandemic, as we are no longer permitted to try garments on before purchasing them. And if a handful of fashion retailers do allow try-ons, there is much-warranted reluctance to do so. Perhaps then a digital shift would be inevitable, as people feel shopping online makes for safer shopping anyway.

However, this phenomenon is also just one of the symptoms of a pandemic facing the retail industry; the impending brick-and-mortar famine. According to The Guardian, brick-and-mortar retailers around the world have been "forced to re-evaluate their business models during the pandemic, amid expectations of lower footfall in stores for a significant amount of time." But the need to reconsider outdated business models had made itself evident in retail long before Covid-19. 

Here, we take a look at some of the brick-and-mortar fatalities we've reported on both before and during the coronavirus pandemic:

Prada leaves SA

Prada, the Italian luxury label owned by the Prada Group, announced its departure from Africa's richest square mile in May, expressing these neatly packed words; "We are writing to inform you that the Prada store at Johannesburg Sandton Mall is now permanently closed." 

They concluded their very brief letter to the Prada community in SA by saying "Don't forget to visit our website an social media channels every now and then for some inspiration too." 

J. Crew bankruptcy

J. Crew filed for bankruptcy due to the pandemic. The decision to file for Chapter 11 protection in federal bankruptcy court was reached in early May. It was reported that J. Crew's e-commerce business will continue and at least two brick-and-mortar stores will open once lockdown restrictions have eased. 

Neiman Marcus... also bankrupt

Also in the first week of May, U.S. luxury department chain, Neiman Marcus Group, filed for bankruptcy protection, marking one of the highest-profile corporate collapses yet among retailers forced to temporarily close stores in response to the Covid-19 pandemic, which has shoppers stuck at home. 

The Dallas-based retailer reportedly plans to cede control to creditors in exchange for eliminating $4 billion of debt (they also reportedly owe $6 million to Chanel). Its debt currently totals about $5 billion. 

READ MORE: Retail industry rattled as Neiman Marcus becomes latest chain to file for bankruptcy 

Forever 21's ongoing bankruptcy woes

The end of fashion month in 2019 was culminated by international retail chain Forever 21, filing for Chapter 11 bankruptcy protectionAccording to Forbes, the company's co-founders Jin Sook and Do Won "Don" Chang were no longer billionaires by July 2019 after over three successful decades of fashion retail.  

SA's revolving door of international retail outlets 

Here today. Gone tomorrow.

The year 2015 saw the coup de grâce of the 30-year-old Platinum Group which had Aca Joe, Urban, Hilton Wiener, Jenni Button, and Vertigo in its stable, after having furnished the wardrobes of middle class black South African consumers for all occasions season after season. In 2017, Stuttafords stores then finally left our malls for good after 159 years of selling coveted (and overpriced) European and American brands to local fashion enthusiasts. In the same year, all standalone Mango, River Island and Nine West stores also packed their paper bags and left SA retail centres hollow. 

And then we were down to a handful of fast fashion options including Zara, H&M, Cotton On, and Topshop; just to name a few. 

That was until Topshop left us too in 2018, but not without a bang of a sale.

Not too long after officially closing its doors in South Africa, Topshop then resolved to close all 11 of their U.S. stores earlier in 2019 as the brand continued to battle. 

W24 article detailing the reasons behind these closures referenced Business Insider, saying that Topshop's parent company Arcadia Group proposed these closures as part of a restructuring deal amid financial difficulty. It was also stated that Topshop will, however, continue to sell its clothing online through its wholesale partners.

Topshop follows its fellow beleaguered Victoria’s Secret, which shared its plans to close 53 stores in the U.S. – and, according to CNN, was due to more women deserting the brand for lingerie startups and big retailers. Both Topshop and Victoria’s Secret have been previously accused of not keeping up with the times when it comes to fashion. 

And therein lies the retail dilemma - the struggle to keep up with the times not only in terms of fashion, but with regards to business trends and changing consumer habits too.

Additional source: Reuters

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