Fashion is undergoing a massive change - and H&M's struggles are proof
- H&M's new millennial-focused brand, Nyden, launched online this week.
- CEOKarl-Johan Persson wants to create the brand of the future - one that he believes does not follow trends or churn out endless different styles but sells a limited selection of "affordable luxury" clothing.
- This new label is the antithesis of H&M, and it speaks to the direction in which fashion is headed, casting doubt on whether H&M in its original form is still viable in the current apparel market.
After much anticipation, the H&M group launched its new, millennial-focused brand online on Tuesday. The new collection is currently in pre-launch and consists of eight different styles of men's and women's T-shirts costing $60 each. Several of the styles appear to have already sold out in the presale.
Nyden - a portmanteau of the Swedish words "ny" and "den," meaning "new" and "it" - is the brainchild of Oscar Olsson, a 35-year-old, tattooed Swede who previously hailed from H&M's innovation lab and has worked for the group since 2013.Rather than looking over his shoulder at competitors, Olsson's strategy is to look ahead and predict how people will shop in the future, using market research and partnering with sociologists and philosophers. In an interview with The Cut, Olsson said he believes that in the future, brands won't exist in the same way that they do today - they might not have one main designer but instead could be influenced by many different people.
Because of this, his collections will be co-created with a series of different influencers, or what he calls "tribal leaders," including Instagram-famous tattoo artist Doctor Woo and Swedish actress Noomi Rapace. The clothing will then be sold online and via pop-up stores.
Nyden is everything H&M is not. It sells minimalist clothing that doesn't follow trends, and given it claims to be the brand of the future, it's telling of the direction fashion is headed and why H&M's flagship brand is lagging behind.
H&M was once the king of fast-fashion but is increasingly finding itself in a tricky position. Analysts claim that it has a brand issue: it's not the cheapest, it's not the best quality, nor is it the most fashionable store, and it's being left behind because of this.
At the end of the fourth quarter of 2017, H&M reported its biggest sales drop on record. This was followed by a 62% decrease in operating profit in the first quarter of 2018 and news that it has accumulated a $4 billion mountain of unsold inventory.
"The offering is the core problem," Erik Sjostrom, a fund manager at H&M shareholder Skandia, which has sold off considerable amounts of its stake in the company, told Bloomberg in February.He said: "The fashion, the price, the distribution. I believe they are off both in terms of fashion and price."
Consumers are also becoming less inclined to jump on cheap clothing that goes out of style quickly, which is a problem for H&M.
"Millennials are becoming more conscious about sustainable living and preserving the environment," Erin Hendrickson, a minimalist expert who runs the blog Minimalist RD, told Business Insider.
The success of its higher-priced but better-quality sister brand, Cos, is a shining example of this. H&M CEO Karl-Johan Persson said that Cos' profitability is in now in line with H&M despite having 95% fewer stores, and it was expected to reach a turnover of around $1.2 billion by the end of 2017.
"There is a market for a customer that wants design and quality for an affordable price," Cos' managing director, Marie Honda, said during the company's Capital Markets Day in February. "These are timeless products that last longer - beyond that season."
With Nyden, a site that sells minimalist designs in limited quantities, H&M seems to be pivoting away from its mistakes and leaning into a style that has worked for them in Cos.