IKEA vs H&M
IKEA the famous Swedish furniture manufacturer known for its cost effective furniture is one of Sweden’s’ best exports to the world. It tells us a lot about Swedish culture and how Swedes like their things. Another marquee from Sweden is Volvo and Volvos are known for their safety and practicality. The endnote – Swedes make things that are practical and not at all fancy. They may not be basic, because they are high quality and durable but they give the customer what he needs at a price he can pay and they do not give any fringes that cost extra money.
The Swede metaphor for the stuga fits all too well here. IKEA makes furniture cheap and durable and it’s well designed, but at no point of time is it too big or has parts that are useless. Whatever IKEA sells in its stores is completely usable. They are known for their stunts during the store openings and they use these stunts for publicity. Or let us say free publicity. Ikea being a very cost conscious company probably uses the store opening as publicity stunts, so you have lots of people who not only queue up before the store opens but also turn up to see who is who and doing what.
However, it is the effect of the publicity that pulls many people after the stores open. Everyday over 1. 1 million people walk into the Ikea stores, they have 230 odd stores and that means nearly 5000 people walk into each store on an average. The average bill is $85 and it is consistent across locations, which means that each store makes a sale of nearly half a million dollars a day, that is great. H&M is also similar in its approach. They spend a lot of money into creating a buzz on store openings and attracting people.
H&M of course is in a completely different business, but the fact is – you need to get the customers into the stores; and both these companies are awesome at it. H&M sells its clothes for a fraction of the price, but their stores are in the best of locations in many counties. They hire the top fashion designers to design their products and celebrities to promote them. Ikea aims to continuously cut prices, even of best selling items and they do not do it just by refining the production process, they do this by finding cheaper and better products / raw materials.
This is a good thing for it keeps the items cheap however; it also challenges the designers and takes in a lot of time and effort. It is a challenge and an expectation that they have built up, people who cant afford a certain thing this year, will expect it to be a little bit cheaper the next year and that is why the company will always have to keep reducing prices and for that they will always need innovative solutions.
The positive side of this is that the new findings will help in making the new products better, so although a lot of time and effort is spent into decreasing the prices of current goods, the exercise helps new product introductions and brings in more knowledge and options for the designers. H&M on the other hand asks famous designers and big names in the fashion industry to design some of their lines – these are of course specials – however, the beauty of H&M is to challenge the design to design clothes that are similar to the designer’s line yet at probably the tenth of the price.
They challenge the designers to price the clothes close to the cost of H&M clothing. By selling a Prada look-alike shirt at $10 and selling sweaters from Stella McCarty $1665 look alike at $79 – best of all, both are designed by her. They have almost 7000 items in their stores and most items need to be replaced every 3 years, which means that almost 2400 items need change every year, 200 a month and 7 items a day need to be replaced, and this is a huge challenge for the company.
For success and to retain its #1 position, it must not only follow the practice of replacing products every 3 years but also get more aggressive about new product introductions. They have a bunch of 12 designers and around 80 freelance designers who assist in all these efforts, looking at that huge numbers. H&M by contrast is a champion at getting the clothes to the market before the designers can ever do. When H&M sees a new design on the street, it’s in their stores in 3 weeks time; a design house by comparison will probably take 6 months to come out with that line.
The supply chain systems at H&M are very strong and it is evident that their sourcing and their partners are probably the most efficient in the world. Both the companies use the best of talents and ensure that their products are always cheap. They want to give quality and class to the middle class at prices that are affordable. When all other companies are making products that sell for thousands of dollars, IKEA and H&M are selling the same for hundreds or even lesser at times. All of us want to go up in the value chain and these two companies give many people a feeling that they are living in and wearing the best there is.