European fashion steals show in America
Sweden’s H&M is just the latest of the invasion force. William Kay and Lynne Bateson report from California
HELICOPTERS hovered, their rotor blades chopping the air menacingly. On the ground, camera crews jostled for the best vantage point.
Their reporters made last-minute adjustments to hair and dress before delivering breathless live transmissions.
But this wasn’t a natural disaster, or even the latest chapter in the career of a colourful celebrity. It was the opening of a women’s clothing shop.
And not in Bond Street, the Champs Elysée or Fifth Avenue, but in the considerably less fashionable Colorado Boulevard in Pasadena, 10 miles north of Los Angeles.
The fuss was over the opening of the 108th American outlet of H&M, the Swedish chain whose clothes may be regarded as cheap-chic in Britain but are an apparent must-have for American women aged anywhere between 16 and 60. Certainly many waited in Pasadena’s 32C heat for their chance to sample the goods of the new-style foreign retailer.
Some had been waiting all night to collect gift vouchers worth up to $300 (£157).
In the new store, rows of neat racks of clothes were laid out to catch the eye. Prices were appealing too: turtleneck sweaters at $19.90, tartan miniskirts for $20, embroidered bras at $12.90 and tweed blazers for $59.90. Customers were piling the clothes into wire baskets.
Sales assistant Jessica Simon, 20, from Burbank, was thrilled. “There’s lots to look at, and some of my friends bought lots without even trying them on because the queues for the fitting rooms went right round the store. The clothes are funky and it makes shopping fun.
“I usually have to go to independent boutiques for the things I like to wear. H&M clothes are affordable but well made, while stuff at other places round here at the same price often falls to pieces quickly.”
Raquel Miranda, 29, manager of the nearby branch of Lush, the soap specialist, said the new store was attracting customers to the area.
“I’ve been to London and it reminds me of your Topshop, which I think is wonderful. It’s stylish and different.”
Monique Garcia, 29, owner of a hair salon, said: “I haven’t been in Gap in years. It’s so mainstream now. People want something different, something adventurous.”
Across the street, sales staff at rival Gap looked on forlornly, with few customers to distract them. The scene was repeated along Colorado Boulevard.
J Crew, Forever 21 and Banana Republic, another Gap brand, languished, while branches of the European-owned Body Shop, Lush and Jigsaw London flourished.
As never before, it is cool for American women to shop European. Madonna, once the face of Gap, now fronts H&M’s American advertising and has designed a tracksuit for her new employer.
Kimberley Wilson, 30, who manages the nearby Jigsaw outlet that opened in February, said: “Fashionable American women want clothes that are different, with a stylish, European twist. American retailers don’t give them what they want. Retailers like us are doing that, and we are educating shoppers who have yet to catch on to our distinctive approach.”
The trend is having a significant impact on H&M’s financial performance. Results for the nine months to the end of August showed American sales up 30% compared with an 11% increase for the group as a whole, after excluding currency effects.
But America still accounts for only 6.3% of the total. H&M began life in Sweden in 1947 as Hennes, selling only women’s clothing. In 1968 it acquired a menswear supplier and changed its name to Hennes & Mauritz, later abbreviated to H&M. It has since become Europe’s second-largest fashion retailer (after Spain’s Inditex, which owns Zara), posting net profits of £185m in the quarter to August, up from £157m a year earlier.
Nils Vinge, head of investor relations at H&M’s Swedish head office, said: “We started in America in New York in 2000 and it has been a huge success. I’ve never experienced anything like it, but it took us until last year to be really profitable there.
“The retail situation in the rest of America is totally different from Manhattan, and our San Francisco opening last autumn was even bigger than New York’s.
“That made us speed up our expansion in California — it has a population of 40m with big spending power and strong demand for high-fashion garments that we can supply. So America is our biggest market for expansion now.”
The successful formula is a combination of in-house design and ultra-efficient production. H&M has 100 designers but no factories, buying 60% of its stock from Asia, half of that from China, where the group plans to open its first store next spring.
The rest of the clothes are made in Turkey and Latin America, and as it grows it is able to reap huge economies of scale, driving prices down even further because of the long production runs it is able to offer suppliers in low-wage countries.
Gap’s sales in America fell by 3% in September, though the decline was not as bad as analysts predicted. Senior vice-president Sabrina Simmons said: “Not only are comparable store sales results improved versus last month, but our overall merchandise margins are above last year as well.”
Michelle Clark, an analyst for Morgan Stanley in New York, said: “For the first time in over two years, we are encouraged by Gap’s clothes offerings and see signs that new merchandise and marketing initiatives are gaining traction.
“After visiting Gap stores on a weekly basis for more than a year, we are finally noticing something that frankly has been missing for some time — traffic. Gap’s back-to-basics strategy and aggressive marketing campaign appear to be winning back customers.”
Meanwhile, H&M is pushing on with its relentless expansion and plans five more stores in the Los Angeles area alone.
And the European invasion is far from over. The bad news for Gap is that Topshop is due to open in New York next spring and, after his recent troubles with BHS, Topshop boss Sir Philip Green will be hungry for success in the Big Apple and beyond.
