H&M is taking a strategic stand in the U.S. fast-fashion market by maintaining stable prices despite rising tariffs that have forced rivals such as Zara and Shein to significantly increase their prices. This approach, outlined by H&M CEO Daniel Erver, reflects the company’s efforts to navigate a turbulent trade environment marked by constantly changing tariffs and shifting geopolitical conditions. While competitors have responded to these cost pressures by raising prices—Zara’s prices in the U.S. climbed by 28% year-on-year—H&M has managed to keep its prices roughly stable, even seeing a slight 3% year-on-year decrease.
The U.S. tariff adjustments, particularly targeting goods imported from China, have disrupted the fast-fashion sector, which heavily depends on low-cost imports from Asia. H&M, whose U.S. market accounts for 13% of its sales and is its second-largest after Germany, sees these disruptions as both a challenge and an opportunity. Erver remarked on the mixed consumer sentiment influenced by these trade tensions and competitors’ pricing moves, suggesting that H&M’s choice to hold prices steady could attract budget-conscious shoppers who might be pushed away by higher prices elsewhere. This strategy, however, is not without risks as rising costs threaten to erode margins, demanding careful balancing.
To soften the tariff impact, H&M is revising its sourcing strategy by diversifying away from China, which faces the highest tariff rates. The company is expanding production in lower-tariff countries like Bangladesh, as well as implementing a “nearshoring” approach by increasing suppliers in regions closer to its key markets, including Turkey, Egypt, Morocco, and newly Brazil, where H&M plans store openings later this year. This consolidation and flexibility in the supply chain allow quicker responses to demand changes and help maintain competitiveness in pricing.
Despite the challenges, H&M recently reported a strong second-quarter profit, underscoring early success in its brand revitalisation focused on trendier and slightly higher-priced offerings, particularly in its upscale brand COS. The company emphasises profitability over sheer sales growth, even as it forecasts a modest sales increase amid a competitive summer retail environment. Profit gains have been helped by shifting consumer preferences towards medium- and high-priced products and tight cost management despite tariff-related headwinds.
In contrast, Shein, the Chinese fast-fashion giant known for ultra-low prices and rapid product turnover, has faced new difficulties since the U.S. government ended the “de minimis” duty-free exemption for low-value parcels from China. This policy change imposes tariffs of 30% or more on packages previously entering the U.S. tax-free, reducing Shein’s cost advantage and contributing to weaker customer growth. Shein’s obscure corporate structure and reliance on opaque supply chains have come under scrutiny alongside these regulatory challenges. These developments open potential space in the market for traditional players like H&M to capture consumers seeking affordable but reliable fashion choices.
The wider policy context includes a shift in U.S. trade regulations that aim to curb the influx of cheap, fast-fashion imports, addressing concerns about undercutting domestic business and illegal goods entering through low-value shipments. This trade environment is prompting fast-fashion companies to rethink sourcing, pricing, and supply chain strategies. At the same time, slow fashion and resale markets that rely more on local inventory are positioned to benefit from this recalibration of duties and tariffs.
Ultimately, H&M’s decision to hold firm on U.S. prices, while navigating the complexities of an evolving geopolitical and trade landscape, marks a calculated bid to strengthen its market position by appealing to cost-conscious consumers amid rising inflation and fluctuating tariff regimes. This approach, alongside supply chain diversification and measured brand repositioning, may allow H&M to retain and potentially grow its U.S. market share as its rivals adjust to new regulatory pressures.
Source: Noah Wire Services
Subscribe to Industry Updates
