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H&M: Soon opening in Twin Cities

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From the Minneapolis Star Tribune:

H&M, Europe's largest clothing retailer, will soon open it's first store west of the Mississippi. It's coming to the the Mall of America in September, and local merchants should be worried.

When the Swedish company opened its debut store in New York five years ago, shoppers lined up around the corner and waited for hours to get in. Similar scenes have been repeated in Boston, Chicago, Philadelphia, Washington, D.C, and soon Milwaukee.

H&M, short for Hennes & Mauritz AB, is among a new breed of retailers that practice "fast fashion." It moves in and out of trends quickly and keeps prices low by cutting out middlemen and dealing directly with clothing suppliers and manufacturers. Though H&M has 1,100 stores worldwide, it still operates much like a boutique.

The company, which said Tuesday that it plans to open a 23,000-square-foot store in the Mall of America early this fall, is both affordable and chic -- a place where even young women on student-loan budgets can build designer wardrobes.

H&M fashion showTina FinebergAssociated PressH&M sells clothing for men, women, teenagers and children.

"Everyone in the Twin Cities that carries fashion clothing should be concerned," said Kurt Barnard, president of Barnard's Retail Consulting Group. "When that store opens, it is guaranteed to make a splash."

At the Chicago store, women's polo shirts and bathing suits go for $9.90. Tank-top dresses can be had for $12.90. And knee-length linen skirts start at $14.90.

But some analysts say H&M's prices are low because its clothing is not made with the same-quality stitching as many of its American competitors. As a result, H&M's stores tend to generate lots of buzz early on but then lose popularity after shoppers discover that some of their apparel doesn't last even a full year.

"It's throwaway clothing," said Dan Skoda of D&R Consulting in Chicago. "It's hot fashion. It's inexpensive. But it's also something that you're probably only going to wear a few times."

Officials at the company have heard this criticism before, and they insist that people wrongly assume that low prices come at the expense of quality. The company buys from many of the same European factories that make clothing for luxury retailers throughout the United States, said Lisa Sandberg, director of communications for H&M's operations in the United States.

"It's not about sacrificing one for the other. We take into account the fashion, the quality and the price all at the same time," Sandberg said.

Like all discount chains, H&M gets strength from its supply chain and low-cost structure.

Unlike many department store chains, which arrange their buying with big brand-name apparel companies a year before they appear in stores, H&M deals directly with more than 700 clothing suppliers worldwide. The company can move design ideas from a runway to a store within a matter of weeks.

The result is that H&M stores turn over their inventory frequently, creating a sense of urgency among shoppers who regularly visit the stores.

"There is a sense of scarcity that explains some of the frenzy" at the stores, said Neil Stern, a senior partner with McMillan Doolittle retail consultants based in Chicago. "It's pretty rare that you would walk into a department store and say, 'I may never find that blue Ralph Lauren blazer,' because you know there are millions more out there. But [at H&M], you may find a blouse for $8 and you don't know if it will be there tomorrow."

H&M's nimbleness also protects it from losing big if a fashion concept bombs. About five years ago, department stores had a poor spring season because they bet, wrongly, that women were ready to buy short skirts again. H&M can yank dud clothing and replace it before it has a big impact on sales.

This versatility enables H&M to take more fashion risks. On its website, the retailer is touting a Western look for the spring, including rolled-up jeans and cowboy boots. Its latest line of swimwear contains 1970s-inspired sleeveless tops with palm trees and pastel colors.

Though H&M is considered by many to be a competitor to discount retailers such as Target Corp., officials at the company eschew the term "discount."

"Target is a big-box retailer that sells some clothes. We are a fashion company that competes with the highest-fashion retailers in the world," Sandberg said.

Yet the company still is something of a mystery to many shoppers in the United States. A San Francisco store is in the works, but most of its 77 U.S. stores are in the East. Though H&M worldwide continues to generate profits that would make most clothing retailers envious, the company's U.S. operations, which feature some larger stores that are more costly to operate, lose money.

H&M is trying to boost its brand in the United States through more aggressive print advertising and more collaborations with designers.

Last week, H&M attracted national attention for a huge fashion show in New York's Central Park, the first fashion show to occur in that venue. About 750 guests attended the event. The New York Times said the show cost $7.5 million, or about $10,000 per guest.

H&M chose the Mall of America location because it is "the best mall in the area," Sandberg said. "The Mall of America is a fantastic location, and we believe as a firm principle in setting up stores in the best locations we can find."
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