In a bid to compete with Shein, the Chinese discount e-retail powerhouse that thrived during the pandemic, H&M has drastically reduced prices on select clothing items to under $2. The Swedish fashion retailer now offers ribbed crop tops for a mere $1.70, marking a 70% discount from its regular price of $4.99.
Shein's rock-bottom prices have made it popular among US shoppers, propelling its valuation to a staggering $66 billion, as reported by The Wall Street Journal. Last year, Shein was even estimated to be worth $100 billion, surpassing the combined market capitalization of H&M and Zara.
While Shein has faced criticism for its questionable business and labor practices, it recently secured $2 billion in its latest fundraising round. Meanwhile, H&M has been implementing cost-cutting measures and shuttered 303 stores across its brands in the year leading up to May 31.
Despite economic challenges and adverse weather conditions, H&M reported better-than-expected second-quarter profits, resulting in an 18% surge in shares. Sales during June 1-27 increased by 10% compared to the previous year, boding well for the start of the third quarter. H&M faces stiff competition not only from Shein but also from Temu, another controversial Chinese fast fashion retailer.
Recent data indicates that Temu surpassed Shein in terms of US-based spending in May. However, both companies have faced scrutiny over alleged unethical practices, with Temu accused of lacking a meaningful compliance program to prevent goods made with forced labor from being sold on its platform. As H&M strives to achieve an operating margin of 10% by 2024, it continues to grapple with intense competition and the need to adapt to a rapidly evolving retail landscape.