H&M calls its newest venture a “paradise” for discount treasure hunters

Attention, discount shoppers!
Attention, discount shoppers!
Image: Reuters/Maxim Shemetov
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H&M’s newest brand will always be on sale.

As it reported its worst plunge in profits in six years, the company announced that it will soon debut a new off-price marketplace called Afound. It describes the news outlet as a “style- and deal-hunting paradise” that will sell discounted clothes and lifestyle items from H&M group’s own labels, which include offshoots such as COS and Cheap Monday, as well as external labels. The first Afound store will open in Stockholm, Sweden, in 2018, along with a website.

H&M is jumping into a category that has thrived in recent years. According to Euromonitor, the global off-price market grew more than 30% between 2012 and 2017, topping $62 billion. The US owns by far the biggest share of that total, accounting for more than 80% of the category’s sales, and other regions are growing quickly.

While retailers such as Nordstrom have had success getting into the discount business, H&M’s move is somewhat unusual in that H&M, itself a fashion brand, will be selling clothes from other labels. H&M hasn’t said which labels those might be yet, or whether it will buy overstock and out-of-season items directly from the brands or via other means. It just says they will be “well-known, popular brands for both women and men.” (In an email, a spokesperson from H&M said it was too early for the company to provide more information.)

The company needs a boost of some sort to shore up its declining growth. H&M was far too slow building out its e-commerce, and has found itself left with too many stores. It has also been outmatched in speed by more nimble digital competitors such as ASOS and Boohoo, as well as its longtime rival, Zara, leaving H&M shops too full of unwanted clothes. Afound gives it a place to unload that inventory, much as Zara long had Lefties, its own discount outlet that it kept quiet and ultimately turned into a low-cost label in itself.

Off-price retail, meanwhile, has proved more and more attractive to increasingly price-conscious shoppers. ”Coincidentally enough, it looks very similar to the same reasons that people shop online too,” Tim Barrett, a retail analyst at market research provider Euromonitor wrote in a 2016 paper about off-price’s attraction. First, there are the low prices, and then the “vast selection that is constantly changing is about the closest one will get to an endless aisle in a store.” The effect is very much like the treasure hunt H&M alluded to in its announcement, which can generate an addictive buzz as you search the racks and score a bargain.

Afound joins a few other new brands H&M has launched lately as it seeks more sales beyond its stumbling eponymous label, though those brands have aimed at higher prices than H&M itself. Arket, a slightly more pricey line focused on staple pieces and manufacturing transparency—at least in theory, if not so much in practice—launched last year. Then came Nyden, which will roll out slowly and goes so far as to enter the territory of “affordable luxury.”

Afound’s items will cover a range of price points, H&M says, though all of them, of course, will be on discount.