"The new acquisition is part of H&M Group’s recent dealings, which, in recent years, has been branching out from just selling pocket friendly garments and accessories. The brand, which, once upon a time was the fastest brands to offer garments and accessories has of late become archaic in comparison to “ultra-fast fashion” entities like Fashion Nova, ASOS, Boohoo and Missguided, which feature new items every week. The group’s shares too have lost nearly two thirds of their value after achieving record highs in 2015. It lagged behind competitors in adoption of e-commerce capabilities and overall approach to merchandising."

H&M, the $26 billion apparel company, second largest in the world, recently launched Afound an off-price luxury site that offers goods from some of the most well-known brands at discounted rates. The site offers a lot of H&M’s own wares such as H&M, Monki, and Cheap Monday labels, accessories from & Other Stories and COS.

Falling market value leads to diversion

The new acquisition is part of H&M Group’s recent dealings, which, in recent years, has been branching out from just selling pocket friendly garments and accessories. The brand, which, once upon a time was the fastest brands to offer garments and accessories has of late become archaic in comparison to “ultra-fast fashion” entities like Fashion Nova, ASOS, Boohoo and Missguided, which feature new items every week. The group’s shares too have lost nearly two thirds of their value after achieving record highs in 2015. It lagged behind competitors in adoption of e-commerce capabilities and overall approach to merchandising.

These losses have compelled the group to not only address its logistical issues, but also broaden the roster by introducing & Other Stories, COS and Arket, its more up-market (than H&M) apparel companies, and Nyden, its millennial-focused “affordable luxury line,” among others. Afound is the latest addition to the list.

Growth in the off-price market

The $62 billion off-price market is well-established in the US, with roughly 80 per cent of sales taking place there. As per Euromonitor, in Western Europe, sales in the off-price retail market for the five years leading up to 2017 grew nearly 50 per cent; in Eastern Europe, they were up by over 90 per cent. In keeping with this trend, H&M Group launched Afound. The idea was to create an innovative marketplace in the off-price segment.

A winning strategy

H&M through Afound is also planning to adopt strategies similar to those of T.J. Maxx, the off-price retailer which, despite its brick-and-mortar exclusive existence, has recorded remarkable revenues in recent years, in large part, due to its affordable prices and treasure hunt-like experiential shopping.

Afound is also incorporating another winning strategy from its liquidation counterparts: the bait-and-switch. Companies such as T.J. Maxx are known to routinely offer quantities of “it” bags and other high fashion items in order to lure consumers. Once shoppers are in its stores, T.J. Maxx, for instance, can then sell them other products. Afound is using the same strategy, particularly since its H&M Group-branded items significantly outnumber the Gucci and Prada ones.

As of now, Afound is accessible to consumers through two brick-and-mortar stores in Stockholm and Malmö, Sweden, both of which opened in June, and a Swedish-specific e-commerce site, which launched at the same time. The ecommerce site is planning to launch additional stores in Gothenburg, Skärholmen and Kristianstad later this year.