H&M Cape Town store world's 'third busiest'

Swedish retail group H&M spent tens of millions of rands launching in South Africa to make sure everyone knew it was coming - and it worked. Its Cape Town store is now its third-busiest outlet worldwide.

Pär Darj, the country manager for H&M, said they were overwhelmed by the reception in the market.

Europe's second-largest retailer opened two large stores in a tough market a few months ago: a 4700m² one at the V&A Waterfront in Cape Town in October, and a 3100m²one in Sandton, Johannesburg, in November.

It is set to open three more stores in the next two months.

Darj said the group did not reveal its advertising spend, but added: "We go big so we make sure people understand we are coming."

Consumers have really taken to the concept and have embraced it to a far greater extent than I thought likely

V&A Waterfront retail executive Alex Kabalin said the redevelopment of the Kings Warehouse in the Victoria Wharf Shopping Centre to house a new multilevel H&M store had proved "massively successful".

"Since its opening in October, the Swedish retailer has consistently met its targets, at times exceeding expectations. In terms of volume of clothing sold, the V&A store is No3 worldwide."

Absa Wealth & Investment Management analyst Chris Gilmour said: "Property companies love concepts like H&M as they act like a magnet in attracting younger, fashion-conscious shoppers."

Expectations of sales were exceeded in particular in kidswear and menswear.

Darj said perhaps there was not too much fashion for kids that was reasonably priced, especially in fast-moving fashion garments.

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"People tend to be very practical when it comes to kids ... worldwide it's the fastest-growing segment.

"In other parts of the world you have to be fashionable in schools, so we have a fashionable and functional offer for the kids. A big variety is also important," said Darj.

On March 19, H&M opens in Mall of the South, and in mid-April in Clearwater Mall, both in Johannesburg, and on April 28 in the big Mall of Africa in Midrand. Another three will be opening later in the year, but the locations have not been made public.

There has been talk in the market that about 25 stores would open within 18 months.

But Darj said: "We don't communicate numbers when it comes to expansion. We need good locations; if we don't find them we take longer."

Nor does H&M reveal its stock-turn figures - how quickly its products sell and are replaced by fresh merchandise. But Darj said new products arrived every week.

This group does not classify shoppers based on an age profile. "We have felt that age is not really the thing for us. A lot of older customers have a very young mind," said Darj.

"It's more your fashion age and how you feel and want to be perceived."

H&M is yet to make any meaningful impact on the local clothing market but it holds promise.

Gilmour said: "It started off with huge fanfare and will be keen to sustain the excitement in future.

"South African consumers have really taken to the concept and have embraced it to a far greater extent than I thought likely.

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"There is plenty of space for it to grow, both in the conventional shopping mall space and in more informal strip malls. Their pricing is keen and it is a cash business, which is precisely where South Africa is going - away from the old-fashioned credit model."

Gilmour said it was likely H&M would be far more successful than Zara, which has about four or five stores. The group also surely had to be looking at expanding into the rest of Africa, he added.

Jean Pierre Verster, an analyst at 36ONE Asset Management, said: "My expectation is they will open only a handful of stores and then decide whether to go the Zara route with a few big stores in large malls, or to push the trigger on rolling out stores more aggressively like Cotton On.

"We've seen some deterioration in the consumer environment with trading updates of retailers like Mr Price being below expectations;[H&M] would take that into account. Maybe they would take the long-term view that there could be competitors who decrease their footprint, vacating some space for H&M to occupy."