By tapping into India’s smaller cities, fashion retailer H&M doubled its business in the country

Swedish fast-fashion retailer Hennes & Mauritz, widely known as H&M, is on a tear in India.

Rapid store openings and competitive pricing have helped the company register a turnover of Rs 955 crore for the year ended November 30, 2017, up 94.5% from the previous year, H&M said in its earnings release last week. The company also added more stores in India, taking the count from 15 to 27.

This strong growth has come on the back of the retailer entering smaller markets such as Raipur, Indore, and Coimbatore, where H&M is aiming to cash in on aspiring middle-income households. It has also added new stores in Mumbai and the Delhi-National Capital Region, where it has a presence since 2015.

Aggressively launching in new cities that most foreign retailers have kept away from has helped H&M gain ground in India’s $70 billion fashion market. “They are growing rapidly and entering all sorts of cities, which is great as they can capture quality real-estate in these markets,” said Pankaj Renjhen, managing director, retail services at real-estate consultancy JLL India.

And now H&M wants to move beyond brick and mortar by cashing in on India’s booming online fashion market. The brand will launch an e-store later in 2018 in India, much in line with its global mandate to steer sales online as in-store sales slump, the company said in the earnings release. While its online business has done well in select markets globally, “...the weakness was in H&M’s physical stores where the changes in customer behaviour are being felt most strongly and footfall has reduced with more sales online,” it said in its earnings release. This has prompted the retailer to expand its online presence in more markets, including India.

India and fast fashion

Fast-fashion brands such as H&M and its global rival Zara are in the race to lure India’s young, urban, fashion-savvy shoppers.

H&M, which entered India in 2015, promised to invest over Rs 700 crore to set up as many as 50 stores over the next five years. Its numbers have so far held strong. Inditex-owned Zara, on the other hand, crossed Rs 1,000 crore in sales for the financial year 2017, seven years after debuting in India. Last year, Zara also opened up its e-commerce portal here.

So far, business has been brisk. But as these brands continue to expand beyond metro cities, they will need to ensure higher footfalls and sales to boost business. That’s because, for most foreign brands, affluent shoppers in India are largely restricted to urban pockets. Also, the lack of quality malls is often a challenge in smaller cities. This makes it difficult for companies to sustain high growth rates beyond a point.

“Going forward these brands will have to ensure adequate returns to mall developers, or else it will pose a challenge for them if developers aren’t able to see sustainable business,” said Renjhen.

But H&M is confident that its low-priced apparel and a wide variety will help it win in India. In an interview with Quartz last year, Janne Einola, H&M’s country manager in India, had said: “I think it is our business concept that is working. We give fashion and quality at the right price. In general, we offer our customers everything – kids’, adults’, mom’s clothing. It is a diverse collection where everyone can find their own style.”

This article first appeared on Quartz.