6 questions on the digitalization of the retail industry for Oliver Lange, Head of H&M LAB Germany
Oliver Lange started working at H&M eight years ago as a Store Manager and is now head of the H&M Lab Germany, designed to look into disruptive innovations within the fashion industry. With his many years of experience in retail, Oliver has plenty of insight regarding the digitalization of the fashion industry.
Tell us a bit about the H&M Lab in Germany and what you’re doing there?
The H&M Lab Germany is a lab for building innovation on a local level. I was charged with leading this initiative, which was a role that involved a lot of freedom. To begin with, we weren’t sure how our role aligned with the running of the organization. We needed an agile and flexible second operating system next to the efficient and established one. We started this initiative at the beginning of last year. Germany is the only market that has this lab on a country level. It resembles a startup within a larger organization and is well connected to the Swedish laboratory that is working on a global level.
The H&M Lab Germany was founded in 2018 and works on innovative projects for H&M with a focus on sustainability, digitalization and customer experience in both offline and online stores.
What are the major changes that have affected the retail industry?
There are four main changes in the industry: the biggest two changes are digitalization and sustainability, the third is financial and political instability and the final one is shifting demands, which is more on a societal level and includes our own purpose, desires, and personal goals. Digitalization has developed speed and complexity in communication alone — take social media for example, it has even driven revolutions in recent years!
Generally speaking, the desire to own things has been replaced by collecting and sharing experiences with people — going new places and discovering new things.
In that sense, shopping does not only fulfill the need for products but the wish to have an experience. At the same time, major online players developed their businesses in Germany and marked this huge shift to online shopping. This was a really big change for retailers like H&M Germany to see that there are not only competitors in brick and mortar, but also online, that want to deliver a great shopping experience. It made us realize that we needed to find new ways to make the in-store shopping experience more attractive. In my opinion, H&M was a bit late looking into the online shopping experience and an omnichannel strategy. The shift happened so quickly that H&M really needed to speed up this development. Digitalization also has a huge impact on the way we work. In-store roles will change as customer demand does, AI will help to specify the service H&M provides and the landscape of stores and touch points will change and adapt to suit the customers needs. Fashion retail is changing and so too is H&M: we need flexibility and the will to constantly change, a constant adaptation of our store portfolio to the requirements of the market to strengthen our position.
In your opinion, what are the biggest trends that will influence the retail sector in the next few years?
Brand DNA
Products are more or less the same for all retail competitors. The product no longer makes the difference. So the first question is, what is the USP if it’s no longer the product? This is what makes companies look deeper into why they exist and what their DNA is. Look at Tesla for example, I think it’s obvious why people gravitate towards a pioneer and visionary like Elon Musk. There needs to be an emotional aspect in each brand. I think a brand with a purpose and a heart is what resonates with people nowadays.
AI and Big Data
The topic of AI and Big Data is at the core of retail right now. Knowing your customer better and delivering the products they really like and want is key to being successful and sustainable. After all, better-targeted customers mean fewer products with more value.
An on-demand industry
The paradigm shift from push to pull, i.e. becoming an on-demand industry in some areas, will happen in the next decade. Production, materials and digitalization will help identify exactly where the demand is.
Have you seen any changes in H&M’s vision over the years?
This change is most obvious in our internally-communicated vision. Our vision used to be about becoming the number one fashion destination in the world, now, however, it has changed to be the most loved design group in the world. What you can see, is there’s an emotional aspect in it;
we now want to be in the hearts of the people and not just in their shopping bags. We want to make our customers look good and also feel good.
Are there any H&M initiatives that come to mind regarding Purposeful Retail?
There are two prominent ones that come to mind. At the moment, we are focussing on the need to be more local and we are developing new store concepts with this in mind. On top of that, I think a H&M neighborhood store is one that is connected to its surroundings and one that plays a social role in the city, it should be part of a community and a place where people can connect and help each other. I am curious to see what we can do to give a H&M store a face in a local context.
We teamed up with Hans Reitz for another initiative to create an in-store café in Heidelberg. Every product in this café will be produced within an 80 km radius of the store — except for coffee! The coffee will come from farmers that are directly connected to us without many people in between. We receive their fantastic products and help them to develop their business in a partnership on eye level. For the whole café concept, we have an accountability circle and we aim to be seasonal, regional, social and sustainable.
In the age of digitalization, how are the values, needs, and behaviors of your customer changing?
In a globalized world, everyone needs to connect to something that is local and tangible. For example, going to the market on a Sunday and buying fruit and vegetables. Co-creation is also very important — to take people and customers into our design process and allow them to create their own products. We are also seeing more strong and empowered customers who are really looking for something beyond the in-store experience.
I think all in all as a society we are opting for more meaningful choices and more sustainable consumption. We have to.
This needs to be reflected in a company’s offer and is also a great opportunity to have an impact on the way we act as consumers.
Also, it’s not just about reaching out to the customer with Big Data and AI and speaking precisely to their needs, but it’s also about engaging with things like diversity, culture and sometimes even politics. I think brands in the future need to take a stand on topical issues.
