H&M: It's The Latest Thing -- Really

The lesson: Spot shifts in demand and tune your company so you can deliver to the market in weeks, not months

It's 1:30 p.m. on a Monday in the bustling H&M store on Manhattan's Fifth Avenue, and Alma Saldana, a 28-year-old makeup artist from Houston, is stuffing three tiny vests into her black H&M shopping bag. That's on top of blouses, jackets, and pants. Saldana is in a buying frenzy. This is her first visit to H&M, the Stockholm-based fashion retailer, and it's everything she had hoped for. "Somebody told me you find great fashion at a very cheap price, and it's true!" she exclaims.

Such enthusiasm has made H&M Hennes & Mauritz one of the hottest fashion companies around. Central to its success is its ability to spot shifts in demand and respond with lightning speed. While traditional clothing retailers design their wares at least six months ahead of time, H&M can rush items into stores in as little as three weeks. Most of its work is done ahead, too. But when it sees consumers scooping up something like vests, it speeds a slew of new variations into stores within the same season, to the delight of shoppers like Saldana. "Speed is important. You need to have a system where you can react in a short lead time with the right products," says Chief Executive Rolf Eriksen.

How does it work? H&M designers had included a couple of cropped vests in their autumn/winter collections. In August, shortly after the vests went on sale, they started "flying out of the stores," says Margareta van den Bosch, H&M's head of design. H&M's designers in Stockholm (it has more than 100) spotted the trend in the company's worldwide sales reports, published internally every Monday. About half of them immediately started sketching new styles. As quickly as designs came off their desks, pattern makers snipped and pinned, pressing employees into service as live models. At the same time, buyers ordered fabrics. The designs were zoomed electronically to workers at H&M's production offices in Europe and Asia, which then selected manufacturers that could handle the jobs quickly. In less than two months most H&M stores had 5 to 10 new vest styles in stock. "They are the fastest," says Christian Wierup, head of research for Carnegie, a Swedish investment banker. "They're very fast at spotting the trend and getting it out to the masses at a very low price."

One of the secrets to H&M's speed is decisiveness. The people in charge of each collection can dream up and produce new fashions on their own authority. Only huge orders require approval from higher-ups. "We have a flat organization. We have a shorter way to a decision," says Sanna Lindberg, president of H&M Hennes & Mauritz USA. That makes H&M fashionable in more ways than one.

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