Made to measure

H&M chairman Stefan Persson has fashioned the Swedish retail chain into a worldwide retail empire. The Middle East is next, he tells Andrew White.

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By  Andrew White Published  September 10, 2006

|~|_NIK5048-200.jpg|~|Launch pad: Persson was present in Dubai last week, as H&M unveiled two of three new stores in the UAE. A fourth is scheduled for Kuwait.|~|H&M chairman Stefan Persson has fashioned the Swedish retail chain into a worldwide retail empire. The Middle East is next, he tells Andrew White. For a man worth US$12.3bn, Stefan Persson is quick to spot a bargain. His suit trousers look expensive, but a quick look at the label suggests he paid considerably less than he might have on Saville Row. “These are H&M,” he says with a smile. “I have a lot of their stuff.” The silver-haired chairman of the board of H&M - Hennes and Mauritz, to give the Swedish retail giant’s full title – is an imposing figure, but a genial one. He is in the Middle East to oversee the next phase of the company’s global expansion programme, which already numbers over 1200 stores worldwide, and annual sales of over US$8.2bn. “People in this part of the world are becoming more and more interested in fashion, and we believe that we are offering the latest fashions at a very good price. So I think we have a good chance,” he says. “We also know from our stores in Europe that people from the Middle East are very interested and are buying our garments. They [Arabs] are big customers in Europe. Tourists from this part of the world leave our stores with their arms full of H&M bags - I think they like the clothing, I think they like the fashion, and I think they like the price.” Middle east shoppers, he insists, will have access to the same fashions as people in London, Paris, or Rome. There is even a concession to the proximity of Ski Dubai, located just a few yards from the two Mall of the Emirates’ stores – H&M will stock a selection of children’s skisuits. “I think we can offer the customers here a new fashion every day, as we are doing in Europe and the US,” he insists. “New garments are coming in every day, and here in the Middle East we will have the same experience. It will be the same selection as anywhere else, minus the very heavy coats for obvious reasons.” Yet H&M are not alone on their Middle East adventure. For the first time, the firm has entered into a franchise agreement, joining forces with Middle East retail giant M.H. Alshaya. The group is already the franchise for more than 42 international retail brands including Debenhams, The Body Shop, and Starbucks, and employs 8000 people across the region. The courtship, Persson reveals, was a lengthy one. “I’ve had contact with Mr Alshaya for a long time, and we agreed that this should be the latest market for us,” he says. “I have known Mr Alshaya for many years, and we’ve had a number of more-or-less-serious discussions over those years. Finally, about a year and a half ago, we said ‘Ok, let’s try’. “Maybe he was pushing a little more than I was,” he smiles. “I was more hesitant, but only because we have never franchised before, and because I didn’t know whether the Middle East was the right market for us. We didn’t know this market, and had so many other things in the pipeline, that we questioned whether the time was right.” So why are H&M taking the plunge now? And why in a market where there is no option other than to franchise? “We consider, now, that this is the right time in the right market. It’s very reassuring to be working with Mr Alshaya, who knows this market very well, and so we know we are in safe hands,” explains Persson. “It has always been in our mind that if we were going to enter into a franchise agreement, it has to be in a market where we don’t know so much, or it has to be in a market where we are not legally allowed to go in on our own,” he continues. “The Middle East is such a market, and I think franchising is a good way in here. Even if it hadn’t been legally required that we have a partner, we would have needed expertise from here, and Mr Alshaya has such enormous experience in this market.” The chain’s rapid expansion has been achieved with the help of a series of collaborations with high-profile designers, and celebrity endorsements. The latest collection, for autumn 2006, will be launched next month and is the work of acclaimed design duo Viktor & Rolf. The designers follow in the footsteps of Stella McCartney, and Karl Lagerfeld, whose 2004 special collection sold out within an hour. “Our big-name designers are very interesting for the customers,” says Persson. “The customers can buy top-brand designer names at an affordable price, which is very attractive.” For H&M, the benefit is not just seen on the shopfloor, he explains: “The big-name designers come in to us and work with us in cooperation, and we manufacture the garments in the factories that we use. The arrangement means that the special collections are also inspiring our own team of 100 designers, who enjoy working with the more high-profile designers, and get new ideas from them. “The special collection designers also appreciate the arrangement, as normal people cannot usually afford to buy their brands, whereas now they all of a sudden come out to the mass market,” he continues. “We’re paying them as well, of course - they’re happy. So it’s attractive for them too. It’s a two-way, win-win situation.” Currently, pop star Madonna is the ‘face’ of H&M, the chain having signed up to supply a complete off-stage wardrobe for the entire 150-strong troupe on her Confessions tour. Band, dancers, crew members, and the Material Girl herself, are all clad in H&M gear. Less successful was last year’s link-up with supermodel Kate Moss, who was unceremoniously dumped after pictures of her allegedly snorting cocaine showed up in the British tabloid newspapers. “She [Moss] became the face of cocaine for a while, and naturally we couldn’t use her. The decision was made in a minute,” explains Persson. “We had to read through all the facts, of course, but after that we took a very quick decision. It wasn’t a hard decision at all - it was a very obvious decision.” Recently, Moss has found herself back in demand amongst many of the fashion houses that elected to dump her last summer. Moss, however, should not expect a call from H&M – her reported US$8m-a-year contract will not be reinstated. “I wouldn’t like to comment on other fashion houses [taking Moss back] – it’s their decision – but it think she’s too much connected with the drug now,” says Persson. “It’s not her personally, but it is the face and the name that now has the connection with the drug. There are many others whose image that we would rather use. I think we took the right decision.” The scandal was particularly damaging considering H&M’s support of the Mentor Foundation, an international non-government not-for-profit organisation that focuses on the prevention of drug misuse and the health and well-being of young people. Persson has himself been heavily involved with the project, sitting on the board of trustees since its inception ten years ago. “It’s a very good foundation doing an enormously good job,” he beams, though his smile hardens as he outlines his determination to continue the fight. “We must prevent youngsters from falling into drugs and substance abuse, and instead point them towards something else. We are selling fashion and we have customers that are young people and teenagers, so it is natural for us to become engaged with this very good cause.” Persson’s own fortune is built on the enormous success of the H&M empire he inherited from his father, founder Erling. Yet whilst Forbes magazine lists him as the world’s 32nd richest man, with an estimated net worth of US$12.3bn, Persson himself is reticent. “I have absolutely no idea where I rank, and I don’t know how they calculate it,” he insists with a shrug. “I’m not really interested in it at all. I’m happy with the way in which the business is run, and the freedom that the money gives you, to do what you want to do. Apart from that, it is a responsibility, and it is money that you invest and hopefully that money creates new jobs and new businesses and so on. That’s my main target.” Money, he insists, has never been a motivation. “It’s the ideas and the possibility to work with people and build success together,” he says. “The money is good to a certain level – it gives you freedom and I must be frank and say ‘Thankyou very much for that’ – but apart from that and above that, it’s just a responsibility that you need to invest to create new businesses, job opportunities, and challenges. “If you are a little bit of an entrepreneurial person, then this is what you like in life – to start new projects and to explore new ideas,” he continues. “It’s in your blood. I absolutely enjoy it, I don’t shy away from responsibility, and I thrive on challenges and new ideas and new projects.” Persson is keen to attribute the success of the chain to those with whom he works – all 50,000 of them – and insists that a sense of corporate pride and identity is crucial to the day-to-day operations of the firm. “It’s very important that everybody in the company understands that they belong to a team and have each contributed to its success,” he says. “We listen to their ideas – it’s not just pointing and shouting. The main thing is to get people to be enthusiastic. If you want to be a military person and give orders, it doesn’t work. You must understand and believe in what you are doing.” His hardest task, he says, is to maintain the original family-firm culture established by his father. He loathes bureaucracy, admires innovation and appreciates a strong connection with the customer. “We try to be close to the customers, to listen to the customers to discover what’s going on down on the sales floor, have as few levels of management as possible, a small head office, open doors, frank discussions in the corridors – really very informal – and to listen to peoples’ ideas,” he explains. “We must always look for something new, always try to be more efficient, to be better, to improve.” Even Persson is not above reproach, and he is disarmingly frank about his own mistakes in the years he has controlled the firm. He claims to take criticism well, though admits, with a chuckle, that his wife might disagree. “Every day I make choices that I later wish I had made differently, but that’s the fun of it,” he smiles. “You must be able to admit, after a couple of days, that something is going in the wrong direction. You must not have too much pride.” Persson, though, has much to be proud of. He inherited a promising firm, and has built it into a retail empire. Whilst he hopes that his son Karl will follow in his footsteps and one day take over the mantle, he is – for now – the reluctant star of the show. Opening ceremonies, with the relentless popping of flashbulbs and champagne corks, are not something that Persson enjoys. The Dubai launch party was attended by nearly two thousand guests - the most highly-attended in the region, but he describes such occasions as “a drag, but one that’s very difficult to avoid in my position.” “I’d far rather be among our team, the H&M team. I enjoy that enormously, but not necessarily the limelight.” At this rate, the limelight will be on him for some time to come. The H&M empire has been in action for nearly sixty years, but the best - if the Middle East dream succeeds - may yet be around the corner.||**||

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