The news: Sweden’s H&M is ramping up efforts to move its sourcing closer to key markets in Europe and the US amid the threat of rising tariffs and political tensions, Bloomberg reported.
The company is looking to shorten lead times and increase supply chain flexibility by procuring products from regions closer to its core markets, CEO Daniel Ervér said in an interview. “We need to increase the pace to find even more alternative suppliers,” he was quoted as saying.
Why it makes sense: Most retailers are hesitant to make big shifts in their manufacturing strategies given uncertainty surrounding tariffs’ longevity. But H&M considers its reshoring efforts necessary to keep pace with fast-fashion rivals like Inditex’s Zara.
- Zara sources most of its products from Spain, as well as nearby Morocco and Turkey—enabling it to get products to key markets faster and stay ahead of trends.
- Likewise, the on-demand sourcing model of Shein and Temu allows for a level of flexibility that H&M’s current sourcing practices do not.
The comments came as H&M recorded a drop in sales for its fiscal second quarter, even as it forecast that June sales would rise 3% in local currencies. Sales came to 56.7 billion kronor ($5.36 billion) from 59.6 billion kronor ($5.64 billion) a year earlier. The company said it was mulling price increases because of the effect of tariffs.
Our take: Moving production closer to key markets could help fuel H&M’s much-needed turnaround, which is struggling to take shape following yet another quarter of lackluster sales. Beyond giving the retailer the ability to be more responsive to apparel trends, it will also help mitigate the impact of tariffs in the US, its largest market—and possibly help it pick up some sales from Shein, whose business is under pressure from tariffs and the end of de minimis.
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