Holy & Moly! Swedish fashion takes Manhattan

Can H&M, the comically low-priced Stockholm retailer, conquer America and sink its teeth into the Gap's once-invincible ankles?

Published May 22, 2000 5:13PM (EDT)

Imagine if IKEA made miniskirts.

The Swedish clothing chain known simply as H&M charged into Manhattan this spring,
and the city appears to have opened its collective wallet in submission. One
retail analyst estimates that the New York store is raking in an unbelievable
$500,000 a day.

H&M's secret: cheap chic. Even jaded, label-conscious Manhattanites are
surrendering to the spell: $9 tank tops! $20 cheetah-patterned skirts! Suits
for under $100. Hippie-chic embroidered shirts, parachute fabric dresses and
other kitschy, Gucci-esque fashions at shocking Contempo Casual prices.

On a recent rainy Wednesday afternoon, the new three-story Fifth Avenue
H&M flagship, just a brilliantly-situated block from the tourist-dripping
Rockefeller Center, was a zoo. Lines to buy were 15 minutes deep; a
dressing-room visit required a 20-minute commitment.

Well-dressed Upper East Side socialites fingered the racks next to suburban
yentas in stone-washed jeans, while fat bald men pushed aside hip-hopping
teenagers hot for wide-leg rayon pants. Prada princesses stood
cheek-to-jowl with acne-battling punks; plush moms caressed the plus-sized
linen line.

"This place is insane," mumbled one overwhelmed clerk. An inquiring visitor,
waiting to buy a sweater and two blouses, asked when there might be "a
quiet time to come back."

"Never," growled the clerk. "Thirty-nine dollars, please." Just then, the
moshing crowd pushed a helpless customer into a mannequin. It hit the floor
and snapped in two.

Hennes & Mauritz turns out to be a 53-year-old chain based in Stockholm
with some 700 stores throughout Europe. Christian Bagnoud, H&M's vice
president of marketing, says the company chose to target the United States
now (other stores are set to open in New Jersey, Rockland County, N.Y., and
beyond) for obvious reasons: a strong economy and even stronger American
spending habits. But even he admits the company didn't expect such a
stunning debut in New York.

Taking note of that $500,000-a-day figure, malls across the country have
begun clamoring for H&M to hurry their way. Meanwhile, H&M executives from
Europe had to be rushed to New York to face the overwhelming demand. The
Swedish sensation may accelerate its ambitious U.S. rollout to capitalize on
the Hype & Madness.

Some in the brick-and-mortar retail industry see H&M as a potential threat to
low-market monopoly. Though Gap Inc. (which includes Banana
Republic and Old Navy) dwarfs H&M, the San Francisco money-spinner has
recently demonstrated some vulnerability (same-store sales at the Gap
declined 5 percent and at least 1 percent at Old Navy during the fiscal first
quarter -- woeful results considering the company's typical double-digit
growth). With the Gap brand tiring and H&M's prices even undercutting Old
Navy, it would appear that H&M could certainly intercept the Zeitgeist, or at
least do some irritating damage to Gap's ankles.

Nevertheless, H&M is not without its troubles. Long a Stockholm stock
darling, its CEO quit a few weeks ago to join a Swedish Internet portal, and
-- despite those Manhattan numbers -- its first-quarter operating profits
dropped 12 percent, the first dip in four years.

Bagnoud admits that the chain's bold attempt to become the Euro-Gap is
risky. Trashy-looking clothes may be in vogue now, but what about next

And H&M certainly has its quality-control issues: As they say, you get what
you pay for. A lot of the stuff at H&M knocks off cheap, trashy pieces that
Chloe or Versace are showing. In fact, the only difference is that they
actually are cheap and trashy. Why not just go straight to Kmart, where the
lines are shorter? The shrewdly branded, floor-to-ceiling ad posters of
up-and-coming actors Benicio del Toro and Chloe
are there to reassure us that the stuff is cool, but they're not
entirely convincing.

Then there's the big question: Can H&M continue earning money at such
ludicrously low prices? "They're not even making this stuff in Third World
countries," said Stephen Stephanou, an analyst at HGCD Retail Services.
"They must be making it on Mars."

H&M's successful formula is essentially to get it in and get it out. When
bored, swing by for more. "It's the concept of disposable clothes," said
Candace Corlett, a partner with WSL Strategic Retail.

You wear 'em a couple times, they fall apart or go out of fashion and
everybody's happy. You get to shop some more -- the sartorial equivalent of
Prozac --
and H&M gets another sale. But some of the clothes are so cheap, so awful
to touch and so off-the-mark it literally hurts to be near them.

And the chaos. By the time you've checked out the third floor, there's new
stuff on the first. With people grabbing things off racks as sales clerks
try to
wheel by, you have to hustle. It's a little like a badly-run thrift shop. You
never know what you're going to find; you just know it's going to be cheap.
You may love this idea or flee in confusion. If you do the latter, you may find
yourself lying awake at night, wondering if you should have braved the
crowds for that cute $11 salmon-colored halter top.

Just watch out for falling mannequins.

By Heather Alexis Chaplin

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