Zara and H&M are adding beauty salons and new digital features to physical locations to renew their appeal
4 min
LONDON—Fashion retailers have found a way to make their shops dazzle customers again: make them more like Apple stores.
Brands including H&M and Zara have closed hundreds of stores in recent years to cut costs as more shoppers turn to e-commerce. Now they are investing in those that remain to woo customers in ways they can’t online.
The new-look stores are typically larger and more spacious, offer services such as beauty salons, repair stations and coffee shops, and enable new digital features such as apps that allow shoppers to rummage virtually through the storeroom.
“Now it’s about engaging with consumers and giving them an experience,” said Henrik Nordvall, manager of H&M’s U.K. business.
At the brand’s recently redesigned store on London’s Regent Street, foot traffic matters more than sales figures, Nordvall said. While in-store sales are still strong, many customers spend time there developing an affinity with the brand and then buy clothes online later, he added.
The refurbished store is home to a floor-to-ceiling TV screen that the company says is the biggest in any store in Europe, a beauty bar for customers to book nail or eyelash treatments, and a rental section where shoppers can borrow selected items, especially relatively expensive clothes from H&M’s designer collaborations.
Since the changes, the average duration of a customer visit has increased substantially, said Nordvall, who declined to provide specific numbers.
By turning their stores into destinations that shoppers actively seek out and spend time in—a model that Apple honed with its roomy, landmark stores filled with usable gadgets—the fashion retailers are redefining the clothing store for the digital age.
Retailers once needed a large network of stores “to reach people, but now they have the internet for that,” said Patricia Cifuentes, an analyst at the asset manager Bestinver. “Now stores are about brand image. They’re like tourist destinations.”
Not every retailer is following the approach of the big global fashion brands. Macy’s, for example, is opening smaller stores as a way of bringing its brand to places where customers run their daily errands. The electronics chain Best Buy is closing larger locations and opening small stores instead.
But for global fashion’s heavy hitters the shift toward fewer but better stores is well under way. While the investment could backfire if the stores fail to draw sustained traffic, for now the strategy appears to be working.
Inditex, the parent of Zara, has eliminated a quarter of its stores since 2018 and now has 5,745 locations across its brand stable, which also includes Bershka and Massimo Dutti. Yet the Spanish group’s total revenue from stores increased 8% in 2022 compared with four years earlier, with each store selling 30% more on average, Chief Executive Officer Oscar Garcia Maceiras said on a recent earnings call.
After closing its weaker locations and upgrading the rest, “We have been left with a network of bigger, better and more beautiful stores in the best retail destinations globally,” Garcia said.
Despite operating fewer stores overall, Inditex increased its capital expenditure budget for 2023 by 14% to 1.6 billion euros, equivalent to about $1.7 billion, half of which is earmarked to make improvements to stores.
Much of that money is being spent on the rollout of a new Zara store design—including at new U.S. locations in Baton Rouge, La., and San Antonio—to make the shopping experience more enjoyable.
Essential to the new layouts is making stores feel roomier by having more open space between displays so customers don’t feel crowded. With more open space, stores will increasingly have discrete in-store boutiques to highlight individual collections.
Zara has a team of in-house architects who design its stores, and uses pilot stores at its headquarters in Spain to experiment with new layouts.
Garcia, who regularly visits Zara stores around the world, said in a recent interview that store managers routinely tell him they want to expand because only larger stores are able to accommodate most or all of Zara’s range.
The Zara store in Miami is one beneficiary of the move toward bigger and better: It is doubling in size, according to Garcia, to provide the more spacious experience the company wants to deliver.
Bigger stores are more productive, Zara has found. Though stores are getting larger, sales per square foot is now up 16% relative to 2019, Garcia said.
Zara is cramming its stores with new tech such as automatic return and collection points, as well as self-checkout areas. Customers can use the Zara app to check the contents of the storeroom to see if an item is available in their sizes, for example.
H&M has shrunk its store count 14% from its 2019 peak to 4,375 outlets today. The company doesn’t break down its revenue into physical and online, and says the two parts of the business are complementary.
Increasingly, stores “are a way for our customers to get inspiration,” CEO Helena Helmersson said in a recent interview.
H&M upped its capital spending budget 43% for 2023 to roughly $1 billion, partly to push ahead with store modernisation.
Even before the Covid-19 pandemic, H&M’s leaders recognised it was time to update the physical store to offer a more engaging experience, said Nordvall, the U.K. manager. When the pandemic led to a surge in online sales, the company accelerated its effort to redesign its stores, he said.
The revamp of the Swedish brand’s store on London’s Regent Street was aimed at encouraging customers to spend more time there. It has a secondhand area, Lego sculptures in the children’s section and fitting rooms with a built-in selfie function.
H&M also uses the store to host events for shoppers who sign up for its membership program. In November, it held a party to mark the launch of a collaboration with the fashion house Rabanne.
The Japanese brand Uniqlo is still expanding in Western markets, where its footprint is significantly smaller than H&M and Zara, but it is also opening so-called destination stores.
The chain’s recently opened store in London’s Covent Garden is located in a converted Victorian-era carriage works building, where shop floors loop around a brightly sunlit courtyard beneath a vaulted glass roof. There is a Japanese tea shop upstairs with a rooftop balcony, and a florist downstairs.
Visitors can use a machine to print their own T-shirt designs, have clothes altered or mended at the store’s repair station, and lounge in comfy chairs while browsing coffee-table books.
While online sales are growing, destination stores “have become the driver of European earnings,” as well as places where the brand communicates what it stands for, said Taku Morikawa, the CEO of Uniqlo Europe, during a recent earnings presentation.
Only a memorable in-store experience will make customers trust and admire your brand, he said.
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Subsidised minivans, no income taxes: Countries have rolled out a range of benefits to encourage bigger families, with no luck
7 min
Imagine if having children came with more than $150,000 in cheap loans, a subsidised minivan and a lifetime exemption from income taxes.
Would people have more kids? The answer, it seems, is no.
These are among the benefits—along with cheap child care, extra vacation and free fertility treatments—that have been doled out to parents in different parts of Europe, a region at the forefront of the worldwide baby shortage. Europe’s overall population shrank during the pandemic and is on track to contract by about 40 million by 2050, according to United Nations statistics.
Birthrates have been falling across the developed world since the 1960s. But the decline hit Europe harder and faster than demographers expected—a foreshadowing of the sudden drop in the U.S. fertility rate in recent years.
Reversing the decline in birthrates has become a national priority among governments worldwide, including in China and Russia , where Vladimir Putin declared 2024 “the year of the family.” In the U.S., both Kamala Harris and Donald Trump have pledged to rethink the U.S.’s family policies . Harris wants to offer a $6,000 baby bonus. Trump has floated free in vitro fertilisation and tax deductions for parents.
Europe and other demographically challenged economies in Asia such as South Korea and Singapore have been pushing back against the demographic tide with lavish parental benefits for a generation. Yet falling fertility has persisted among nearly all age groups, incomes and education levels. Those who have many children often say they would have them even without the benefits. Those who don’t say the benefits don’t make enough of a difference.
Two European countries devote more resources to families than almost any other nation: Hungary and Norway. Despite their programs, they have fertility rates of 1.5 and 1.4 children for every woman, respectively—far below the replacement rate of 2.1, the level needed to keep the population steady. The U.S. fertility rate is 1.6.
Demographers suggest the reluctance to have kids is a fundamental cultural shift rather than a purely financial one.
“I used to say to myself, I’m too young. I have to finish my bachelor’s degree. I have to find a partner. Then suddenly I woke up and I was 28 years old, married, with a car and a house and a flexible job and there were no more excuses,” said Norwegian Nancy Lystad Herz. “Even though there are now no practical barriers, I realised that I don’t want children.”
Both Hungary and Norway spend more than 3% of GDP on their different approaches to promoting families—more than the amount they spend on their militaries, according to the Organization for Economic Cooperation and Development.
Hungary says in recent years its spending on policies for families has exceeded 5% of GDP. The U.S. spends around 1% of GDP on family support through child tax credits and programs aimed at low-income Americans.
Hungary’s subsidised housing loan program has helped almost 250,000 families buy or upgrade their homes, the government says. Orsolya Kocsis, a 28-year-old working in human resources, knows having kids would help her and her husband buy a larger house in Budapest, but it isn’t enough to change her mind about not wanting children.
“If we were to say we’ll have two kids, we could basically buy a new house tomorrow,” she said. “But morally, I would not feel right having brought a life into this world to buy a house.”
Promoting baby-making, known as pro natalism, is a key plank of Prime Minister Viktor Orbán ’s broader populist agenda . Hungary’s biennial Budapest Demographic Summit has become a meeting ground for prominent conservative politicians and thinkers. Former Fox News anchor Tucker Carlson and JD Vance, Trump’s vice president pick, have lauded Orbán’s family policies.
Orbán portrays having children inside what he has called a “traditional” family model as a national duty, as well as an alternative to immigration for growing the population. The benefits for child-rearing in Hungary are mostly reserved for married, heterosexual, middle-class couples. Couples who divorce lose subsidised interest rates and in some cases have to pay back the support.
Hungary’s population, now less than 10 million, has been shrinking since the 1980s. The country is about the size of Indiana.
“Because there are so few of us, there’s always this fear that we are disappearing,” said Zsuzsanna Szelényi, program director at the CEU Democracy Institute and author of a book on Orbán.
Hungary’s fertility rate collapsed after the fall of the Soviet Union and by 2010 was down to 1.25 children for every woman. Orbán, a father of five, and his Fidesz party swept back into power that year after being ousted in the early 2000s. He expanded the family support system over the next decade.
Hungary’s fertility rate rose to 1.6 children for every woman in 2021. Ivett Szalma, an associate professor at Corvinus University of Budapest, said that like in many other countries, women in Hungary who had delayed having children after the global financial crisis were finally catching up.
Then progress stalled. Hungary’s fertility rate has fallen for the past two years. Around 51,500 babies have been born there this year through August, a 10% drop compared with the same period last year. Many Hungarian women cite underfunded public health and education systems and difficulties balancing work and family as part of their hesitation to have more children.
Anna Nagy, a 35-year-old former lawyer, had her son in January 2021. She received a loan of about $27,300 that she didn’t have to start paying back until he turned 3. Nagy had left her job before getting pregnant but still received government-funded maternity payments, equal to 70% of her former salary, for the first two years and a smaller amount for a third year.
She used to think she wanted two or three kids, but now only wants one. She is frustrated at the implication that demographic challenges are her responsibility to solve. Economists point to increased immigration and a higher retirement age as other offsets to the financial strains on government budgets from a declining population.
“It’s not our duty as Hungarian women to keep the nation alive,” she said.
Hungary is especially generous to families who have several children, or who give birth at younger ages. Last year, the government announced it would restrict the loan program used by Nagy to women under 30. Families who pledge to have three or more children can get more than $150,000 in subsidised loans. Other benefits include a lifetime exemption from personal taxes for mothers with four or more kids, and up to seven extra annual vacation days for both parents.
Under another program that’s now expired, nearly 30,000 families used a subsidy to buy a minivan, the government said.
Critics of Hungary’s family policies say the money is wasted on people who would have had large families anyway. The government has also been criticised for excluding groups such as the minority Roma population and poorer Hungarians. Bank accounts, credit histories and a steady employment history are required for many of the incentives.
Orbán’s press office didn’t respond to requests for comment. Tünde Fűrész, head of a government-backed demographic research institute, disagreed that the policies are exclusionary and said the loans were used more heavily in economically depressed areas.
Government programs weren’t a determining factor for Eszter Gerencsér, 37, who said she and her husband always wanted a big family. They have four children, ages 3 to 10.
They received about $62,800 in low-interest loans through government programs and $35,500 in grants. They used the money to buy and renovate a house outside of Budapest. After she had her fourth child, the government forgave $11,000 of the debt. Her family receives a monthly payment of about $40 a month for each child.
Most Hungarian women stay home with their children until they turn 2, after which maternity payments are reduced. Publicly run nurseries are free for large families like hers. Gerencsér worked on and off between her pregnancies and returned full-time to work, in a civil-service job, earlier this year.
She still thinks Hungarian society is stacked against mothers and said she struggled to find a job because employers worried she would have to take lots of time off.
The country’s international reputation as family-friendly is “what you call good marketing,” she said.
Norway has been incentivising births for decades with generous parental leave and subsidised child care. New parents in Norway can share nearly a year of fully paid leave, or around 14 months at 80% pay. More than three months are reserved for fathers to encourage more equal caregiving. Mothers are entitled to take at least an hour at work to breast-feed or pump.
The government’s goal has never been explicitly to encourage people to have more children, but instead to make it easier for women to balance careers and children, said Trude Lappegard, a professor who researches demography at the University of Oslo. Norway doesn’t restrict benefits for unmarried parents or same-sex couples.
Its fertility rate of 1.4 children per woman has steadily fallen from nearly 2 in 2009. Unlike Hungary, Norway’s population is still growing for now, due mostly to immigration.
“It is difficult to say why the population is having fewer children,” Kjersti Toppe, the Norwegian Minister of Children and Families, said in an email. She said the government has increased monthly payments for parents and has formed a committee to investigate the baby bust and ways to reverse it.
More women in Norway are childless or have only one kid. The percentage of 45-year-old women with three or more children fell to 27.5% last year from 33% in 2010. Women are also waiting longer to have children—the average age at which women had their first child reached 30.3 last year. The global surge in housing costs and a longer timeline for getting established in careers likely plays a role, researchers say. Older first-time mothers can face obstacles: Women 35 and older are at higher risk of infertility and pregnancy complications.
Gina Ekholt, 39, said the government’s policies have helped offset much of the costs of having a child and allowed her to maintain her career as a senior adviser at the nonprofit Save the Children Norway. She had her daughter at age 34 after a round of state-subsidised IVF that cost about $1,600. She wanted to have more children but can’t because of fertility issues.
She receives a monthly stipend of about $160 a month, almost fully offsetting a $190 monthly nursery fee.
“On the economy side, it hasn’t made a bump. What’s been difficult for me is trying to have another kid,” she said. “The notion that we should have more kids, and you’re very selfish if you have only had one…those are the things that took a toll on me.”
Her friend Ewa Sapieżyńska, a 44-year-old Polish-Norwegian writer and social scientist with one son, has helped her see the upside of the one-child lifestyle. “For me, the decision is not about money. It’s about my life,” she said.
