Fashion’s New Look for Stores: Bigger, Better, Fewer
Zara and H&M are adding beauty salons and new digital features to physical locations to renew their appeal
Zara and H&M are adding beauty salons and new digital features to physical locations to renew their appeal
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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Selloff in bitcoin and other digital tokens hits crypto-treasury companies.
The hottest crypto trade has turned cold. Some investors are saying “told you so,” while others are doubling down.
It was the move to make for much of the year: Sell shares or borrow money, then plough the cash into bitcoin, ether and other cryptocurrencies. Investors bid up shares of these “crypto-treasury” companies, seeing them as a way to turbocharge wagers on the volatile crypto market.
Michael Saylor pioneered the move in 2020 when he transformed a tiny software company, then called MicroStrategy , into a bitcoin whale now known as Strategy. But with bitcoin and ether prices now tumbling, so are shares in Strategy and its copycats. Strategy was worth around $128 billion at its peak in July; it is now worth about $70 billion.
The selloff is hitting big-name investors, including Peter Thiel, the famed venture capitalist who has backed multiple crypto-treasury companies, as well as individuals who followed evangelists into these stocks.
Saylor, for his part, has remained characteristically bullish, taking to social media to declare that bitcoin is on sale. Sceptics have been anticipating the pullback, given that crypto treasuries often trade at a premium to the underlying value of the tokens they hold.
“The whole concept makes no sense to me. You are just paying $2 for a one-dollar bill,” said Brent Donnelly, president of Spectra Markets. “Eventually those premiums will compress.”
When they first appeared, crypto-treasury companies also gave institutional investors who previously couldn’t easily access crypto a way to invest. Crypto exchange-traded funds that became available over the past two years now offer the same solution.
BitMine Immersion Technologies , a big ether-treasury company backed by Thiel and run by veteran Wall Street strategist Tom Lee , is down more than 30% over the past month.
ETHZilla , which transformed itself from a biotech company to an ether treasury and counts Thiel as an investor, is down 23% in a month.
Crypto prices rallied for much of the year, driven by the crypto-friendly Trump administration. The frenzy around crypto treasuries further boosted token prices. But the bullish run abruptly ended on Oct. 10, when President Trump’s surprise tariff announcement against China triggered a selloff.
A record-long government shutdown and uncertainty surrounding Federal Reserve monetary policy also have weighed on prices.
Bitcoin prices have fallen 15% in the past month. Strategy is off 26% over that same period, while Matthew Tuttle’s related ETF—MSTU—which aims for a return that is twice that of Strategy, has fallen 50%.
“Digital asset treasury companies are basically leveraged crypto assets, so when crypto falls, they will fall more,” Tuttle said. “Bitcoin has shown that it’s not going anywhere and that you get rewarded for buying the dips.”
At least one big-name investor is adjusting his portfolio after the tumble of these shares. Jim Chanos , who closed his hedge funds in 2023 but still trades his own money and advises clients, had been shorting Strategy and buying bitcoin, arguing that it made little sense for investors to pay up for Saylor’s company when they can buy bitcoin on their own. On Friday, he told clients it was time to unwind that trade.
Crypto-treasury stocks remain overpriced, he said in an interview on Sunday, partly because their shares retain a higher value than the crypto these companies hold, but the levels are no longer exorbitant. “The thesis has largely played out,” he wrote to clients.
Many of the companies that raised cash to buy cryptocurrencies are unlikely to face short-term crises as long as their crypto holdings retain value. Some have raised so much money that they are still sitting on a lot of cash they can use to buy crypto at lower prices or even acquire rivals.
But companies facing losses will find it challenging to sell new shares to buy more cryptocurrencies, analysts say, potentially putting pressure on crypto prices while raising questions about the business models of these companies.
“A lot of them are stuck,” said Matt Cole, the chief executive officer of Strive, a bitcoin-treasury company. Strive raised money earlier this year to buy bitcoin at an average price more than 10% above its current level.
Strive’s shares have tumbled 28% in the past month. He said Strive is well-positioned to “ride out the volatility” because it recently raised money with preferred shares instead of debt.
Cole Grinde, a 29-year-old investor in Seattle, purchased about $100,000 worth of BitMine at about $45 a share when it started stockpiling ether earlier this year. He has lost about $10,000 on the investment so far.
Nonetheless, Grinde, a beverage-industry salesman, says he’s increasing his stake. He sells BitMine options to help offset losses. He attributes his conviction in the company to the growing popularity of the Ethereum blockchain—the network that issues the ether token—and Lee’s influence.
“I think his network and his pizzazz have helped the stock skyrocket since he took over,” he said of Lee, who spent 15 years at JPMorgan Chase, is a managing partner at Fundstrat Global Advisors and a frequent business-television commentator.