The recent announcement of Afound’s impending closure highlights a significant shift in the retail landscape, particularly for H&M and its approach to digital outlets. Launched in 2018, Afound aimed to tap into the growing online discount market by offering a diverse range of products, including clothing, shoes, home accessories, and even cosmetics. However, as consumer preferences evolve and brands increasingly opt for direct-to-consumer strategies, the viability of such platforms is called into question.
H&M’s move to terminate Afound comes in the context of its overall strategic adjustments aimed at enhancing economic viability and ensuring long-term resilience. Their financial report for the first half of 2024 revealed an increase in net sales by 1% compared to the previous year. Moreover, the company reported a substantial operating profit of 806.1 million euros, demonstrating a robust recovery in some sectors of their business. However, these positive indicators do not obscure the larger trend affecting digital outlets like Afound.
The core issue lies in the consumer’s demand for direct engagement with brands. As noted by H&M, “When evaluating Afound’s current position, we do not see enough demand, partly because brands increasingly choose to use their own channels for sales, to further strengthen their customer relationships.” This statement underscores a critical transformation in the retail environment: consumers are drawn to authentic connections with the brands they buy from. Brands that were once incentivized to sell surplus stock through outlets are now prioritizing direct sales strategies to cultivate a loyal customer base.
For instance, many apparel companies have effectively redesigned their sales models, opting to sell discounted items directly on their websites. According to recent studies, approximately 79% of consumers prefer to purchase directly from brands, indicating a shift in consumer loyalty. This illustrates that Afound’s role as a middleman has become less appealing in a market where direct interaction is valued.
The digital outlet initially started with a combination of online and offline formats, including a physical store in Stockholm. Over time, it expanded into several European markets, establishing more brick-and-mortar locations. However, with the transition to a fully digital platform, H&M and Afound faced the challenge of competing against direct sales channels, which had become increasingly effective in reaching consumers.
In 2020, Afound broadened its product offerings to include cosmetics and personal care items, but this diversification has not sufficed to curb declining consumer demand. The market has changed, and brands that once relied on outlets to offload excess inventory are now optimizing their e-commerce strategies. The focus is shifting towards enhancing customer experience, personalization, and developing community engagement—all aspects rarely found in discount outlet models.
H&M’s decision to close Afound is also a reflection of broader industry trends. Companies like Zara and ASOS have successfully navigated similar waters by strengthening their online presence and optimizing their supply chains to meet consumer demand more effectively. In light of these shifts, it’s imperative for retailers to reconsider their digital strategies, factoring in the direct-to-consumer model as a more sustainable approach.
In the aftermath of the closure announcement, H&M is keen on redirecting its efforts towards creating a more cohesive and integrated online shopping experience. Adjusting return fees, improving the customer journey, and focusing on retention are pivotal elements of this initiative. As the retail sector continues to adapt to changing consumer behaviors, clarity in brand messaging and operational strategies will become increasingly vital.
In conclusion, the closure of Afound serves as a case study on how digital outlets must reevaluate their roles in the current retail ecosystem. As brands pivot towards stronger direct-to-consumer models, the one-size-fits-all approach of discount outlets may no longer suffice in meeting the demands of today’s consumers. H&M’s strategic reevaluation signifies that the future of retail lies not just in selling products, but in fostering genuine connections with customers, ultimately leading to sustained growth and success.
