What recent H&M investments in AI, recycling and payment tech mean

Thread

Thread

H&M has invested in several major startups in recent months indicating a direction of travel for the retailer that’s related to greater personalization, a circular economy and increased convenience for shoppers.

The group announced it is backing men’s personal styling service, Thread, this week through its venture arm, CO:LAB. It is putting $13m into the artificial intelligence-based startup, which has just closed a $22m Series B round.

The UK-based service offers recommendations for men on what to wear by combining data with a layer of human insight.

The team behind it said the funding will go towards “hiring data scientists and engineers to make the artificial intelligence much more powerful”, according to CEO and co-founder Kieran O’Neill. The site sells 536 brands, including Paul Smith, Diesel, Barbour and Hugo Boss, among others.

What Thread has alongside that, of course, is data into how men shop and what their tastes are. H&M says its interest lies in exactly that to strengthen the personalized shopping experience that it too can offer shoppers at a time when such expectations are only increasing.

With that same consideration comes the fact shoppers now demand better options around payments, it has also noted. Enter its $20m investment in Klarna, a Swedish fintech startup.

The funding, announced just last week, signals a global partnership that will see Klarna’s digital payments technology integrated into H&M’s physical and digital stores. The outcome will “provide an enhanced omnichannel customer payment offering [and] a streamlined post-purchase service in the H&M app”, according to the company.

What Klarna is particularly known for is its “try before you buy” service, which gives shoppers the flexibility to pay for their items later. That will be available eventually to H&M customers in 14 markets, starting with the UK and Sweden in 2019.

Karl-Johan Persson, CEO of the H&M group, referred to the move as part of a strategic and relentless focus on creating great customer experiences.

Both come at a time when H&M, which has been struggling in the market, has promised its shareholders that it will focus on improvements around not only inventory, but the shopping experience directly, based on understanding the changing retail and consumer landscape it sees before it.

“We know the industry is undergoing a huge shift – the catalyst for this transformation is technology. It’s not just one technology, but a set that includes artificial intelligence, augmented reality, robotics and more,” he said back in February at the company’s Capital Markets Day.

“There are changing consumer behaviours as a result – they are expecting more and more. They expect a more tailored offering in how we set up our stores, in how we communicate with [them]. They want a hassle free shopping experience, and the ability to shop anywhere and anytime. And they want even better designs at higher quality and better prices.”

Meanwhile, the company is also placing a big focus on sustainability. One of its other broad ambitions is to move to a 100% circular model by 2030, which means that everything it uses will go back into the system to be either recycled or reused.

Another, quieter investment it announced in August helps with this – it led a £5m round for polymer recycling technology startup, Worn Again Technologies. This is a business focused on how to drive circularity for the fashion industry by separating, decontaminating and extracting polyester polymers and cellulose from cotton to create new products as part of a repeatable process.

As Cyndi Rhoades, Worn Again Technologies’ CEO, said: “There are enough textiles and plastic bottles ‘above ground’ and in circulation today to meet our annual demand for raw materials to make new clothing and textiles. With our dual polymer recycling technology, there will be no need to use virgin oil by-products to make new polyester and the industry will be able to radically decrease the amount of virgin cotton going into clothing by displacing it with new cellulose fibres recaptured from existing clothing.”

At present, less than 1% of non-wearable textiles are turned back into new textiles due to technical and economic limitations of current recycling methods. This will therefore help with H&M’s goal.

As the group’s head of sustainability, Anna Gedda, explained on TheCurrent Innovators podcast recently: “We only have one planet, and the toll [the fashion industry] has on resources today is simply unsustainable.”

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