The debut of H&M's more upmarket COS format this month shows that the global fashion giant is chasing new customers. The fascia targets those who want a break from the pile it high, sell it cheap approach of value stores, as H&M returns to the more sedate middle market.
But what is today's middle market, and what does it offer the new generation of style- and value-savvy consumers? Futurelab analyst Martin Raymond, who specialises in consumer attitudes, describes a middle market transformed from the days when it was dominated by Next and the pre-turnaround Marks & Spencer. "Traditionally the middle market dealt with consumers who were wary of design, which they thought was valueless," he says.
This area of the market is now for people in their thirties and forties who had their formative fashion years in the 1980s, the design-led era that created the lifestyle brand, he adds.
Raymond believes that although the value market will continue to grow, it will have to appeal to these grown-up Generation X-ers not just through price, but product quality, provenance, and customer experience - aspects that COS has clearly tried to address with its store design.
"Although customers want value, they are also looking for values," says Raymond. "COS is commoditising a mood that forecasters have predicted for some time: that consumers are moving towards niche and bespoke, and things that are trans-seasonal."
Richard Fitzpatrick, an analyst for market research firm Retailmap, does not believe consumers will turn their backs on the value market. "The value sector is here to stay. From the customer point of view there will be more choice - for example with Primark opening about 40 new stores," he says.
He adds that H&M's confidence in COS does not necessarily point to a resurgent middle market; rather, a blurring of the boundary that divides it from the value sector. This is again driven by the changes in consumer awareness.
The success of the value market has resulted in consumers becoming much more price-savvy, meaning middle-market players have had to lower their entry price points accordingly.
"Retailers have a more disciplined approach to pricing structure and getting customers in on low price," says Fitzpatrick. "M&S has sharpened up its price structure by having a bit of everything, from mid to low price points."
COS is a result of value retailers doing the same thing in reverse, by pushing upwards to the middle market. In the same way that M&S realised that low T-shirt prices will attract customers to its stores, retailers such as H&M and New Look have cottoned on to the fact that they can sell the odd premium line without compromising their value-for-money customer perception.
Fitzpatrick adds: "H&M had success with its Stella McCartney tie-up and realised it could sell pricier products."
Other big fashion companies such as Arcadia and Mosaic have also recognised this, to the extent that the former has opened in-store designer boutiques in its larger Topshop stores and added premium line limited-edition ranges to the offer at Wallis. Mosaic now has premium lines in its Principles, Oasis and Warehouse chains. H&M, however, is the first young fashion chain to launch an entire new fascia devoted to higher-end product.
And it has not done so by halves. In terms of store environment, the retailer pulled out all the stops by employing top architect William Russell - who has designed Alexander McQueen's boutiques - to design a swanky shopfit. "It is using a similar strategy to Zara by investing in image," Fitzpatrick says.
Inditex-owned Zara is one of the forerunners in catering for the new middle-market customer, who demands a premium shopping experience to justify additional spend.
Inditex managing director for the UK and Ireland Mike Shearwood says that by having a more upmarket image Zara has not only attracted customers from the value end of the market, but also from the higher end. "People who shop at boutiques and designer stores are delighted at our prices," he says.
H&M will hope that the savvy consumer, which its eponymous stores have helped to create, will have a similar reaction when they enter COS.
Customer reaction at the fascia's launch event proved positive. H&M's Swedish bosses would have had reason to crack open the champagne at the sight of a packed store and long queues at the till on the first day of trading last Friday at the COS shop on London's Regent Street.
Footfall was bolstered by the media, extra H&M employees on hand for the launch, and even the odd fast-fashion competitor in for a look around. But among these were bona fide shoppers. Those who were buying appeared to be of the age bracket described by Raymond, whereas a gaggle of twentysomething fashion students left the store empty handed, perhaps preferring the cheaper and more colourful offer at the H&M flagship 100 metres up the road at Oxford Street.
One City analyst was on a recce for his bank, but also managed to buy a belt and shirt. He thought COS was perhaps too fashion-forward to be scalable. "Before we knew about the COS concept we were hoping for something more like Massimo Dutti or Banana Republic. You can get mass consumption in stores like these, but at slightly higher prices."
Value fashion stores such as H&M and Primark have helped to shape a new mould of consumer over the past five years. H&M will be hoping that COS will offer them a natural progression into the middle market.
WHO WILL BE SHOPPING AT COS?
Sabah Boranbay, 30, buyer for a restaurant business
VERDICT: "The clothes are a lot plainer than I thought they would be. They're almost Muji-like. They are nice quality for the price."
PURCHASES: Sleeveless silk tops and pyjamas.
ALSO SHOPS AT: Gap, French Connection, Topshop
Andreas Johansson, 31, hedge fund employee
VERDICT: "I thought the new store was very good. It fills a gap between high-end shops and stores such as H&M and Zara."
PURCHASES: Two pairs of trousers and some T-shirts
ALSO SHOPS AT: Selfridges, Harvey Nichols
Berid Vinegrad, 67, interior designer
VERDICT: "The store looks very nice overall, but I was hoping it would be targeted at a more mature customer."
ALSO SHOPS AT: Mexx, Fenwicks and H&M for basics
Jade Bronze, 20, fashion student
VERDICT: "It's kind of Zara-ish in a way. I thought the ranges were a bit bland - there weren't any colours in there."
ALSO SHOPS AT: High street chains such as Topshop and Harvey Nichols
Anna Bromilow, 28, fashion editor at Tatler magazine
VERDICT: "The concept will be very successful. The product is well cut and simple, but with more edge than Gap."
PURCHASES: Grey coat, grey belt and grey skirt
ALSO SHOPS AT: Miu Miu, Selfridges, Topshop
Natalie Alden, 20, student
VERDICT: "The layout is really nice. It's very on trend."
ALSO SHOPS AT: Accessorize, All Saints, Topshop and one-off boutiques.