H&M’s AI Playbook: The Tech Strategy Behind Its Transformation

In the ever-evolving landscape of the fashion industry, the integration of Artificial Intelligence (AI) has emerged as a transformative force, reshaping the traditional paradigms of product development. It’s becoming a core part of operations, design, and customer engagement for a growing number of brands.

Many businesses are turning to predictive analytics to optimize their supply chains, leveraging computer vision for visual search, and experimenting with generative models for design and content creation.

Fast‑fashion giant H&M has become the latest retailer to put artificial intelligence at the centre of its operations. From enhancing customer experiences with virtual fitting rooms to optimizing supply chains with AI-driven insights, H&M’s strategic integration of AI demonstrates its commitment to innovation and sustainability. H&M’s public communications and corporate pages make clear that AI is no longer an experiment for them. It’s part of their strategy across design, supply chain, marketing, and sustainability.

Whether you’re aCTO, a tech enthusiast, a retail professional, or simply curious about the future of fashion, here’s an in-depth look into how H&M uses AI to innovate, adapt, and thrive in a competitive industry.

Inside H&M’s AI-powered fashion ecosystem

H&M is integrating artificial intelligence into the very fabric of its operations. From amplifying creativity to reimagining product development and streamlining logistics, the brand is embracing AI as a force that elevates both innovation and execution.

Here are a few innovative ways AI is transforming creativity, product development, and logistical processes in the H&M business:

Inventory management

Like many other fashion retailers, H&M also faced challenges with overstocking and understocking due to inaccurate demand forecasting.

Fast-changing trends, unpredictable customer preferences, and the industry’s rapid production cycles often led to challenging situations. Popular items sold out quickly, while slower-moving or unpopular products piled up in warehouses, contributing to inventory surplus and waste.

Likewise, seasonal shifts and regional buying behaviours made accurate forecasting even more challenging. External factors such as economic changes or weather patterns added another layer of complexity. Beyond financial losses, this imbalance also challenged H&M’s sustainability ambitions, as excess stock often ended up as waste.

To tackle these issues, H&M turned to AI-driven demand forecasting. By leveraging machine learning and advanced analytics, the company built systems capable of processing vast amounts of information. This helped predict customer demand with far greater precision.

These systems utilize historical sales data, market trends, customer preferences, and external variables such as weather patterns and local events to generate detailed forecasts. Moreover, the AI models continually learn and improve as new data is introduced.

It has helped H&M adjust inventory in real-time, stay more confidently responsive to changing consumer demands, and move closer to both operational efficiency and sustainability goals.

Automated warehouses

H&M has invested in automated warehouses. These facilities use robotics, automated sorting systems, and AI-driven logistics software to process orders, manage inventory, and distribute products more efficiently. Automation allows H&M to:

• handle large volumes of merchandise at high speed,
• reduce human errors in picking and packing,
• quickly restock stores based on real-time demand signals, and
• improve delivery times for e-commerce orders.

Inspiring and friction-free customer experience

Here are some ways H&M is offering a superior customer experience:

• Find in store is a feature on hm.com that helps customers locate products quickly and easily in the size they want at a physical store location where the item is in stock.
• In-store mode, available within the H&M app, enables customers to view which items are currently in stock at their physical store location, as well as determine if an item is available for purchase online.
• Scan & Buy enables customers to scan the QR code on a product in-store, allowing them to quickly and easily locate and purchase the item online in their preferred size and color.
• RFID (Radio Frequency Identification) is used to help customers quickly and easily locate items with digital price tags and obtain precise information on an item’s availability.

Together, these tools make the shopping experience smoother, more personalized, and far more convenient – ensuring customers can discover, locate, and purchase the products they want without friction.

Digital avatars and virtual fitting rooms

H&M has adopted AI-generated digital avatars and 3D body scanning to create personalized virtual fitting experiences. In collaboration with technology partners like NeXR, H&M allows customers to scan their bodies in-store, create a digital avatar, and virtually try on garments from new collections.

This initiative has been piloted in Germany and Japan, where it delivered an increase in click-through rates and a reduction in production costs by eliminating the need for physical samples and travel.

The technology also supports H&M’s sustainability goals by reducing textile waste and aligning with the company’s Science-Based Targets for carbon reduction.

Material innovation and circularity support

H&M’s Circular Innovation Lab, partnerships, and R&D use technology (including data analytics and AI) to identify promising alternative fibres and to optimise material flows and recycling processes.

AI can help prioritize which material innovations to scale, model lifecycle impacts, and support traceability across complex supply chains. This aligns with H&M’s public target to significantly increase the use of recycled and sustainably sourced materials.

“We’re exploring emerging technologies like generative AI to amplify creativity and reimagine how we showcase fashion. The technology offers an opportunity to enhance storytelling and find new ways to connect with our customers, while staying true to H&M’s style-led, human-centric identity. We remain committed to empowering self-expression and liberating fashion for the many,” says Jörgen Andersson, Chief Creative Officer, H&M

“AI will be an essential tool for H&M Group to reach our vision of achieving a climate positive value chain by 2040″, says Linda Leopold, Head of Responsible AI & Data at H&M Group

That’s not all!

Responsible AI governance and ethics

H&M Group has a comprehensive internal Responsible AI Framework based on nine guiding principles.

“At H&M Group, we’ve set up a framework for Responsible AI based on nine main principles. We believe AI should be: Focused, Beneficial, Fair, Transparent, Governed, Collaborative, Reliable, Respecting Human Agency, and Secure”, says Linda Leopold, Head of Responsible AI & Data at H&M Group

According to Linda Leopold, Head of Responsible AI & Data at H&M Group, the team evaluates all AI projects using their ‘Checklist for Responsible AI’. This helps the teams identify and discuss different types of potential risks and ways to mitigate them. It also ensures that the development and use of AI align with our company values.

Moreover, to raise awareness, the H&M Group has also created another section to consider problems that don’t exist: the Ethical AI Debate Club. Here, people discuss fictional scenarios and ethical dilemmas related to AI.

Potential developments that could impact the fashion industry in the future.

Future AI projects H&M is working on (what to watch)

Based on public announcements and H&M Group narratives, these are the near-term directions:

Expanded generative AI in marketing and product concepting

H&M has announced a bold experiment: using artificial intelligence to create digital “twins” of 30 of its models. These AI replicas will appear in marketing and social media content, clearly labelled and watermarked as synthetic imagery. 

Scaling AI across supply-chain and store operations

There will be deeper integration of forecasting, replenishment, and store workforce planning with AI/ML models to make operations more resilient.

AI for circular systems and material discovery

The focus is on the efficient use of AI modeling, simulation, and data analytics to accelerate the adoption of recycled and bio-based fibers and optimize recycling workflows. H&M’s Circular Innovation Lab and its various partnerships are actively driving this progress.

H&M’s adoption of AI has fundamentally reshaped its approach to fashion retail. It has enabled the company to become a pioneer in leveraging technology to enhance efficiency, customer experience, and sustainability.

By embracing AI, H&M is setting an example for other leaders to follow. It proves that technology is not just a tool for convenience but a driver of meaningful change.

Moreover, H&M’s success with AI demonstrates the immense potential of integrating technology into business strategies. It serves as a reminder that the future of fashion lies at the intersection of creativity, sustainability, and advanced technology.

The next decade of fashion and tech

The future of fashion and tech is a fusion of physical and digital realms, driven by AI, data analysis, and automation. This convergence will create more personalized, sustainable, and responsive customer experiences.

But neglecting to explore the possibilities this technology offers could be just as risky. The pace at which it is evolving and the explosive growth of its user base make ignorance or inaction a potential competitive disadvantage. Tech leaders in fashion should start thinking now about how their businesses could use AI.

Likewise, tech leaders need to educate and train employees, including designers, marketers, sales associates, and customer service representatives, on the use of the technology. With an AI-savvy workforce, collaboration will take on a new meaning.

Leaders should consider: How do we define responsibilities and operate collectively between technical and nontechnical roles? They can set up weekly meetings to strategize quarterly road maps and working sessions among teams.

Moreover, it’s essential to remember that leaders who combine responsible governance with productized AI platforms will gain resilience, reduce waste, and foster customer loyalty.

AI as a creative partner, not a competitor

AI isn’t about replacing stylists or fashion specialist but its enhancing their capabilities, making them more efficient, accessible, and creative. Moreover, it’s freeing up human professionals to focus on the innovative, emotional, and strategic aspects that AI cannot replicate, such as personal connection, cultural context, and brand storytelling. 

AI is about enhancing choice, confidence, and connection. It’s about reminding people that fashion isn’t about what you buy – it’s about how it makes you feel. Seen. Styled. Expressed.

AI amplifies that journey, helping every individual step into a version of themselves that feels authentic, empowered, and uniquely their own.

In brief

AI is currently dominating tech conversations, and fashion is no exception. It’s being hailed for its potential to fix problems that have plagued the industry for decades – from product discovery and personalized marketing to sizing discrepancies among brands. 

And with the advancement of gen AI and artificial super intelligence (ASI) in the coming years, millions more users will soon experience what effortless fashion feels like.