Reporter | Zhou Fangying
Edit | Lou Shuqin
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Uniqlo was surprised by its recent performance in the Chinese market.
On January 14, Fast Retailing Group, the parent company of Japanese apparel brand Uniqlo, released its financial report for the first quarter of 2022. In its earnings report, Fast Retailing specifically mentioned that UNIQLO and its sister brand GU recorded a collective decline in revenue and operating profit in Japan and Greater China, on which it has long relied.
Among them, Japan's local UNIQLO revenue and operating profit fell by 10.8% and 18.8% respectively. the results of the Chinese mainland market are not disclosed separately, but the financial report mentions that the Hong Kong and Taiwan markets in the Greater China region recorded a significant increase in earnings and profits, which means that the decline in market earnings and profits may be even greater Chinese mainland.
Since FY2014, greater China has become the overseas market on which Fast Retailing group relies most. In the past fiscal year 2021, the Greater China region, which accounted for nearly 30% of UNIQLO's overall performance, set a record for the best performance in history. For the 12 months ended August 31, 2021, UNIQLO Greater China recorded high growth of 16.7% and 52.7% respectively.
Of course, this is related to the low base caused by the decline in the performance of the Chinese market due to the impact of the new crown epidemic in 2020. In addition, Fast Retailing has not missed the opportunity brought about by the rapid recovery of the Chinese market from the epidemic, and has actively expanded the Chinese market in the past year.
In August 2020, the number of UNIQLO's directly operated stores in China exceeded that of the Japanese domestic market for the first time. In March 2021, Wu Pinhui, senior global vice president of Fast Retailing Group and CMO of Uniqlo Greater China, said that in the future, UNIQLO China will maintain the opening speed of 80 to 100 stores per year, and at the same time sink stores to third- and fourth-tier cities.
Image source: Fast Retailing Group
In this context, UNIQLO's latest performance in the Chinese market is even more glaring.
Ken Okazaki, Senior Executive Vice President and CFO of Fast Retailing Group, said: "For us, the revenue reduction and loss in China is a very special situation. ”
Fast Retailing analyzed the main reason for Uniqlo's revenue reduction and gain in the Chinese market was the strict epidemic prevention policy and the higher performance base of the previous year. Second, although the temperature temporarily dropped in mid-October, the overall warm climate in the first quarter inhibited the sales of the winter series. In addition, e-commerce sales have also declined.
It is worth mentioning that the above-mentioned unfavorable factors mentioned by Fast Retailing actually plague all brands competing in the Chinese market.
And the signs of instability in the UNIQLO market can be seen from the previous list of e-commerce promotion activities. In the 2021 Tmall Double 11 Women's Clothing List, Uniqlo, which has won the championship for five consecutive years, was squeezed to the third place. The first and second places are the designer collection brand ITIB, which has been established for less than two years, and the domestic down jacket brand Bosideng.
Fast Retailing may have to admit that its competitive environment in the Chinese market has changed. These changes directly affect its performance.
Around 2014, when Uniqlo began its rapid development in the Chinese market, the "fast fashion" trend swept the world. At that time, UNIQLO's biggest competitor in the Chinese market was ZARA, H&M and other international fast fashion giants.
Compared with the above major competitors, UNIQLO's intensive cultivation in a single category is its core competitiveness. From fleece to lightweight down jackets, to heattech thermal underwear, to AIRism sunscreens... Relying on fabric technology innovation, UNIQLO has created a number of long-lived, classic explosive products, and driven the market popularity of corresponding categories.
But popularity can lead to a surge in sales and also give competitors a chance. In the current Chinese market, in addition to competing with the old rivals of fast fashion, Uniqlo also needs to face the impact of new opponents to seize the market.
Taking the field of thermal underwear as an example, Chinese consumers can now buy emerging brands such as banana, inside and outside, and Ubras in addition to Uniqlo. As for down jackets, fleece jackets and other fields, almost all the large and small brands visible on the market are launching similar products - from a broader sense of competition, UNIQLO's current competitors include Amoy brands with strong price competitiveness, emerging domestic brands, and sports and leisure brands with stronger brand effects, more successful technology and functional marketing, such as Nike and Li Ning.
Uniqlo's bigger crisis comes from the fact that in recent years it has rarely launched a national hit like HEATTECH thermal underwear that everyone wants to buy.
If you have to say "blockbuster", UNIQLO's current hits mostly come from special series launched in cooperation with well-known fashion designers or well-known trend IP, such as the U series it launched after introducing designer Christophe Lemaire as artistic director, or its multiple co-branded series launched with designers Jil Sander, JW Anderson, and the well-known trend IP KAWS.
However, the popularity of the above special series usually only occurs at the beginning of the first series. Consumer enthusiasm for their sequels is difficult to maintain for a long time. Usually, when the second and third bullet joint series are listed again, both the online discussion and sales will be greatly reduced. This is partly because co-branding itself has become so proliferated in the global marketplace that consumers are tired of this form.
KAWS and UNIQLO cooperate
Compared with the path of using fabric patents as a selling point and making explosive models into classic models, UNIQLO seems to have invested more energy to improve its fashion attributes.
There is reason to believe that Uniqlo does have the intention to get rid of the impression of "basic model" synonymous. Because the basic paragraph is related to universality, it corresponds to a larger customer acquisition base. But basics can also mean limited number of repurchases, highly replaceable, and tedious, no personality.
More than one market research report points out that the new generation of Chinese consumers has a very high demand for personalization. If UNIQLO wants to occupy a favorable position in the future market competition, it needs to catch young people with such preferences.
In fact, in the competition for China's new generation of consumers, UNIQLO does not have an advantage.
One of the most important points is that unlike the post-80s and post-90s consumers who have a higher acceptance of international brands, the post-95s and post-00s consumers who are growing into the main consumers in the Chinese market have witnessed the development of China's national strength and the establishment of cultural self-confidence, and have also experienced the elimination of the global information gap by the rise of the Internet, so the recognition of domestic products is naturally higher.
This is also why whether in the field of beauty or fashion, domestic brands are rising strongly. The issues left for international brands like UNIQLO are not limited to products and services, but also to how to show greater sincerity in communicating with Chinese consumers.
As can be seen, Uniqlo's old rival ZARA announced the launch of a joint collection with Chinese designer brand Susan Fang. Previously, H&M has successively reached cooperation with Chinese designer brands Angel Chen and PRONOUNCE. But Uniqlo still has gaps in this regard.
Recently, UNIQLO has added a new project of "Vitality Flower Shop" in some stores in China, hoping to create a "fourth living space" for physical retail. On social platforms such as Weibo and Xiaohongshu, this project has attracted many young consumers who punch in. But how long consumer enthusiasm will last, and how profitable the project will be profitable, is yet to be seen.
And the problem with UNIQLO has never been that it doesn't sell enough – with the concept of "serving life", it has been selling products covering men, women, young and old, as well as multiple life scenarios. It wants to continue to improve its profit performance in the Chinese market, and more importantly, how to form a breakthrough in the main field of clothing.