Uniqlo, began to "fall out of favor" in China?

Produced by | Tiger Sniff Financial Group

Author | Zhou Yueming

Caption | Visual China

Uniqlo may have been a little anxious lately.

Recently, Uniqlo's parent company, Fast Retailing Group, released its first financial quarter performance report for 2022 (the reporting period is From September to November 2021). According to the report, the quarterly results set a record high in the first quarter of the calendar year, and during the reporting period, the net profit attributable to the owners of the parent company was 93.5 billion yen, an increase of 33% year-on-year, and the total consolidated operating net profit was 119.4 billion yen, an increase of 5.6% year-on-year.

According to the group, this is mainly due to the diversification of global earnings. For example, in Southeast Asia, South Asia and Oceania, North America and Europe, UNIQLO's revenue and net profit have increased significantly, and its performance has been strong.

However, it is worth noting that compared to these markets, UNIQLO's two most important markets, Japan and Greater China, have declined in revenue and net profit.

In particular, the decline in performance in Greater China, especially the decline in Chinese mainland revenue and the sharp decline in net profit (no specific data disclosed), appears to be more sudden, after all, except for the decline in UNIQLO's performance in China in fiscal 2020 (September 2019 to August 2020), fiscal 2016 to fiscal year 2021 are all growth.

But is it really sudden?

Judging from some important data, Uniqlo has shown signs of decline before.

For example, during the 618 period in 2021, the sales of Uniqlo's Tmall flagship store were 536 million yuan, down 9% year-on-year (Everbright Securities Research Report).

For example, in 2021 double 11, in the Tmall clothing category sales list, UNIQLO only held the first place in the men's clothing list, and women's clothing was surpassed by ITIB and dropped to the second place (2020 double 11 is the 1st place); the underwear category fell behind the domestic emerging brands ubass and bananas, ranking 3rd (2020 double 11 is the 2nd place).

It should be noted that according to the CFO report disclosed on the official website of Fast Retailing, in the fiscal year of 2021 (August 2020 to August 2021), Chinese mainland e-commerce accounted for 25% of the total sales in the mainland. In the increasingly important sales node of the channel, UNIQLO's performance has revealed a downward trend to some extent.

In addition, at the recent analyst meeting disclosed on the official website of Fast Retailing Group, there has been more and more discussion about the weakness of the Chinese market. For example, at the analyst meeting in the third quarter of fiscal 2021 (September 2020 only In May 2021), fast retailing's chief financial officer mentioned that sales performance in China was lower than expected, although there were some external factors, but we also had some problems in the way we developed our own business.

For example, at an analyst meeting for the entire fiscal year of 2021 (September 2020 to August 2021), Chairman Yanai Masaharu had estimated that the business in fiscal 2022 was weak Chinese mainland.

What happened to UNIQLO and began to "fall out of favor" in China?

Staying in the guest base is under more pressure

"In a way, UNIQLO is experiencing a midlife crisis." Liu Ming, an analyst in the apparel industry, told Tiger Sniff.

First of all, from the perspective of product positioning, UNIQLO itself emphasizes the basic model, which can be matched with any clothing, a bit like the concept of "basic parts" and "open interface", this design feature also determines that it is compatible with other fashion brands, and the coverage of the population is also extended to 6-60 years old.

On this basis, in order to add fashion, UNIQLO also has a special UT line, this series is mainly through the launch of a variety of co-branded models, to the basic style of UNIQLO clothes to add some personality.

"But at present, whether it is a basic model or a fashion, UNIQLO is a bit embarrassed, because the customer base faced by these two positionings may have a certain degree of loss in the current environment and face some challenges." Liu Ming said.

First of all, it is the customer base that the basic clothing faces. Uniqlo for this type of clothing, has always emphasized the fabric, texture, in the clothing material has put a lot of effort, the main fabric of the sense of science and technology and professionalism, but also because of this, its positioning customer group is the middle class, the pursuit of a certain texture and comfort, pricing relative to the basic model of other clothing companies, higher.

(In fact, in 2003, when Uniqlo first entered Shanghai and Beijing, it was originally intended to continue the low-price route in Japan, but at that time, Chinese consumers thought that low prices were cheap and did not buy this model too much, so Uniqlo founder Yanai was determined to change the low-price image that Uniqlo adhered to in Japan, but to increase the price of clothing and position it as the middle-class market to enhance the brand level.) This period of history can also be found in "One Victory and Nine Defeats". ）

However, under the current environment, whether it can seize this part of the customer base will face two problems, one is that with the advent of the epidemic and the impact on the economy, the original part of the customer group may further sink, that is to say, some of the customers who have previously consumed Uniqlo, because of the economic situation, to find cheaper downgraded products.

"Cheap basic models are the most non-shortage type in the domestic supply chain environment." Clothing practitioner Wang Lei said to Tiger Sniff.

"Because of the impact of the epidemic, the economic pressure has become greater, and I used to go to Uniqlo to buy some basic models such as thermal underwear, but now I prefer to go directly to 1688 to buy this basic type of clothes, and some of the materials are not bad, very comfortable, but the price is much cheaper." Consumer Dong Miao said to Tiger Sniff.

In addition to the factors of consumption downgrade, the choice of this part of the customer group has also increased. With the rise of domestic brands, there are more clothing choices that are versatile and have a good texture. For example, in the underwear category, at the 618 and double 11 major shopping festivals, domestic brands ubras have already surpassed UNIQLO to the top of the list, and the momentum under the banana, inside and outside is also fierce. In addition, these domestic brands have also begun to attack offline, such as the inside and outside has opened nearly 100 stores in 23 first- and second-tier provincial capital cities across the country; Ubras' current number of stores is about 10; Banana opened its first store in Shenzhen at the end of 2020, and the first store in Shanghai was officially opened on September 26, 2021.

It can be seen that the competition facing UNIQLO is becoming increasingly fierce, but some consumers said to Tiger Sniff: "After wearing a circle, I still feel that UNIQLO's materials are the most comfortable, such as heattech thermal underwear, if I pursue comfort more, I will still choose UNIQLO things." ”

In this way, the customer base faced by the basic model, coupled with the factors of the epidemic and the economic environment, have made Uniqlo face some challenges. The competition between pricing and local brands has increasingly become a key issue for UNIQLO to consider. In the latest quarterly financial report, regarding the decline in the performance of Chinese mainland, Fast Retailing Group also mentioned: "Due to the continuous strict epidemic prevention measures during the epidemic, the overall consumption of the apparel industry has been sluggish. ”

And with regard to competition, UNIQLO itself has noticed these situations. At the analyst meeting disclosed on the official website, mentioning the development of Chinese local brands more and more, UNIQLO said: "The potential and quality of Chinese local brands are significantly improving, and we must provide global brand value that only UNIQLO can create to distinguish it from local brands." But it also mentions: "The strength of local brands in the Chinese mainland market is increasing, however, to be honest, we have not seen any competitors position themselves as we do, we believe that our lifewear concept has successfully penetrated the Chinese mainland market and won the support of customers, and we remain convinced that we will be able to grow our company with the broader development of the Chinese market." ”

In addition to some pressure on the basic customer group, UNIQLO's fashion line UT series can also face some challenges in whether it can grasp the corresponding customer group.

Because the style is simple and basic, UNIQLO has been complained that it is not fashionable enough, in order to solve this problem, UNIQLO launched a UT series, combined with various designers and fashion elements, to launch a joint brand of clothes.

This model was once very popular. For example, UNIQLO has cooperated with designers of luxury brands to launch many popular co-branded models, such as co-branded UT with artist KAWS, and collaborative series with designer Jill Sang. Although these co-branded models are still based on the style of Uniqlo, they have exposed consumers to big-name designs and tasted the "taste" of luxury goods. It can be said that the co-branded clothing indirectly satisfies the young people's desire for luxury goods.

However, in recent years, UNIQLO's joint model does not seem to have such a big "movement" as before. Tiger sniff to see the official website of Uniqlo UT, and the previous hot sales of designer co-branded clothing, the recent co-branded series promoted by Uniqlo are mostly Marvel, Cherry Pills, Minions, linefriends and other IP, although they are all joint, but the route is different.

Clothing designer Lin Wei told Tiger Sniff: "When Uniqlo took the joint route before, this game was not particularly much at that time, but now major brands and major categories are taking the marketing method of the joint name route, in this case, this model is not too rare." In addition, although they are all co-branded, but the different effects of the selected IP are also different, the designer co-branded models are often more customized and scarce, and it is more limited to cooperate with this one brand, but if it is cooperated with more popular cartoons, animations, film and television, these images may have appeared many times in different scenes and different brands, and the sense of scarcity and limitedness will be relatively worse, perhaps this is why Uniqlo and the designer co-branded models are hot at that time. ”

There are also fashion kols and consumers who said to Tiger Sniff: "If you pursue fashion, there are too many choices, UT co-branded models are not very attractive, and it may be easy to collide." ”

But some consumers told Tiger Sniff, "I will still see what series Uniqlo has launched, such as the previous Marvel series, I like it more, or I will buy it to wear." ”

Clothing analyst Wang Lin told Tiger Sniff: "With the post-90s becoming the main consumer force, as well as the rise of the Z era, these customer groups have higher requirements for fashion and personality, and the challenge of how UNIQLO's UT series can seize this part of the customer group will be greater, after all, the style of the UT series is still a basic model, many times just make some changes in printing, but there are too many factors affecting fashion, styles, styles, versions, colors, fabrics, and clothing itself is a kaleidoscopic business." ”

Moreover, compared with the basic clothing, the texture of the fabric is more pursued, and the fabric and texture of the UT series are also complained about by some consumers. Some consumers said to Tiger Sniff: "I have bought a joint model of the Marvel series, but the texture of the material is not good, harder and rougher, and then it is rarely worn out, and I have bought it several times, probably because I am older, and men wear more texture, so they give up buying." ”

"If it is not fashionable enough, it cannot catch the emerging crowd, if the fabric is not good, it cannot grasp the crowd that pursues texture, how to balance the UT series is a problem to think about, if both ends can not be grasped, it will become a chicken rib." Costume designer Lin Wei said to Tiger Sniff.

As for how to convey more fresh product features, UNIQLO also noticed this problem. At the analyst conference, UNIQLO said that two years ago, we launched the KAWS UT co-brand, showing how we stand out as a global brand. It has caused a lot of discussion and attracted customers to the store. Looking back, we realize that neither the current business in Japan nor China has adequately conveyed the product qualities that have a fresh feeling, cannot provide enough freshness and appeal, or conveys a product message that is not more convincing, which is an inherent flaw.

From this point of view, how to more accurately grasp the customer base is a new challenge brought to Uniqlo in the new environment, and perhaps the decline in market performance Chinese mainland this time is also an opportunity for Uniqlo to adjust again.

Offline stores were hit

In addition to the challenges faced by the customer base, the expansion and sales of UNIQLO's offline stores are also suffering an impact.

The first is the significant reduction in the number of net growth stores, according to Tiger Sniff statistics Jihai brand monitoring data, in fiscal 2019, fiscal 2020, 2021, UNIQLO's net new stores in China were 98, 70, 33 respectively, it can be seen that in fiscal 2021, the net new number accounted for only one-third of the 2019 fiscal year.

In addition, the number of store closures has also peaked. According to Jihai monitoring data, as of December 14, UNIQLO had 873 stores in 181 cities in 30 provinces (including municipalities directly under the central government) in China, and 104 stores were closed cumulatively, of which 41 were closed in 2021 (the monitoring of store closure data was as of October 28).

Moreover, Tiger Sniff statistics Jihai monitoring data, from September to November 2021, UNIQLO net added 19 stores, but this quarter Chinese mainland market revenue declined, net profit fell sharply, can be roughly calculated, although the store is growing, but the average single store revenue and profitability has declined.

It should be known that a large number of stores has always been the most important market strategy of UNIQLO, and UNIQLO founder Yanai Zheng once mentioned in his "One Win and Nine Defeats", "In a certain area to open stores, when the number of stores reaches a certain number, sales will rise suddenly." He summed up this experience as a "dominant phenomenon."

But whether it is net growth or single-store profitability, UNIQLO's current situation is not too good.

This may have something to do with the epidemic, after all, under the epidemic, the traffic of offline stores will indeed be affected.

However, it is worth noting that according to the general calculation of Tiger Sniff (according to the Chinese mainland revenue and jihai monitoring data), in fiscal 2021 (September 2020 to August 2021), Uniqlo Chinese mainland average single store revenue of 32.31 million yuan, and in fiscal year 2020 (September 2019 to August 2020), the average single store revenue was 30.89 million yuan, so it seems that in fiscal 2021, Chinese mainland is also under the epidemic, but why can the single store revenue at that time still grow?

In the analyst meeting documents disclosed on the official website, Uniqlo also mentioned that internal factors need to be paid more attention to than external factors. Perhaps the decline in single-store earnings at UNIQLO's China stores in the latest quarter already reflects some problems with product attractiveness (as UNIQLO mentioned in the analyst meeting).

It is also worth noting that in addition to the decline in the profitability of existing stores, the development of UNIQLO stores in the sinking market is not ideal.

Uniqlo has said, "In order to gain a longer-term foothold in the Chinese market, UNIQLO has also set its sights on the sinking market in China's third- and fourth-tier cities, which may be the future "fertile soil" for UNIQLO." However, according to jihai brand monitoring data, from the beginning of 2021 to December, UNIQLO added 96 stores, including 17 first-tier cities, 39 new first-tier cities, 20 second-tier companies, 9 third-tier stores, 6 fourth-tier stores, and 5 fifth-tier stores. New stores are still mainly concentrated in new first- and second-tier cities.

"This may be related to the clothing preferences of third- and fourth-line audiences, and whether Uniqlo's sexual coldness and pricing are accepted by third- and fourth-line consumers is a problem." Clothing marketing experts told Tiger Sniff.

It is said that all of UNIQLO's online traffic will eventually lead to the Tmall flagship store, one reason is that it is more conducive to analyzing consumer data, so as to guide the location and planning of offline stores, UNIQLO is not fast to open stores in third- and fourth-tier cities, and may also reflect the third- and fourth-tier consumer data.

After all, for the expansion of a brand, penetration and coverage are very important ways, which need to work the density and sinking of the store.

"Intensive store opening in a city is one of the strategies to seize the minds of consumers, when you have this store all around you, it will naturally deepen the impression of this brand and this store, and the consumption habits are naturally formed, so the density is very important." Moreover, many times, the Tmall store consumers of the shoe and clothing brand coincide with the offline store consumers, that is to say, when shopping offline, there is this brand to buy, they may also choose to buy online, to some extent, offline stores are also an important means of drainage for online stores. So why brands should open up more cities and promote sinking is also important. Clothing analyst Zi Rui told Tiger Sniff.

From this point of view, how to adjust UNIQLO's offline store strategy is also a challenge for UNIQLO.

Write at the end

In the current Chinese market, domestic emerging brands are rising day by day, and in some categories have challenged UNIQLO's traditional position. The post-90s and Z era have become the main force of consumption, and the changes in their consumption habits and preferences have also brought more and more profound changes and impacts to the field of clothing. In addition, the superimposed impact of the epidemic factors and the economic environment has also made the living environment of big clothing brands more and more complicated.

These changes are under the surface of the water, calm and gentle on the surface, but in fact violently turbulent.

How clothing giants like Uniqlo live by themselves in such an environment has also become the focus.

In fact, Uniqlo has been making various attempts, such as the Ariake Project reform that it has focused on promoting in recent years, which is an attempt to transform into a digital consumer retail company. In this reform, UNIQLO is trying to turn information into products, creating products that customers really want based on their daily feedback.

It should be known that since its establishment in 1963, behind uniqlo's transformation, there have been countless difficult moments, but as Yanai said, "The greater the risk you take, the more benefits you are likely to get." "

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