For Chinese brands aiming to go global, Uniqlo's global experience is undoubtedly a valuable textbook. Through an in-depth analysis of UNIQLO's marketing strategy, product innovation, localized operations and digital transformation, this article reveals the key factors for UNIQLO's success in the global fast fashion sector.
Going to sea is no longer a choice question for Uniqlo.
At present, the tide of going to sea is higher and higher. In the field of global fast fashion clothing, although Uniqlo is the slower one in the "Big Four", it has greater reference value for clothing brands in mainland China and even Asia.
On April 11, Fast Retailing, the parent company of Uniqlo, released its performance report for the first half of fiscal year 2024 (September 2023 to February 2024). During the reporting period, Fast Retailing's revenue increased by 9.0% year-on-year, of which Uniqlo's revenue in Greater China (including Chinese mainland, Hong Kong and Taiwan) increased by 12.3%. [1]
Specific to the Chinese mainland market, although UNIQLO's revenue is also growing, its profit has declined slightly, and its gross profit margin has declined. Uniqlo's performance in Chinese mainland is also increasingly similar to that in Japan, where it will be more difficult to achieve sustained high growth as the market becomes saturated. [1]
In addition, UNIQLO also has to face competition from other "Big Three", while China's new and old footwear and clothing and fast fashion brands such as Anta, Li Ning, UR, etc., are also accelerating their revival and rise. Uniqlo's growth in China is clearly under pressure on many sides.
Even so, Greater China is still UNIQLO's second-largest market. For the entire fiscal year 2023 (September 2022 to August 2023), Greater China contributed 42.8% of UNIQLO's entire overseas revenue. In other words, more than 40% of Uniqlo's overseas revenue comes from the Chinese market. [2]
Compared with the annual revenue ratio of H&M, ZARA, and GAP in the Greater China region of more than 10 points or single digits, Uniqlo is the most dependent on the Chinese market. But on the other hand, its layout in Europe and the United States is smaller than that of the other three giants.
After ZARA's growth slowed in China in 2021, the U.S. has become the second largest single market for its parent company, Inditex Group, after Spain. HM from Sweden has also established itself in Germany, the United States, the United Kingdom and the Netherlands. GAP, on the other hand, is a native American brand that has been deeply rooted in North America.
For Uniqlo, it is ready to maintain its position as the "Big Four" and reach a new level of growth, speed up the opening up of the European and American markets, and reduce its dependence on the Chinese market and even the entire East Asian market.
The history of a "technology company".
Although it is already one of the "Big Four" in the fast fashion industry, Yanai Masa prefers to position Uniqlo as a "technology company" rather than a "fashion company". As for the reason, we have to start with its development history.
Forty years ago, in 1984, Yanai opened his first UNICLO store in Hiroshima, Japan, and from the outset he was determined to make the store an "environment where customers can choose freely", and emphasized the basic function of clothing in terms of products: "easy to wear" and "easy to match" with other clothing.
Not surprisingly, the success of Uniqlo's No. 1 store made Yanai realize that making "basics" should be a path to success, and immediately began to expand the store.
By 1987, the number of UNIQLO stores had reached seven, and the number of men's suit stores and women's clothing stores other than UNIQLO stores had reached six, with total sales of 2.2 billion yen and pre-tax profit of 65 million yen. [3]
However, with the gradual increase in the number of stores, Uniqlo's capital turnover is also in trouble, and it has to implement a fast-in and fast-out play, that is, which product is good to sell, which one is purchased, and the goods that do not sell well are discounted and cleared in the current season, and never sold in the next season. But this has also led to the fact that it is becoming more and more difficult to supply best-selling products.
It was then that Yanai joined a business delegation to Hong Kong. In Hong Kong, he saw Giordano shirt with a low price but a very good quality, which was exactly what he wanted. At that time, there was no distinction between retail and production of garment manufacturers in Hong Kong, and they were engaged in the processing trade of European and American garments while opening their own stores for sales. This kind of activism made Yanai realize that there was a lot to be done in this way.
Although UNIQLO was not able to produce ready-to-wear directly at the time, it was entirely feasible to participate in production management when entrusting manufacturers with production and processing. In fact, at that time, UNIQLO was suffering from the stigma of "cheap but not good", and in order to be able to produce high-quality goods, it had to do the same.
In 1988, Yanai opened a purchasing office in Hong Kong and established a local corporation in cooperation with Hong Kong people. When the trademark registerer mistakenly wrote the "C" in "UNICLO" as "Q", the story of UNIQLO and UNIQLO began a new chapter. [4]
In 1991, Yanai changed the name of the company founded by his father, Ogori Shoji, to "Fast Retailing", that is, Fast Retailing, and started a direct chain with Uniqlo as the main brand. At the same time, it announced that it will open more than 30 stores every year, and reach 100 stores in three years, and achieve the company's listing goal as soon as possible.
In the second year after Yanai Masa's "official announcement", Japan ushered in a bubble economic collapse, and bank loans were full of resistance. However, in 1994, three years later, the number of UNIQLO stores exceeded the target, and its own headquarters building was built, and the company was listed on the Hiroshima Stock Exchange.
Since then, Yanai has begun to focus on the research and development of independent products, and after collecting a wave of "bad reviews" from users, he is determined to improve product quality. Although Yanai has taken measures after being inspired by Giordano in Hong Kong, they have had little effect. It wasn't until 1998 that UNIQLO achieved a milestone victory in product innovation since its establishment, when its star product "fleece" was launched.
In the early days, fleece fabrics were monopolized by foreign manufacturers, and the cost of importing them was very high, and the fleece jackets in other clothing stores were usually sold for 5,900 yen a piece. UNIQLO was developed in collaboration with fabric supplier Toray Corporation of Japan to reduce costs and sell it for 2,900 yen. The original sales plan of 6 million units turned out to be 8.5 million units sold within one year of its launch. [4]
Based on this gratifying performance, in 1999, UNIQLO formulated a sales plan of 12 million pieces, developed 15 colors of the same style, and also used the ultra-low price of 1,900 yuan as the main selling point, and sold 26 million pieces in the winter of that year, creating a miracle in the history of Japanese clothing, and UNIQLO also became the largest clothing retailer in Japan. [4]
By 2000, Uniqlo had sold fleece sweaters to nearly one-third of the Japanese. [4]
Subsequently, UNIQLO cooperated with its old partner Toray to overcome technological obstacles and apply professional fabrics such as Heattech and AIRism to mass products such as thermal underwear and underwear, and in 2009, it also launched a subversive light down product.
From polar fleece, Heattech, AIRism, to light down, UNIQLO has been taking the path of "technology commercialization". That is to say, the original high price and some aspects of strong performance, but rarely used in daily life clothing materials, through research and development and innovation with professional fabric suppliers, and constantly optimize and reduce costs, so as to create a new market for clothing that takes into account the price and quality of beauty.
It is UNIQLO's positioning as a "technology company" that has helped it navigate Japan's 30-year cycle of economic stagnation and continue to grow into a global apparel brand.
Based in Asia, bet on North America, and accelerate globalization
In 1999, while the polar fleece products made Uniqlo sell well in Japan, it also helped UNIQLO enter the overseas market, and it can be said that this period was the first year of UNIQLO's globalization.
Uniqlo took the lead in targeting the UK, but its early development in overseas markets was not smooth, although the quality came up and the price was not expensive, but "not good-looking" became a new label. In order to change this situation, UNIQLO began to work design, and successively invited well-known designers to join.
In terms of brand VI system and store display design, in 2005, Yanai invited designer Kashiwa Sato to serve as creative director. As soon as Sato took office, he changed UNIQLO's original dark red logo to eye-catching red, and changed UNIQLO's "hypermarket" style, and designed the world's first flagship store in New York, covering an area of more than 500 square meters, and using a strong visual impact of the display method - the same color polo shirts are combined into a colorful wall. The American media commented at the time that the store was "unprecedentedly public". This has also become a fixed style for UNIQLO stores since then.
In terms of product design, in 2006, UNIQLO launched a designer collaboration program, inviting big-name designers who agree with UNIQLO's "basic function" concept to develop fashion collections, thus creating a very popular designer co-branded collection. For example, the "Ines" series co-designed with French supermodels, the "+J" series in collaboration with German minimalist fashion designers, and the "U" series in collaboration with the former creative director of Hermès are all popular models that are out of stock as soon as they are launched.
In 2007, Harajuku, Japan opened a U flagship store, and Kashiwa Sato's "canned T-shirt" design made this T-shirt series get rid of the original "hypermarket" image and began to become fashionable, and then Uniqlo also made a lot of articles around UT. For example, 7 years later, UT was repositioned as a "next-generation T-shirt" by Tomoaki Nagao, and about 30 themes and more than 1,200 colors and patterns were launched, setting off a UT trend. [4]
With the blessing of fashion attributes, in 2012, UNIQLO successfully became one of the world's fourth largest fast fashion brands.
As the second largest market of Fast Retailing, Greater China was locked by Uniqlo as early as 2002, when Uniqlo opened 2 stores in Shanghai, and after 2006, offline stores of ZARA, HM and GAP appeared in China.
At the end of 2005, Uniqlo ushered in a turning point in the Chinese market, which had been losing money for three consecutive years. Pan Ning, a professional manager who has been with Fast Retailing for 10 years, has taken on the role of Uniqlo China's head of business (CEO), and his "middle class" brand positioning strategy has made China Uniqlo's largest and most successful overseas market to date.
In Japan at that time, Uniqlo's marketing slogan was "continue to provide high-quality products at the lowest price in the market", but Pan Ning found that because of the difference in the level of economic development, the "lowest price in the market" was only in line with the Japanese market, and it was not common for Chinese people.
Pan Ning had an insight into the fact that in China at that time, there was a group of middle-class people who had the desire to consume, not only for clothing, but also for various information, and had their own ideas and pursuits. Through their own changes, they can lead to the growth of the so-called mass population.
Pan Ning's approach to re-acquainting Chinese consumers with Uniqlo was to quickly open a 1,000-square-meter store in accordance with the decoration style of Uniqlo's latest store in Tokyo at the time, at Shanghai Grand Gateway Plaza, which was known as the best shopping mall at the time, and Shanghai Super Brand Mall, the largest shopping mall in Asia at that time. In addition, we have set up a product group that reflects more fashion style and release new products every week, sending a signal to consumers that "quality of life should be like this". [5]
With the formal establishment and implementation of the "middle class" positioning, UNIQLO has really found its place in China.
Since then, UNIQLO has carried out a series of localized operations in the Chinese market.
If UNIQLO's localization strategy in Japan, the United Kingdom, the United States, and France basically revolves around the direction of personalization, creativity, freedom, street art and young fashion, then UNIQLO's localization strategy in China is completely out of the same category, and "e-commerce" and "digitalization" are UNIQLO's more concrete grasps in China.
In addition to continuously opening offline stores in China's prefecture-level cities, Uniqlo has seized the opportunity of the rise of domestic e-commerce.
In 2009, UNIQLO took the lead in opening a flagship store on Taobao. In 2014, UNIQLO's Greater China management noticed that China's mobile Internet had entered a period of rapid development, and that there were trending changes in content dissemination, media delivery, and the construction of a communication platform between brands and consumers. In the same year, UNIQLO built and began to operate the official WeChat public account, Weibo and other self-media positions, breaking the limitations of traditional retail in time and space, and serving Chinese consumers in an all-round way.
Against the backdrop of slowing economic growth and the impact of online shopping, the brick-and-mortar retail sector hit a bottleneck in 2015. In order to break the situation, Ma Yun proposed the "new retail" model the following year, and the leading companies in the apparel industry have also tried to reform the retail model, and Uniqlo is no exception.
At the end of 2016, UNIQLO implemented a new shopping model of "online ordering, in-store pickup" in China, and during the Spring Festival in 2018, it was upgraded to support remote pickup. This fully combines the advantages of online and offline shopping: online and online stores are not limited by time and space, and offline stores are convenient for trying on clothes and feeling the quality of the products.
In 2018, UNIQLO also launched the "Handheld UNIQLO", which provides multiple shopping portals including WeChat mini-programs, official websites, apps, and offline QR code scanning, opening up online and offline links for product information, inventory, services and purchases.
In the same year, UNIQLO also integrated its offline stores with online sales. Partnered with logistics company Daifuku Co to build a new distribution system and gradually automate the warehousing and distribution system. The new distribution system will better support the growth of online sales and provide same-day or next-day delivery to online consumers.
Because it has opened up the inventory of all stores, and it is all the same price and style, UNIQLO can now achieve a seamless connection between online and offline. Whether it is purchased online after scanning the code in the store, or picked up in the store or delivered to your home after online purchase, it can be realized.
The new digital retail model allows UNIQLO to fully meet customer needs and establish closer ties with consumers, while also winning more customer resources. With the improvement of the national economic level, UNIQLO's positioning in China has basically reached the same as Japan's, that is, a people-friendly brand with "low price and high quality".
In addition to seizing the opportunity and establishing a new digital retail model, Uniqlo's marketing in the Chinese market has also created several "miracles", such as the cross-border co-branding with Kaws a few years ago, and stores in various cities were robbed on the day of the sale. There are also short videos in the "magical" dialect that were filmed to promote light down products around the same time.
Today, although there is pressure on growth in China, China is still a market that Fast Retailing wants to hold on to and continue to cultivate. Its business strategy in China has begun to shift to more refined operations, such as optimizing resource allocation by closing down some offline stores that are not profitable, and developing new platforms such as Douyin and Xiaohongshu to achieve the integration of physical and online, e-commerce and live broadcast through high-quality UGC and PGC content.
In other overseas regions, the U.S. market has turned a profit in 2022 under the takeover of Daisuke Tsukakoshi. As a result, he became the new president of UNIQLO in 2023.
Before taking over, Daisuke Tsukakoshi, who served as the chief executive of the U.S. business, also said that he planned to grow the total number of Uniqlo stores in North America to 200 over the next four years. Soon after taking over, Daisuke Tsukakoshi took charge of all of UNIQLO's overseas business and began to increase investment in North America. As of December 2023, Uniqlo has a total of 72 stores in the United States and Canada, and according to the latest plan, Uniqlo will open more than 20 new stores by 2024. [2]
The plan is also beginning to bear fruit. According to Uniqlo's annual report for the first half of fiscal year 2024, the three major markets after the Chinese market - South Korea, Southeast Asia, India, Australia, Europe, and North America maintained a high growth rate of 16.8%, 24.5%, and 25.5%, respectively. [1]
Based on Asia and betting on North America, it is the general idea of UNIQLO to go overseas at this stage.
epilogue
Nowadays, the mainland clothing retail industry enjoys the continuous growth of the market scale, not only a number of old brands but also a new life, a large number of cutting-edge clothing brands have also emerged, such as the Internet fast fashion brand SHEIN, which has made small achievements in the European and American markets, as well as focusing on the basics, underwear/home clothing, outdoor/sunscreen clothing products subdivision track of bananas, inside and outside, bananas, etc.
However, under the market competition of multinational apparel groups such as Uniqlo, they are also facing the problem of overcapacity. If domestic clothing brands want to achieve rapid development, they are bound to go abroad and face overseas.
Whether it is the local growth history or the globalization process, UNIQLO's innovation in product development, design, production, pricing and other links, the creation of store location, design and display style, as well as the continuous optimization and upgrading of the supply chain management system and localized marketing strategy around the world, are worthy of learning and reference for brands.
Under the wave of globalization, I believe that in the next 5 years or the near future, we can also have our own "UNIQLO".
Author: He Miao
Producer: Fan Yi
Resources
[1] Uniqlo didn't sell well in China last winter, Interface News
[2] Uniqlo is more dependent on China, but the challenges are increasing
[3] The history of UNIQLO's development, from a small store to more than 100 stores, is based on constantly challenging oneself, Zhihu author Fei Fei Qi
[4] Analysis of UNIQLO's 30-year development history: creating a "basic" culture, tiger sniffing network
[5] Penning and Uniqlo: "Chinese Characteristics" of Japanese Brands, China Business Newsweek