"Do you mind buying it?" This was the question asked by a well-dressed Japanese youth in his 20s when he was interviewed by a TV station in the street in 2004.
To this question, the young man replied: "If it is underwear or socks, I don't mind wearing Uniqlo." In other words, he would never consider clothes worn outside. At that time, Uniqlo gave the impression that it was cheap, earthy, tasteless and "casual".
But 15 years later, all this has changed completely. Uniqlo has developed rapidly in the global market, especially in China. With Uniqlo's parent company Fast Retailing Group announcing record mid-term results for fiscal year 2019, investors have completely forgotten the downturn of Japanese fast fashion giant Uniqlo.
Overseas markets become the main force
Recently, Fast Retailing Group (parent company of Uniqlo) released its performance report for the first half of fiscal year 2019 as of February 28. Judging from the data published in the report, its first half comprehensive income, operating profit, profit before income tax and profit attributable to the owners of the parent company all set new records over the years.
The report shows that in the first half of 2019, the comprehensive sales of Fast Retailing Group increased by 6.8% to 1.27 trillion yen (76.3 billion RMB), with a gross profit rate of 47.9%, operating profit increased by 1.4% to 172.9 billion yen, and net profit increased by nearly double digits, reaching a record high of 9.5% to 114 billion yen (6.8 billion RMB).
It is worth noting that Uniqlo's overseas sales revenue exceeds that of its home country. During the reporting period, Uniqlo's international business recorded a 14.3% growth rate from 507.456 billion yen to 580.06 billion yen, which was the main driving force for the group's revenue growth. Operating profit increased by 9.6%, from 80.763 billion yen to 88.486 billion yen, with a 15.3% operating profit margin higher than Uniqlo in Japan for the first time in history.
Uniqlo's operating profit margin in the first half of the year was 13.8%, down 420 basis points year on year. Operating profit plunged 23.7% to 67.741 billion yen, compared with 88.729 billion yen in the same period of fiscal year 2018. Fast Retailing also lowered Uniqlo's full-year performance target for fiscal year 2019.
The Greater China market recorded double-digit revenue growth in the first half of the year, with mainland China's revenue and profit both registering about 20% growth, while South Korea, the second largest international market in East Asia, also saw both revenue and profit growth. The Southeast Asian and Oceania markets that Uniqlo has been focusing on in recent years have seen rapid growth in revenue and profit driven by soaring same-store sales. U.S. Uniqlo turned a historic deficit into a profit in the first half of the year, while European Uniqlo performed steadily.
Both the first quarter results and the released interim results show that Fast Retailing Group's unstable profitability in the Japanese market is no longer the key factor affecting the company's final performance. After the international business profits surpassed the domestic level for the first time in the third quarter of fiscal year 2018, China has actually become the first decisive factor for Asia's largest apparel retailer.
Liu Jingzheng, founder and CEO of Uniqlo, said at the mid-term performance meeting that sales of Fast Retailing in China would not decline and that the company could achieve the set target of 1,000 stores in mainland China in fiscal year 2021. By the end of March this year, Uniqlo had 767 stores operating in China, almost the same as 825 stores operating in Japan. The number of stores in other overseas markets reached 1311.
In addition, Uniqlo will also open more stores in Asia and Oceania other than China and South Korea. It plans to increase the number of stores in these regions to 2.5 times that in 2017, reaching 400 by fiscal year 2022.
After so many years of development, today's Uniqlo is not what it used to be. Not only has it opened stores in many countries around the world, but also Liu Jingzheng's personal wealth has returned to the top for the first time since 2016.
This year, Liu Jingzheng defeated Masayoshi Son with a fortune of 24.9 billion US dollars to become the richest man in Japan. And according to data, Liu Jingzheng's wealth has increased by 5.6 billion US dollars in the past year.
The focus is still on Asia.
As the third largest clothing retailer in the world, Uniqlo aims to surpass H&M and become the world champion. Liu Jingzheng hopes to turn his company into the world's largest clothing retailer by becoming Asia's first private brand clothing store.
However, thanks to Liu Jingzheng's emphasis on basic funds and innovative technologies, Uniqlo still focuses on the Asian market. "Asia today is the engine of business growth," Liu Jingzheng said. Millions of consumers in Asia are entering the middle class. This year, Uniqlo will open its first branch in India and is considering expanding its market to Vietnam and other countries (Uniqlo already has online stores in Indonesia, Singapore and Thailand).
The Economist pointed out that China is a solid foothold for Uniqlo in Asia, with Chinese stores accounting for more than half of its overseas stores. Especially in 2018, China's revenue accounted for about 70% of its total international revenue. Many people are surprised by this. It is not easy to stand up in China. At least in the clothing industry, Chinese consumers tend to advocate brands.
However, even some people who are obsessed with brands occasionally need simple matching in order to dress harmoniously. Chinese consumers are pursuing quality. Uniqlo's cost performance has become its greatest advantage when more and more fast fashion brands are criticized for their quality problems. In particular, some uniqlo special fabrics, such as Heattech warm clothing series and light down jackets.
In addition, more importantly, analysts pointed out that Uniqlo has a group of Chinese management who have received education in Japan. They are very good at business and are proficient in the different business cultures of the two countries.
Although Uniqlo has been successful in the Chinese market, The Economist believes that markets in other Asian countries may be more difficult to capture because the warm climate in some countries means Uniqlo cannot rely on winter products as its main sales force.
Qi Teng Saito, a fashion retail analyst who has written a book comparing Uniqlo with Zara, said that Uniqlo must change its product plan, but it is risky.
Liu Jingzheng said that the anti-globalization wave is the biggest risk Uniqlo faces in its Asian expansion plan. The free flow of goods and people will be restricted, thus interfering with the supply chain and labor force. But he believes that he can lead Uniqlo to carry out the required changes. He also talked about plans to expand the line of shoes and dresses-Uniqlo currently has only a small number of such products.
The Economist said that Uniqlo's performance in Europe is not so bright at present. According to Qi Teng Longhao, most of the reasons are attributed to the existence of the same molding enterprise model, such as Gaipu (). However, Uniqlo still hasn't given up looking for a way out in the big cities along the east and west coasts of the United States, and has made a lot of efforts in promoting its brand concept. Its carefully planned cooperation with the spokesmen such as tennis player Roger Federer and designers such as Jil Sander has achieved initial results.
In order to achieve the goal of "the world's first retail clothing manufacturer" more quickly, Fast Retailing Group said that it would continue to expand its physical store network and consolidate Uniqlo's position as a major brand in the world by opening global flagship stores and large-scale stores in major cities. The turnaround of Uniqlo in the United States in the first half of the fiscal year undoubtedly injected a stimulant into the group's globalization.
What Does Uniqlo Win
Fortune magazine survey shows that in the United States, the average life span of small and medium-sized enterprises is less than 7 years, while that of large enterprises is less than 40 years. However, Uniqlo was established as early as 1984. After 35 years, Uniqlo can still maintain such achievements. What does it depend on?
The Economist's article reported that Liu Jingzheng, founder and CEO of Uniqlo, when asked what the vision of Uniqlo was, took down from the bookshelf the autumn/winter fashion catalogue published by the British fashion retail giant in 1987. He said that all the clothes in the catalogue are classic and it is too late now. While Spain's INDITEX (under the Zara brand) and Switzerland's H&M are blindly following the trend, Uniqlo has consistently adhered to the basic model that spans time.
As early as 2005, Uniqlo also experienced a sales crisis. Liu Jingzheng took advantage of the situation to adjust the brand positioning, which runs counter to the direction of general fast-selling clothing brands to strengthen fast fashion. Uniqlo began to pay more attention to the functionality of clothing, taking selling "clothing everyone needs" as its purpose, and embarked on a basic, practical and personalized development path.
Besides being practical, cost performance is another trump card of Uniqlo in the fast fashion circle. Uniqlo's success in this area is attributed not only to its being a clothing company, but also to its being a "technology" company specializing in improving clothing production technology. Uniqlo has always been rich in fabrics, and there are also many exclusively developed materials, such as Heattech heat series and AIRism sweat absorption and quick drying series.
Uniqlo has not forgotten to use fashion to attract the attention of consumers while giving consideration to real wear and cost performance. Some people in the industry pointed out that Zara was the "Fast Fashion Textbook" in the first five years. Now the name seems to have shifted to Uniqlo.
While specializing in high technology, Uniqlo accelerated its invasion of the trendy market by seizing a series of influential players. Every year, its joint series with different designers are very popular. From the joint cooperation with Christophe Lemaire, former design director of Hermès, to the current Uniqlo U series, to the cooperation series with J.W Anderson, creative director of Loewe, there is always a rush in line. The move captures exactly the psychology of consumers who can buy products designed by well-known designers with little money.
This strategy was interpreted by an article on BoF Fashion Business Review website. The article introduces that this marketing method is called "Premium Mediocre", which was originally proposed by commercial writer and consultant Venkatesh Rao. "High quality and mediocrity" refers to spreading the halo of luxury goods like bread flour onto ordinary commodities in some simple ways to make consumers think they are consuming luxury goods. But in fact, they only consume ordinary goods and have nothing to do with luxury goods.
The author of the article introduced that the marketing method of "high quality and mediocrity" is not new in the fashion industry, but its popularity nowadays is surprising. The reason why "high quality and mediocrity" is so popular is, first of all, that people now prefer consumption experience to commodities. Second is the democratization of fashion in the era of social media. Many designers and brands hope that everyone can enjoy their own designs. Third, the concept of "being kind to yourself" is being accepted and practiced by more and more people, and the long-term practice of saving money to buy something is out of date.
Fast Retailing Group released its first half of fiscal year 2019 performance report as of February 28. Judging from the data published in the report, its first half comprehensive income, operating profit, profit before income tax and profit attributable to the owners of the parent company all set new records over the years.
Inschina Co. Ltd is the largest business service provider with over 14 years’ experience in China since 2005. We has been specializing in enterprise services, including company set-up, china trademark registration, copyright registration china, patent application process in China, translation services, serviced offices renting, and other kinds of business services. We invite you to find out more information about the individual services offered by Inschina via firstname.lastname@example.org or online LiveChat directly.