H&M, GAP And Other Brands Are In The Doldrums.

As Asia's largest apparel retailer,

Chain giant UNIQLO parent Xunmei group 2016 new financial year start bad, the company net profit fell sharply 16.9% compared to the same period.

Among them, Japanese domestic performance and overseas market performance based on Greater China were not up to standard, and operating profit decreased by 12.4% and 14.2% respectively.

Affected by this, XXX group also lowered its annual profit and revenue forecast for the 2016 fiscal year.

For the reason for the collapse of profits, UNIQLO said that the year-end cold clothing accounted for a larger proportion of the product portfolio, resulting in the face of the winter climate anomalies and warmer times can not respond in a timely manner, making the November and December sales performance higher in poor performance, and the expansion of sales promotion activities in January and February, the gross margin fell by 3.5 percentage points.

Coincidentally, the world's second largest

H&M so expected that the first quarter net profit of SEK 2 billion 550 million, down 30% compared to the same period.

H&M also pointed out that the warm weather led to a large backlog of winter clothing in H&M. Excessive discount and inventory clearance led to a sharp fall of 320 basis points to 55% in the first quarter and a 29.6% decline in pre tax profits as a result of increased procurement costs.

Worse is GAP.

In March 15th, Gap group released 2015 fourth quarter earnings, net profit of $214 million, down 33% compared with the same period in 2014, worse than Wall Street analysts had expected to lower Gap earnings forecasts.

Among them, GAP group's biggest downfall was Banana Republic, sales fell 14%, Old Navy fell 8%, Gap brand also had a 3% decline.

UNIQLO, H&M, GAP profits unexpectedly slump, does it mean that the development of fast fashion brands has a critical point?

Half flame and half seawater

UNIQLO has maintained a high speed of development in the 14 years when it entered China. According to the 2014 financial year's earnings report (as at the end of August 2014), sales in Greater China (including Mainland China, Hongkong and Taiwan) for the first time exceeded 200 billion yen (11 billion 140 million yuan) mark, an increase of 66.5% over the same period last year. The performance data of the Greater China region, known as the engine of growth, greatly enhanced UNIQLO's confidence.

But the expansion of UNIQLO in the US and Europe has been frustrated, and the biggest market in Japan, great China and South Korea has been hit hard by the global warming winter.

Originally trying to dominate the world through overseas expansion, except for the Asian market, its plan for 2020 basically failed.

The stock market and the economy are both in the doldrums.

H&M group said the first quarter profit slump was mainly caused by increased purchasing costs and write downs.

Under the strong dollar, the cost of purchasing dollars based on the dollar makes the group's profits under pressure.

As the fifth largest market of H&M group, with the slowdown of China's economy, H&M Group recorded only 7.1% of its revenue in the first quarter of the Chinese market (up to 41% in the 2015 fiscal year). The chief executive of the H&M group, Karl-Johan Persson, has been worried that the growth rate of China's market has slowed from the previous 30+% to 10+%. Now it may be necessary to worry more about the slowing down of this digit.

Fast fashion slow response

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GAP is facing fierce competition from fast fashion brands such as ZARA (Theme Reading), H&M, UNIQLO and so on. In terms of speed up in the supply chain, GAP falls behind the sister brand, which makes it unable to react quickly to the hot or cold fashion trend, nor can it quickly cope with the competition's action on the hands.

In addition, GAP's clothing design is not good enough, and its brand appeal is not as good as before.

Fast fashion or critical point

Morgan Stanley released a report in mid March that although H&M is expanding at more than 400 stores a year, increasing the number of stores is the most direct way for H&M to increase sales.

But by 2020, the group's operating profit will still shrink by 40%.

The bank points out that H&M group is at the critical point of development, that is, to keep stores and sales grow and profits decline.

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In fact, the fast fashion brand has experienced a rapid expansion in the first few years, and its freshness in the market has gradually weakened.

With the pformation and follow up of domestic brands and the entry of foreign brands, fast fashion has been monopolized from previous big brands to countless brands nowadays. When the market capacity is limited, the increase of brand means the reduction of the share of the unit.

In order to deal with the critical point, fast fashion brand giants have adopted various tricks to lengthen the brand growth period.

Sinking channels, fast fashion brand giants often only lock first tier cities when they first enter China, but as the domestic consumer market environment and consumption level change, fast fashion brand giants are also beginning to target two or three tier cities, and because the price of "category of people" is always a good market reaction.

Rapid expansion

The world's largest clothing retailer, Zara's parent company Inditex, has 7013 stores in 88 markets around the world, while H&M has opened 12 stores in the Chinese market in the first quarter, and is opening 4000th stores in Mall of India, New Delhi, India. The rapid expansion of the channel sinking strategy has become the most direct means to increase sales.

Brand sniper

In the first quarter of UNIQLO suffered a heavy setback, XXX group's parity fashion brand GU has increased considerably, and sales have achieved double-digit growth, becoming the second largest brand of fast selling group.

H&M has more brand names, Monki and Weekday and Cheap Monday are sister brands, and belong to H&M, which is only its fast fashion brand.

ZARA's owner Inditex has 8 clothing retail brands, including ZARA, Pull and Bear, Kiddy 's Class, Massimo Dutti, Massimo, and so on. This multi brand strategy effectively decomposes the risks to the whole group when a single brand is in crisis.

Joint cooperation

In response to the challenge, uniqo has launched more cross-border cooperation, such as the introduction of a series of former Hermes designer cooperation, to attract more attention to fashion customers.

Most of the cooperation with the big designer is H&M, such as the Alexander Wang series robbed mad, and the recent cooperation with Balmain has also been exploded.

Although it is fast fashion brand.

More than ZRAR300 designers flew around the world's fashion shows and copied the latest styles to stores at an incredible speed. Although lawsuits continue, their target consumers are not plagiarized, but they only recognize ZARA.

O2O development

The fast fashion brand's electricity supplier war also officially started last year.

Fast fashion brands have set up one or more e-commerce sales platforms, adding a total of 11 online markets to 34 in HM2016.

UNIQLO is offering a series of exclusive outlets only in online stores and designated stores in Beijing, Shanghai and Guangzhou.

The fast fashion brand business has enhanced the data sharing of online and offline stores. Online data can be the basis for offline decision making, including location selection, product structure adjustment, promotional activities, and so on, so as to maximize brand value.

Some people say that fast fashion brands are carrying on their own lives, but when they change things with fashion, they may not die.

Today, regardless of the critical point of the development of any category, these are irrelevant to consumers, because this is a consumer oriented market, and consumers need to do nothing but to watch the fire and catch the profits.