How Long Will The Fast Fashion Downturn And UNIQLO Profit Increase?

For fast fashion, the year 2019 was bad, and the continuous closing shop tide. After NEWLOOKTOPSHOP came out of the Chinese market one after another, Forever21 and H&M were facing the situation of closing department stores.

In the past ten years, European and American fast fashion brands have entered China's second tier cities. However, since 2017, these brands have slowed down with the saturation of the market, and even once triggered a wave of closing stores.

Even in China, the growth in the number of uniformed stores increased by a double profit has slowed down. In September 2018, 11 new stores were opened, but 12 stores were shut down, and no new stores were opened in three months since December. It is expected that by the end of August, 18 stores will be closed, and there are more than 4000 stores from the 5000 stores set up in 2015.

Fast fashion downturn, UNIQLO Japan also "anxious"

The fast fashion trend of low tide was first reflected in the significant decline in the performance of the head giant company.

The world's largest fast fashion brand ZARA parent company Inditex2018 fiscal year sales increased by only 3% over the same period last year, while net profit increased by 2%, slower than the 2017 fiscal year, the worst performance in the past 5 years.

The Inditex plan will reduce the number of new outlets from 370 last year to 300 by January 2020.

The second ranked Hennes&Mauritz (H&M, Sweden) plans to close 160 stores in fiscal year 2019, 14 more than the previous fiscal year, and 335 new outlets, the lowest level in recent years.

Japan's fast selling group, the parent company of UNIQLO, has also been unable to escape. Its performance in Japan has been dismal. In the past six months, its total revenue was 491 billion 300 million yen (about 29 billion 600 million yuan), down 0.5% compared with the same period last year. Operating profit of 67 billion 700 million yen (about 4 billion 60 million yuan) decreased by 23.7% compared to the same period last year.

For the poor performance of UNIQLO in Japan in recent years, the performance conference often attributed the objective factors such as weather. In the quarter, UNIQLO's weak growth factor was attributed to warm winter. Before that, UNIQLO's performance plummeted in 2016, and the reason given was also affected by the weather.

The objective factors are understandable, and the sustained decline in performance will have to say that the market space of UNIQLO is near the ceiling.

In fact, since its birth, UNIQLO has run into a business crisis almost every five years. UNIQLO's advantage lies in the fact that UNIQLO can adjust its strategic direction in every crisis time, and every pformation is related to the market environment in Japan.

The first UNIQLO store was born in 1984, when the bonus period of the Japanese domestic market began. At that time, the Japanese consumer market began to appear "crowd" phenomenon. The rich, but not wealthy, "new poor" sought low price and high sensitivity commodities, and some consumers also showed a simple consumption tendency.

During this period, there were many brands with high cost performance, and UNIQLO, Muji and other brands were born in this period.

With the collapse of the Japanese economic bubble in 90s, the cliff clippings of domestic economic growth dropped, consumers' willingness to dress and consume Yi Suizhi weakened. UNIQLO, known for its low price, began to go on the market. In 1999, UNIQLO landed in the capital market.

However, it did not last long. The weakness of new product development such as UNIQLO after the listing began to appear. Until 2002, its revenue dropped nearly 30%, and its profit fell by nearly 50%. UNIQLO faced the first crisis since its listing.

In 2004, it was a new attempt for UNIQLO. This year, UNIQLO entered the Chinese market and established subsidiaries in the US, South Korea, China, Hongkong, France and Singapore to expand overseas markets.

Today, as Japan's aging population and low birth rate, the market of UNIQLO in Japan's domestic market is sluggish, so we have to hope that the growth momentum will remain in the blank mainland China market.

Betting on China market, opening up two or three line cities

In the past six months, most of the growth of UNIQLO came from the Asia Pacific region, especially China.

According to the results of the fast selling group of UNIQLO parent company, the first half of 2019 showed that the turnover increased by 80 billion 900 million yen, while the overseas turnover contributed 72 billion 500 million yen growth. Almost 86.6% of the growth came from overseas markets, especially the mainland China market.

Driven by the strong performance of the Chinese mainland market, sales of UNIQLO overseas business increased by 72 billion 500 million yen to 580 billion yen, up 14.3% from the same period last year, operating profit of 88 billion 400 million yen, up 9.6% over the same period last year, and the Greater China region has already been the main driving force for the growth of overseas performance.

By the end of February, there were 673 stores in mainland China, 28 stores in Hong Kong and Macao, 67 stores in Taiwan, and 768 stores in Greater China.

The first half sales and operating revenue of UNIQLO showed a two digit growth. By the end of August 2019, the sales volume of UNIQLO will reach 500 billion yen in the whole fiscal year, and its operating income will reach 85 billion yen.

As the first overseas market of UNIQLO, the Greater China region is an area where digital pformation has been carried out earlier and deeper.

The digital pformation of UNIQLO has made more localization attempts here.

In 2014, the management of the Greater China region noticed the trend of China Mobile Internet's rapid development. Both in terms of media delivery, digital content innovation, and brand and consumer communication platform construction, the trend of mobile Internet was changing.

UNIQLO started building digital marketing teams since 2014, and has been operating on media platforms such as WeChat, micro-blog, nice and other social platforms.

Through collaborate with fashion KOL, co authorize with Disney, and collaborate with designer, this series of joint marketing has pformed fans of different dimensions into UNIQLO consumers.

UNIQLO also made use of the fans effect to further expand the channels of communication for the brand. When fans saw the information pmitted on KOL, they purchased products, and spontaneously took two UGC share information and fashion dress, so that the marketing effect was further improved. After nearly 5 years of operation, the number of fans in Univerity on the digital platform has exceeded 100 million.

In addition, the development of e-commerce in UNIQLO China has been rapid. The ratio of electricity to electricity has reached 20%, which can be said to be the initial achievement of the pformation of digital retailing in UNIQLO.

In 2017, Liu Jing, chairman of fast selling group (UNIQLO parent company), put forward a "bright plan" at the shareholders' meeting, announcing the pformation of UNIQLO to "digital consumer retail companies", that is, importing digitalization from design, production, manufacture, sale to full staff through cooperation with technology companies.

The Greater China region, represented by China, is the largest overseas market of UNIQLO. Since last year, Tmall stores on UNIQLO online supported online ordering, offline pickup, and opened up inventory of goods online and offline, which brought 30% growth to the e-commerce business of UNIQLO, which accounted for more than 30% of e-commerce sales in the fiscal year of August 2021.

However, faced with the slowdown in China's current economic growth, many analysts questioned the strategy of UNIQLO's bet on the Chinese market.

President Liu Wei, chairman of fast marketing group, said that the speed of clothing consumption in China will not slow down. China has 50 trillion yen demand for clothing every year, and we only reach 1000 stores. This is a large market with a population of 1 billion 300 million.

"He also said that he would accelerate the opening of stores in the two or three tier cities in the future, and repeatedly stressed:" China's clothing market will never slow down. "

For the next plan to sink to the two or three tier city, UNIQLO Greater China CEO Pan Ning gave the answer, "is currently advancing.

"In Pan Ning's view, there is still much room for growth for UNIQLO in China's two or three tier cities," he said. "Sales of stores in Shanghai and southwest Central City stores are almost equal." now, when large scale business center developers invites brands to enter, they will first consider UNIQLO.

He said, "UNIQLO started to focus on the business of electronic commerce. We constantly try new things, and use O2O to combine physical stores with virtual stores, and take measures to link them to attract customers to increase sales.

In 2018, double 11, UNIQLO broke through 100 million yuan in 35 seconds (about 1 billion 700 million yen), UNIQLO's clothing retail sales ranked first in the country, sales in Tmall shops ranked the top five, and UNIQLO is confident of future growth potential.