UNIQLO Brilliance And Gap Fade, Fast Fashion Market Really Become Difficult To Do?

　 Industry view

China's fast fashion brands, and even the entire clothing consumer industry, are entering a new stage, which is a new opportunity for many brands. After several years of barbaric development of low base, China's clothing consumption industry has also reached a new stage of differentiated development. Since 2015, the appearance of overseas fast fashion clothing brands in China reflects the differentiation of fast fashion clothing brands in China, and also confirms that China's fast fashion clothing consumption industry has entered a new stage. The transformation of the stage may be a crisis for some brands, but it is also an important opportunity for many other brands. China's fast fashion market has entered a new stage of more refined differentiation and development. In order to seize new opportunities, we may not simply use the past experience for extensive development, but need to better understand the local consumer culture, and integrate more deeply into China's local market from the aspects of products, channels and marketing.

Four fast fashion brands in China: it's not difficult, it's just differentiation - UNIQLO is booming, Zara is regular, gap and H & M are obviously resistant. Gap's business in China has met with obvious resistance. Zara's development is regular, but it is not as rapid as before. UNIQLO's business in China continues to advance rapidly. UNIQLO's strength and gap's desolation are the epitome of the new era of China's fast fashion industry differentiation. Obviously, UNIQLO has benefited from the differentiation of China's fast fashion industry. UNIQLO understands the Chinese market better and is more grounded. It has won the share of the Chinese market in the way of high turnover, high exposure and high cost performance. However, many international fast fashion brands represented by gap do not seem to keep up with the train of change. These brands do not understand the Chinese market very well and operate with past experience. When the development period of "flooding" is over, they will encounter great pressure in adapting to the new differentiated market.

The barbaric development stage of China's fast fashion clothing has passed. The new stage of differentiation development breeds opportunities. It is very important to understand the local commercial culture, and local brands have natural advantages. It is not "China's fast fashion clothing market is not easy to do", but in China, has passed the stage of barbaric development, to the new stage of differentiation development, to better understand and better adapt to China's consumer business culture fast fashion clothing brands, in order to better develop for a long time. UNIQLO's rapid development in recent years has set a positive example for all clothing brands that want to develop in China. If you want to seize the new stage of China's fast fashion clothing development, it must be more in line with China's local business culture. In this regard, Chinese local fast fashion brands have natural advantages in terms of their understanding of business culture, brand grounding, and channel advantages. The development of fast fashion clothing has entered a new stage, which is also an opportunity for Chinese local fast fashion brands.

Investment suggestion: the new stage of China's fast fashion differentiation is an opportunity for uniqlos, but also an opportunity for China's national brands. The success of uniqlos clearly reflects the great opportunities in the new differentiation era of China's fast fashion industry. UNIQLO in China, compared with other international fast fashion, the most important advantage is that it has a better understanding of Chinese consumer culture, and can occupy advantages in channels, products, marketing and other aspects. This is the advantage of UNIQLO and the opportunity of China's national brand. China national brand has a better understanding of China's local consumption culture, and its channel layout goes deep into Chinese cities at all levels, and has a natural high degree of acceptance of e-commerce. Since 2017, China's fast fashion clothing industry has entered a new stage of differentiation, which may bring many new opportunities for the rise of China's national brand in the future.

Recommended attention: Li Ning (02331), Anta sports (02020), bosden (03998), Senma clothing and other national brand clothing enterprises, Antarctic e-commerce and other Chinese e-commerce brand enterprises.

Risk tips: consumption growth slows down, market competition intensifies, and channel structure reform foreword

　　 preface

China's fast fashion brands, and even the entire clothing consumer industry, are entering a new stage, which is an opportunity for many brands. Recently, the famous fast fashion clothing brand Forever 21 has decided to withdraw from the Chinese market, which is deplorable. After several years of barbaric development of low base, China's clothing consumption industry has also reached a new stage of differentiated development. Since 2015, the appearance of overseas fast fashion clothing brands in China reflects the differentiation of fast fashion clothing brands in China, and also confirms that China's fast fashion clothing consumption industry has entered a new stage. The transformation of the stage may be a crisis for some brands, but it is also an important opportunity for many other brands.

Four fast fashion brands in China: UNIQLO is booming, Zara is regular, gap and H & M resistance is obvious. This paper analyzes the development of four fast fashion brands Zara, gap, H & M and UNIQLO in China in recent years. It can be seen that gap's development in China has met with obvious resistance. Zara and H & M develop in a regular manner, but they are not as fast as before. UNIQLO's business in China continues to advance rapidly.

The barbaric development stage of China's fast fashion clothing has passed. The new stage of differentiation development breeds opportunities. It is very important to understand the local commercial culture, and local brands have natural advantages. It is not "China's fast fashion clothing market is not easy to do", but in China, the clothing industry has passed the stage of barbaric development, to the new stage of differentiated development, fast fashion clothing brands that better understand and adapt to China's consumer business culture can develop more long and better. UNIQLO's rapid development in recent years has set a positive example for all clothing brands that want to develop in China. If you want to seize the new stage of China's fast fashion clothing development, it must be more in line with China's local business culture. In this respect, Chinese local fast fashion brands have natural advantages in terms of understanding of business culture, brand grounding and channel advantages. Fast fashion clothing development has entered a new stage, which is also an opportunity for Chinese local fast fashion brands.

All great consumer goods companies must be companies that have learned a certain business culture. If we talk about the most important particularity of business culture in China, we think it is four points: ① the huge demand supported by the huge population; ② the extremely complex urban hierarchy and demand hierarchy; ③ the most popular e-commerce culture in the world; ④ it is still a developing country at this stage. Understanding and adapting to these characteristics of business culture is the fundamental characteristic of a great consumer goods company.

① the country with the largest population has sufficient demand. China is the most populous country in the world, with a population of more than 1.3 billion. The huge population ensures the consumption demand base of China. China's consumer demand is sufficient. Numerous giants, no matter overseas P & G, Coca Cola and other companies, domestic Gree and Maotai, have proved that the Chinese market can achieve great success. The fundamental problem lies in how to tap these consumer demands.

(2) complex urban hierarchy. There are 34 provincial-level administrative regions, 334 prefecture level administrative regions, 2851 county-level administrative regions and 39888 township level administrative regions in China's vast land. This is also a headache for many international brands that have entered China for a long time. In terms of distribution, inventory management, personnel management, and in low-level cities, the total strength is beyond our grasp.

(3) the most popular e-commerce culture in the world. Many people may not realize that China's e-commerce industry is now No.1 in the world. By the end of 2018, China's overall e-commerce penetration rate was 18.4%, while that of the United States was only 8% in 2016, and it is expected to be less than 10% by the end of 2018.

China is still a developing country. Although the living standard of our people has been greatly improved in recent years, we must admit that we are still a developing country. The monthly disposable income of residents in 75% of the areas did not exceed 2500 yuan. In 2018, the disposable income of the national people is 2352 yuan, which can be simplified as: the group with monthly income of more than 2500 yuan has already belonged to the group with higher income in China.

　　1. China's market has always been the strategic place for the major clothing brands

There has always been a huge number of brands in China. In 2018, the retail sales of clothing of Enterprises above the quota will be about 100 billion, while if other knitted textiles are included in the calculation, the retail sales of Enterprises above the quota will be about 1400 billion. (Enterprises above the quota refer to those whose sales volume is greater than a certain amount. The retail industry requires 5 million employees and more than 60 employees). With such a huge demand, China has become the strategic place for the major international fast fashion brands (in the following, the data are all the data of the parent group, for example, UNIQLO adopts the data of FMCG, and Zara adopts the data of INDITEX).

The proportion of China (Asia) business of the four fast fashion brands has experienced a significant increase stage. Since 2005, international fast fashion brands have been developing rapidly in China. The proportion of revenue of the four fast fashion brands in China has shown a rapid growth (some companies disclose that the caliber is the revenue of Asian business, and the core of Asian business is still the business in China. The annual average financial year used in this paper refers to FY fiscal year).

The proportion of gap's Asian business increased from 3.6% in 2005 to 10.0% in 2017; INDITEX (Zara) accounted for 23.9% of Asia's revenue, up from 6.7% in 2005; The proportion of H & M's revenue in China increased from 0.6% in 2007 to 5.5% in 2017; UNIQLO's share of China's revenue increased from 9.9% in 2014 to 14.0% in 2017 and 16.3% in 2018, reaching a new high.

　　2. How are the four fast fashion brands doing in China—— UNIQLO is making rapid progress, Zara and H & M are growing steadily in a regular manner, and gap is facing bottlenecks

China's clothing market has slowed down, but it is still an attractive market. Based on the total retail sales of clothing (Enterprises above Designated Size), China's clothing industry experienced a wave of rapid growth from 2006 to 2012. During this period, the overall growth rate of the clothing industry was 20% +. During this period, clothing brands of all countries entered the Chinese market and shared the stage of rapid growth. However, after 2015, the overall growth rate tended to be flat at 6% - 8%, which is a normal development stage evolution. After the rapid growth stage evolves into the stable growth stage, it is the time to test the real operation ability of each brand. However, it should be noted that at this stage, the overall growth rate of 6% - 8% in China's clothing market is still an attractive market in the world.

In terms of overall volume, the four fast fashion groups are of the same magnitude at present. As can be seen from the figure below, the sales of the four fast fashion groups can be said to be of the same volume and magnitude. Calculated in US dollars (there may be a certain exchange rate error), the revenue of gap is about 15.9 billion US dollars, H & M revenue is about 24.4 billion US dollars, INDITEX (Zara) revenue is about 29 billion US dollars, and fast sale (UNIQLO) revenue is about 19.3 billion US dollars. Basically, it can be considered as an enterprise of the same volume level.

From the perspective of development trend, UNIQLO and Zara (INDITEX) are stronger. Although the total volume, the four fast fashion groups belong to the same volume, but the development trend is not the same. As can be seen from the figure below, the development trend of UNIQLO (fast sale) and Zara is stronger, the growth of H & M is relatively slow, and gap has not seen any growth in the past 15 years. The rapid development of UNIQLO and Zara is inseparable from its China strategy.

The strong development of UNIQLO and Zara is largely attributed to the success of China's strategy. Although the sales volume of the four groups is not the same as the global trend of fast development. As can be seen from the figure below, the development trend of UNIQLO (fast sale) and Zara is stronger, the growth of H & M is relatively slow, and gap has not seen any growth in the past 15 years. The rapid development of UNIQLO and Zara is inseparable from its China strategy. In terms of sales volume in Asia (China), by 2018, the sales volume of gap Asia and H & M China will be about 1.2 billion US dollars, while the sales volume of intitex (Zara) Asia will be 6.7 billion US dollars, and the sales volume of fast track (UNIQLO) China will be more than 3 billion US dollars. In fact, Zara and UNIQLO are an order of magnitude ahead of gap and H & M in China (Asia) business. The strong development of UNIQLO and Zara in recent years is largely attributed to the success of their China strategy. The rapid development in China makes the business of UNIQLO and Zara group reflect strong growth.

The business growth of four fast fashion brands in China (Asia) is now differentiated - UNIQLO is booming, Zara and H & M are in order, gap is facing bottlenecks. In recent years, the business operation of the four fast fashion brands in China (Asia) has shown great differentiation. Since 2014, the compound growth rate of H & M in China is 6.8% (the compound growth rate of global total sales in the same period is - 0.3%), and the compound growth rate of INDITEX (Zara) in Asia is 10.3% (the compound growth rate of global total sales in the same period is 6.8%), The compound growth rate of fast sale (UNIQLO) in China was 23.7% (the compound growth rate of global total sales in the same period was 9.1%) and that of gap Asia was - 2.6% (the compound growth rate of global total sales in the same period was 9.1%). Generally speaking, China (Asia) business has been growing rapidly for H & M, Zara and UNIQLO in the past five years, but gap's Asian business has not been able to grow rapidly.

By fy2018, the China (Asia) business of the four fast fashion brands further showed differentiation. Fast retailing (UNIQLO) China grew by 33.5%, making rapid progress all the way. INDITEX (Zara) Asia grew by 9.2%, which was still a rapid growth in accordance with the rules, while gap showed negative growth, of which h&m China business grew by -3.0% and gap Asia business grew by -18.2%. From the perspective of Asian business growth, gap has actually encountered a development bottleneck. H & M has a large degree of shock, and the overall growth rate has also narrowed.

2.1 fast retailing (UNIQLO): the rapid development of China's business is an important driving force for its overall growth

Fast retailing (UNIQLO) China - with China business as an important driving force for its growth. Since 2014, fast retailing group (UNIQLO) disclosed the relevant information of China business. Since 2014, the business of fast retailing (UNIQLO) in China has made great progress. Since 2014, the compound growth of its business in China has reached 23.7%, which is an important engine driving the whole global sales, while the growth rate of global sales in the same period is 9.1%.

Obviously, the Chinese business is an important driving force for the growth of the whole fast retailing (UNIQLO) business. The proportion of its Chinese business also increased from 9.9% in fy2014 to 16.3% in 2018, especially in fy18, when the proportion of other fast fashion brands in Asia (China) declined, UNIQLO's China business was still booming. However, we can see that from fy2014 to fy2018, UNIQLO's China business accounted for only 15% of the growth rate (fy2018). It can be said that China business is one of the most important parts of UNIQLO's overall growth strategy. In recent years, UNIQLO's China business has also shown a very rapid growth, Significantly faster than the rest of the world.

UNIQLO's strong growth is largely due to its strong China business, which has grown stronger in the past two years. In UNIQLO, there is no sign that "fast fashion is becoming more and more difficult in China".

2.2 INDITEX (Zara): Asia's business is in line with the overall business growth

INDITEX (Zara) - moderate, stable growth in Asia. Asia business is an important driving force for Zara's development. From 2006 to 2019, INDITEX (Zara) Asia business developed rapidly. In 2006-2019, INDITEX Asia's compound growth rate was 20.6%, while during this period, INDITEX's total revenue compound growth rate was 10.6%. Asian business is the spear of INDITEX (ZARA) attack. Its total revenue in Asia increased by 5.7% in 2013.

In recent years, the growth rate of INDITEX (Zara) business in Asia is gradually keeping pace with that of global business. Since 2014, the Asian business of INDITEX has kept relatively synchronous with the global sales growth in the same period. The growth rate of Asia business and total revenue in fy2019 is 6%, and the proportion of Asian business in recent three years has been maintained at about 23%, which matches the growth contribution. The Asian business of fy2019 contributes 23.2% of the growth rate with 23.2% of the total.

In general, it can be said that the Asian business has been an important driving force for the rapid growth of INDITEX (Zara) in 2006-2016. During this period, the growth rate of its Asian business was significantly faster than that of other regions in the world, and the proportion of Asia business of the company was also significantly and rapidly increased to 20% +. However, since 2017, the growth rate of INDITEX (Zara) Asia business has been consistent with its global overall growth rate, and the Asian business still has a rapid growth, but this is based on the rapid growth of global business, and the Asian business does not show excessive growth. Since 2017, Zara is still a strong brand all over the world, and all of them are growing at a fast speed. However, its Asian business has not shown any special strength.

2.3 gap: from "lifesaving straw" to "burden", Asia's development is now a bottleneck, showing significant negative growth

Gap -- the global business has stagnated for more than ten years, and the Asian business was once a bright spot. From 2006 to 2011, when the average growth rate of total revenue was negative, the growth rate of gap Asia business maintained at about 10%. It can be said that the Asian business pulled gap in the quagmire and kept it growing to a certain extent. From FY2006 to fy2016, the composite growth rate of gap's Asian business was 9.4%, while that of gap's total revenue was - 0.1% in the same period. The proportion of Asian business increased from 3.9% in 2006 to 9.6% in 2016. However, generally speaking, the proportion of Asian business in the whole gap business system is still small.

Since 2017, gap's Asian business development has become an obvious bottleneck. Since 2017, the growth rate of gap's total revenue has rebounded, but its growth rate in Asia has declined significantly, even negative growth. The growth rate of Asia business in fy2018 is - 18.2%, far lower than the growth rate of total revenue by 2.2%, which is a negative contribution to the growth of gap's whole group. In the latest fiscal year, the growth rate of gap Asia business in fy2019was -2.4%, while the growth rate of total revenue was 4.6%. After reaching the highest 10% in F017, the proportion of gap Asia business fell to 7.4% in fy2019.

In fact, the overall growth of gap has stagnated since 2006. The total global revenue of gap in 2006 was 16 billion US dollars, while that in 2018 was 15.9 billion US dollars. It can be said that the growth of gap was stagnant in recent years, not in recent years.

But the role of gap's Asian business is changing from a lifesaver to a burden. From 2006 to 2016, the total composite growth rate of gap was negative, while the compound growth rate of Asian business was nearly 10%. That is to say, during the decade, gap's business outside Asia showed a more headache negative growth. During this period, the Asian business can be said to be the "life-saving straw" of gap, pulling gap, so that its overall business development remains flat. After 2017, gap's Asian business showed obvious problems. In 2018, gap's business growth was - 18.2%, reflecting a very obvious negative growth. The Asian business began to gradually become a "burden" from gap's "life-saving straw". Gap is often regarded as an argument that "it is not easy to do it in China soon". However, in fact, it is not that fast fashion is not difficult to do, but the business of gap itself has stagnated for more than ten years. Previously, Asian business can be used as a lifesaver to pull gap. In the past two years, gap's Asian business has stagnated, even negative growth, just like the global business. This may not be the problem of China's fast fashion environment, but the gap itself, With the slowdown of Asian business, gap's future shows a more difficult situation.

2.4 H & M: China business has never been the core of its business. The overall fluctuation is large, and the next few years will be the key

H & M: China's business has experienced rapid growth, but it is still not its core business. From 2007 to 2013, H & M's global business showed rapid growth. From 2007 to 2013, the compound growth performance of H & M China business was strong, and the compound growth rate reached an astonishing 54.5%. In the same period, the overall growth rate of H & M business is also very fast. The proportion of China's business increased from 0.6% in 2007 to 4.6% in 2013 and only 5.1% in FY 2018. China's business accounts for only about 5%, which is not the core business of H & M.

Since 2014, the growth rate of H & M's total revenue and China business revenue has been declining. Since 2014, the global business development of H & M has experienced a decline in growth. From fy2014 to fy2018, the compound growth rate of H & M global business dropped to 2.1%, and during this period, the compound growth rate of its Chinese business also dropped to 6.8%. However, in general, in recent years, China business has made significant positive and excessive contribution to the performance of H & M. H & M China business, with less than 5% of its share, contributed 34.8% growth in fy2012, 11.5% in fy2013 and 33.7% in fy2017.

On the other hand, the growth rate of H & M business is not very stable. In recent years, both the total revenue and the revenue of China's business have great growth fluctuations. It can be seen from the figure that the growth rate of both H & M's total revenue and its Chinese business has fluctuated greatly, but the growth rate of total revenue has slowed down since 2014, which is a relatively certain trend.

H & M's global business has slowed down for several years, and fy2018's China business is now experiencing negative growth, and fy2019 is critical to H & M China. In fy2018, H & M's China business grew by - 3.0%, showing negative growth for the first time, which is also regarded as the argument that "China's fast fashion has become difficult to do". But in fact, it may not be the case. First, the overall business of h&m has slowed down significantly since 2015, not only its China business; Second, the growth rate of H & M's business shows great volatility. The growth rate of its Chinese business in fy2015 is 13.6%, that of fy2016 is 0.9%, that of fy2017 is 16.8%, and that of fy2018 is - 3.0%. The growth rate is not stable. Therefore, in general, we think that the negative growth rate of H & M China business in 2018fy does not reflect that "China's fast fashion market is not easy to do", but fy2019 is really critical to H & M China.

　　3. Full analysis of store operation strategy -- the store operation strategy of the four fast fashion groups in China reflects their operation

In terms of the number of stores in the world, INDITEX group currently ranks first, and the other three are basically of the same quantity level. In fy2018, the number of global stores of fast sale, INDITEX, H & M and gap is 3445, 7475, 4968 and 3594 respectively. INDITEX (Zara) is significantly higher than the other three, and H & M stores are slightly higher than gap and UNIQLO, but they are basically of the same quantity level.

From the perspective of global store growth, the number of fast selling global stores increased from 1232 to 3445, an increase of 180% from fy2005 to fy2018; INDITEX increased from 2244 to 7475, an increase of 233%; The number of H & M increased from 1193 to 4968, an increase of 316%; Gap increased from 2994 to 3594, with an increase of only 20%. In addition to gap group, the other three fast fashion groups have achieved 2-3 times the number of stores in the world.

In terms of the number of stores in China (Asia) of the four fast fashion groups, gap is obviously lagging behind, and the number of the remaining three is equal. The number of stores in UNIQLO China, INDITEX China, H & M China and gap Asia in fy2018 are 633, 593, 530 and 372 respectively. In addition to gap's obvious backwardness, the number of other three stores is similar, and none of them shows obvious advantages.

In terms of store growth in China (Asia), in fy2008-fy2018, UNIQLO's stores in China increased from 13 to 633, an increase of 48 times; INDITEX stores in China increased from 14 to 593, an increase of 41 times; The number of H & M stores increased from 40 to 530 in China; Gap Asia stores increased from 131 to 372, an increase of 1.84 times. It can be said that the past decade has been a golden age for fast fashion group to expand stores in China.

From the proportion of the number of stores in China (Asia) in the total number of stores in the group, UNIQLO ranks first: fy2005-fy2018, the proportion of UNIQLO's Chinese stores in the global stores of FMCG increased from 0.65% to 18.37%; In fy2007-fy2019, the proportion of INDITEX stores in China increased from 0.22% to 7.86%; From FY2007 to fy2018, the proportion of H & M stores in China increased from 0.46% to 10.67%; In fy2005-fy2018, the proportion of gap Asian stores increased from 2.61% to 10.35%. UNIQLO's China business accounted for 18.4%, which is the brand that attaches the most importance to China business among the four fast fashion brands.

In terms of the proportion of China (Asia) net open stores in the group's global net stores, UNIQLO still ranks first: the proportion of UNIQLO's net stores in China increased from 26% in FY2010 to 53% in fy2015, and then accounted for more than 50% each year; INDITEX's proportion of net stores in China has increased from 1% in FY2008 to 27% in fy2012. Fy2013-fy2017 fluctuated between 13% and 25%, but decreased significantly to - 15% in fy2018; The proportion of h&m's net stores in China increased from 3% in FY2008 to 23% in fy2014, and then began to decline. The proportion of China's net stores in fy2018 was only 10%. For gap group, the proportion of Asia's net stores in the world has fluctuated greatly in the past decade. In fy2019, the proportion of gap's net stores in Asia is 28%. China accounts for more than half of UNIQLO's net stores. There is no doubt that UNIQLO attaches the most importance to China business. Among the net stores of H & M and INDITEX (Zara), China accounts for about 15% - 20%, which is also an important business. However, the influence of China business on H & M and Zara is not so important to UNIQLO. Gap, as a whole, or its Asian business, has not seen much growth.

3.1 UNIQLO: the number of stores opened is fast, the number of closed stores is less, and the net store opening continues to grow rapidly, and the proportion of China is getting higher and higher

Number of UNIQLO stores opened and closed in China: the number of stores opened and closed in China continued to be strong, and the profitability of stores was excellent, which did not reflect that "China's fast fashion has become difficult to do": UNIQLO's stores in China in the past 10 years have shown a strong trend, and it has become more and more strong after 2012. From FY2009 to FY2011, UNIQLO opened 20-30 stores in China every year, while after fy2013, UNIQLO opened more than 80 stores a year. After fy2016, many people believed that "China's fast fashion has become difficult", but UNIQLO still maintains 90 stores every year, with strong development. As for the number of closed stores, in fy2008-2014, UNIQLO China's number of closed stores was less than 3, and there were few closed stores. Since fy2015, the number of UNIQLO stores in China has increased slightly, but compared with the number of UNIQLO stores, the proportion of closed stores is also very low, which means that most of the stores of UNIQLO have strong profitability and the demand for closing stores is small. It also means that UNIQLO's strategy in China is very successful, which does not reflect the so-called "China's fast fashion market has become very difficult to do".

UNIQLO China's net number of stores: has been positive, good business, rapid expansion. In the past ten years, UNIQLO's net stores in China have been positive, and in the past five to six years, it has maintained a high net number of more than 80 stores per year, reflecting that UNIQLO stores are operating well and expanding rapidly. UNIQLO not only entered China's first and second tier cities, but also began to penetrate into China's third and fourth tier cities. In recent years, UNIQLO has continued to open positive net stores, reflecting that China's fast fashion market still has a wide range of space.

UNIQLO's global net stores and China's share: China's business is contributing more and more to its business growth. In the past decade, UNIQLO's global business has maintained a rapid growth, with the number of global net stores increasing from 26 in FY2008 to 186 in fy2014. Fy2015-2015 has more than 120 stores, but the number of net stores in fyku is still declining rapidly. What is more noteworthy is that the proportion of UNIQLO net stores in China has increased from 26% in FY2010 to 53% in fy2015. After fy2015, UNIQLO's net stores in China accounted for more than 50% each year, reflecting that China's business is becoming more and more important in UNIQLO's overall growth strategy. In the future, if UNIQLO wants to maintain rapid growth, it is the only way for UNIQLO to continuously strengthen and optimize its China business.

In recent years, UNIQLO has maintained a high net opening of stores, reflecting a good profit situation. It also reflects that China's fast fashion market is not "becoming difficult to do", but "entering a new stage of differentiation". It still has great potential and will generate many new opportunities.

3.2 INDITEX (Zara): global expansion slows down, so does China business

The number of indetex's net stores in China: before 2017, the number of net stores in recent two years has changed from positive to negative. The number of net stores in China increased steadily from FY2008 to fy2012, with 132 and 121 stores respectively in fy2012 and fy2013, reflecting the rapid expansion of INDITEX group in China. However, since fy2018, the number of net stores in China of the group has changed from 54 to - 27, and the adjustment and contraction strategy is obvious. Although the net opening number of fy2019 is still negative, the number of net closed stores in fy2019 is narrower than that in fy2018.

INDITEX (Zara) global net stores and China's share: global expansion decelerates, while China's net stores account for a decline. From FY2008 to fy2017, INDITEX has a net opening of 300 to 570 stores worldwide every year, and its global business has also maintained a rapid growth. In the past two years, in fy2018 and fy2019, the global expansion speed of INDITEX has slowed down, and the number of net stores has decreased. In fy2018, the global net opening of INDITEX (Zara) has dropped to 183, while in fy2019, the global net opening of INDITEX (Zara) has dropped to 15, which is close to zero - it is obvious that the slowdown of INDITEX (Zara) is global, not only its business in China.

During the period of rapid expansion, INDITEX (Zara) has a net store opening ratio of about 20% in China. During the rapid expansion period of fy2008-2017, China accounted for about 20% of INDITEX's net stores. China is an important region for Zara, but compared with 50%-60% of UNIQLO's net stores in China, Zara's China business is not so important.

INDITEX (Zara) China business - in the past two years, the net opening has turned negative. After entering fy2018, INDITEX's global stores began to shrink, with 183 and 15 net stores in fy2018-fy2019 respectively, and its net opening in China turned from positive to negative. INDITEX (Zara) has - 27 stores in China in fy2018 and - 4 stores in fy2019 in China. INDITEX's slowdown in China is more than that in the global business.

INDITEX (Zara) has shown a slow down trend in global store expansion in recent years, and the expansion trend in China has declined rapidly in recent two years. This side reflects that China's fast fashion market has entered a new differentiation stage. Zara may now encounter some difficulties in the global scope, and may need to make some adjustments, otherwise it may lose its advantages in this changing situation.

3.3 gap: depression is not two or three days. Gap has been in place for many years, and China is not its life-saving straw

Gap's opening and closing stores in Asia was once a lifesaver for gap, but now there is a crisis. From FY2011 to fy2016, gap opened about 20-80 stores in Asia every year. For gap's overall sluggish business, Asian business has been a lifesaver for gap. However, compared with INDITEX (Zara) and fast retailing (UNIQLO), H & M has not opened many stores in Asia. However, after fy2017, gap's Asian business began to exceed the number of stores opened. The net number of stores opened turned negative, and the number of closed stores exceeded the number of stores opened. This shows that gap's Asian business, like its global business, has experienced operational problems.

Gap net stores in Asia: the number of net stores in Asia increased steadily before fy2016, and after adjustment of fy2017-2018 contraction, the net open stores changed from negative to positive. In fy2010-fy2016, the number of net stores in Asia was positive, and the number of net stores in fy2013-2016 maintained a steady growth, of which the number of net stores in fy2016 was up to 68, reflecting the steady expansion of gap in Asia. In fy2017, the number of net stores in Asia was negative for the first time, which was - 49, showing a significant decline. Compared with the previous 20 stores in 2016, FYy is still in a bad state of operation.

Gap's global net stores and Asia's share: the group's global performance is sluggish and Asia's contribution is declining. From fy2013 to fy2015, there are more than 130 net stores in the world every year, of which 170 are net stores in fy2015, reaching a historical high level. However, in the same period, the proportion of net stores in Asia decreased from 112% in fy2012 to 38% in fy2015; Fy2016 group has only 12 net stores in the world, entering a comprehensive adjustment period. The overall operating difficulties of fy2019 are slightly improved, with 72 net stores in the world, but the proportion of net opening stores in Asia is only 28%. Both global and Asian business development are facing severe challenges.

Gap's recession is not two or three days, and its global business has been depressed for more than ten years. In most years of the past decade, the number of net stores has been negative or less than 20. In fy2012-fy2016, Asian business seems to be a lifesaver. However, after fy2017, Asian business has also turned negative. However, it seems inappropriate to use the slowdown of gap's China business to explain that "China's fast fashion has become difficult", because the decline of gap is global, It's not just in China. We tend to think that China's fast fashion market has entered a new stage of differentiation, but gap is not likely to be a brand that can benefit in the new stage of differentiation.

3 4 h & M: the opening of stores in China has declined slightly, but the overall situation is relatively stable

Number of h&m stores opened and closed in China: the number of h&m stores opened and closed in China has declined slightly, but the overall situation is relatively stable. From FY2008 to fy2018, H & M's store opening in China experienced a complete cycle from expansion to contraction. From FY2008 to fy2013, H & M accelerated its expansion, from 6 stores per year in FY2008 to 52 stores in fy2012, with the closing rate of 0. After fy2013, H & M had some store closures. However, from fy2013 to fy2018, the number of H & M closures has not been very large. In the past two years, only 7 and 14 stores were closed each year. In the past 10 years, H & M China has been in a positive state of net opening, and its operation status is relatively stable.

H&m's net number of stores opened in China: it has been positive, and its business situation is relatively stable. In the past decade, H & M China has maintained a positive number of net stores, with good store operation and fast opening. From 6 in FY2008 to 91 in fy2016, the net number of stores in fy2018 has declined. In the process of the sinking of the third and fourth tier cities, some attempts have been made, but generally speaking, the positive net opening number reflects the strong profitability of H & M stores in China.

H & M's global net stores and China's share: China's contribution to its business growth has weakened. In the past decade, the growth of H & M's global business slowed down, and the number of global net stores increased from 216 in FY2008 to 427 in fy2016. From fy2017 to 2018, h&m's global net number of stores has decreased. Although the number of stores is still more than 220, the speed of opening stores has slowed down significantly, reflecting the weak growth of the company. It is worth noting that the proportion of H & M's net stores in China has increased from 3% in FY2008 to 23% in fy2014. In fy2018, the proportion of H & M's net stores in China has decreased, and the operation of H & M in the next two years is very important to H & M China.

H & M's business in China does not account for a large proportion. However, H & M China has maintained a positive net opening and a small number of closed stores in the past years, which reflects a strong profitability. In fy2018, China's share of the global H & M stores has declined. We believe that H & M has strong management and brand capabilities, and it is possible to find new opportunities in the differentiation of China's fast fashion industry. However, there is still uncertainty. In the next 2-3 years, it will be very important for H & M China.

　　4. Is Chinese fast fashion really hard to do—— We don't think so

From the negative growth of gap Asia and H & M China in 2018fy, plus the withdrawal of Forever 21 from the Chinese market, many people think that "China's fast fashion market has become very difficult to do, and the golden age has passed.". However, we think that it is still difficult to take advantage of the rapid development of new fashion market in China, Fast fashion group needs to adapt to China's local consumption culture.

From the analysis of the above two chapters, it can be seen that the development of China business of the four fast fashion groups in recent years has shown a distinctive differentiation. Some brands are not adaptive to the local consumption environment in China, and the business development in China has become a bottleneck, while some brands can seize the opportunity to further develop and even promote the rapid growth of their global business.

UNIQLO (fast sale): the brand closest to China's local conditions, is still advancing rapidly in the new differentiation stage of China's fast fashion industry, and China's business is growing bravely. In recent years, the proportion of UNIQLO's China business has been increasing, while the growth rate of China's business is significantly higher than the overall growth rate. The overall growth rate of the group is less than 15%, while the growth rate of China's business is more than 30%, It can be said that China business is the engine to promote UNIQLO's rapid development in recent years. In recent years, UNIQLO's opening in China shows no sign of slowing down. China has accounted for more than 50% of the world's net stores. UNIQLO is the brand most connected to China, with high turnover, high exposure and high cost performance, which proves its success. The rapid development of UNIQLO in China in recent years also means that China's fast fashion market is not declining, but has entered a new stage of differentiation and still has great potential. Brands that are more grounded and more adaptable to local consumption culture can seize the opportunity and usher in new development opportunities.

INDITEX (Zara): the revenue of China (Asia) business began to be in line with the overall growth of the world, facing certain challenges - it can be said that in the decade 2006-2016, China (Asia) business was an important driving force driving the rapid growth of INDITEX (Zara). During this period, the growth of its China (Asia) business was significantly faster than that of other regions in the world, The proportion of Asia business of the company has also rapidly increased to 20%. However, since 2017, the growth rate of INDITEX (Zara) Asian business has been consistent with its global overall growth rate, with a growth rate of about 6%. The Asian business still has a rapid growth, but this is based on the rapid growth of global business, and China (Asia) business does not show excessive growth. China has changed from the fastest growing region of Zara to the region with the same growth rate as the global business. In the past two years, with the slowdown of the company's global store opening, China has also shown a slowdown in store opening and an increase in store closing, even leading to a negative number of net stores opening in the global overall business. The business of Zara (INDITEX) in China is obviously facing certain challenges. In the past decade or so, the rapid design and supply chain model of Zara (INDITEX) and whether it is necessary to make changes in the Chinese market in the future are issues that Zara needs to consider carefully.

Gap: it's not two or three days, it's more than ten years, it's not the problem of Asia, it's the whole group's problem - the slowdown of gap in China in recent two years is considered by many people as a signal that "China's fast fashion has become difficult to do". However, in fact, the decline of gap has lasted for more than ten years, not just in these two years, from 2005 to 2018, During this period, its competitors such as UNIQLO, INDITEX (Zara) and H & M overtook gap with a very rapid development attitude. In the past two years, the business situation of gap in Asia seems to be worse. However, we believe that this is not the problem of Asia, nor the market situation in the past two years, but more likely the problem of gap itself. Whether it can survive better in the new differentiation stage of China's fast fashion market, gap may not be so optimistic.

H & M: the revenue fluctuates greatly, and the single store profit shows stability. The next few years are very important to H & M China - H & M's China business has not been considered as its core business. After years of development, H & M's business in China only accounts for about 5% of the global business revenue. However, in terms of the opening and closing situation of H & M stores in China, compared with the other four fast fashion stores, the number of H & M closed stores is less, which reflects the better operation of its stores to a certain extent. H & M's growth fluctuates greatly both in global business and in China. We believe that H & M China business has good business ability and brand strength, but the current Chinese business is not its core business. The next 2-3 years will be a very critical year for H & M China. Whether we can seize the new opportunities to take advantage of the situation or sink in this way may be in the next few years.

　　5. The future development direction of China's fast fashion -- the new stage of differentiation produces new opportunities, and the soil for the rise of local brands is also mature

2006-2016 is the stage of barbaric growth of Chinese clothing brands. Since 2017, China's fast fashion clothing market has entered a new stage of more refined differentiation and development. During the period of 2016-2006, all kinds of clothing brands developed rapidly in China. Since 2017, the industry has entered a new stage of more refined differentiation and development. In order to seize the new opportunities, we may not simply use the past experience for extensive development, but need to better understand the local consumer culture, and integrate more deeply into China's local market in terms of products, channels, marketing and other aspects.

UNIQLO's strength and gap's desolation are the epitome of the new era of differentiation of China's fast fashion industry since 2017. Since 2016, the number of UNIQLO stores in China has been stronger than that in the previous decade. The growth rate of UNIQLO's revenue in China is 30% +, which is much higher than that of the global average growth rate of about 14%. The proportion of Chinese business in UNIQLO's overall business is getting higher and higher. In contrast, gap, which is also one of the four fast fashion brands, shows a completely different situation. Gap's global business has been declining for more than ten years, and its brand development vitality is relatively weak. In the savage growth period of China's fast fashion from 2006 to 2016, gap's Asian business also has a seemingly rapid development. However, since 2017, gap's global business has been declining, After China's fast fashion industry has entered a new stage of differentiation, gap does not seem to adapt, and Asian business shows a large negative growth. UNIQLO's strength and gap's desolation are the epitome of the new era of differentiation of China's fast fashion industry since 2017. Obviously, UNIQLO has benefited from the differentiation of China's fast fashion industry. UNIQLO knows more about the Chinese market and is more grounded. It has won China's market share in the way of high turnover, high exposure and high cost performance. In the next few years, it can be predicted that UNIQLO's ability to penetrate the third and fourth tier cities in China will also be stronger. However, many international fast fashion brands represented by gap do not seem to keep up with the train of change. These brands do not understand the Chinese market very well and operate with past experience. When the development period of "flooding" is over, they will encounter great pressure in adapting to the new differentiated market.

The differentiation of China's fast fashion market has brought new opportunities and challenges to international fast fashion groups and local clothing groups: young consumer groups, low-end urban consumer groups and e-commerce channels are becoming the core business variables of China's fast fashion market. How to better grasp the new main consumption force and new consumption channels, It will be an important issue for international and local enterprises to solve in this differentiated market war. It is gratifying that in 2018, when the international fast fashion giants are greatly divided, we see the rise of "national trend" and the growth of local clothing brands. In fy2018, the revenue growth rates of Li Ning, Anta, bosden, SEMAR clothing and Hailan home are 18%, 45%, 30%, 31% and 5%, respectively, of which the revenue of Li Ning, Anta, bosden and SEMA clothing all show accelerated growth. We believe that China's fast fashion clothing consumption industry has entered a new stage. The transformation of this stage may be a crisis for some brands, but it is also an important opportunity for many other brands.

In terms of the number of main brand outlets of the group, Anta, lining, Senma, Balabala (subordinate to SEMAR group) and Hailan home have also achieved rapid growth in the past five years: at present, Anta's main brand outlets are the largest, with 10057 outlets in fy2018, and Li Ning, Balabala, Hailan home, Senma, and The total number of outlets of bosden's main brands was 6344, 5293, 5097, 3830 and 3337. From fy2014 to fy2018, the number of brand outlets of Li Ning, Anta, Senma, balabalabala and Hailan home increased by 12.8%, 31.9%, 8.1%, 49.5% and 52.2%, respectively, reflecting a good expansion trend. Although bosden has contracted in its outlets in recent years, bosden has achieved great success in brand upgrading since 2018, including terminal sales and inventory management, The product price has been greatly improved. The rapid development of national brand in recent years is also the strength that national brand is more familiar with China's local consumption culture and reflects in the new stage of differentiation of China's fast fashion industry.

In addition, e-commerce is a very core variable of Chinese commerce, and also a very important point of Chinese local commercial consumption culture. China's e-commerce penetration rate reached 18.4% in 2018, compared with about 10% in the United States over the same period, which is lower in most European countries. Take SEMAR clothing as an example. Since 2012, SEMAR, which has been mainly engaged in e-commerce business, has increased its e-commerce business from 0 in 2012 to more than 7 billion in 2018, fully reflecting the potential and charm of China's local business culture. In China's local e-commerce culture, there are also many e-commerce consumer goods brands, such as Xiaomi and three squirrels. Among the clothing and daily consumer goods, the representatives of Chinese e-commerce brands, such as Antarctica, Arctic velvet, Playboy and Hengyuanxiang, deserve attention.

The new stage of China's fast fashion differentiation is an opportunity for UNIQLO, but also an opportunity for China's national brand. The success of UNIQLO clearly reflects the great opportunity in the new differentiation era of China's fast fashion industry. UNIQLO in China, compared with other international fast fashion, the most important advantage is that it has a better understanding of Chinese consumer culture, and can occupy advantages in channels, products, marketing and other aspects. This is the advantage of UNIQLO and the opportunity of China's national brand. China national brand has a better understanding of China's local consumption culture, and its channel layout goes deep into Chinese cities at all levels, and has a natural high degree of acceptance of e-commerce. Since 2017, China's fast fashion clothing industry has entered a new stage of differentiation, which may bring many new opportunities for the rise of China's national brand in the future.

Recommended attention: Li Ning, Anta sports, bosden, SEMAR clothing and other national brand clothing enterprises, Antarctic e-commerce and other Chinese e-commerce brand enterprises.

　　6. Risk tips

Consumption growth slows down

Market competition intensifies

Channel structure reform

Changes in consumer preferences

Authors: wujincao, jiyunan