MUJI Is Hard To Get Back. Net Profit Fell 31% In The Second Quarter.

MUJI is hard to get back. UNIQLO continues to be crazy. In the past few years, two distinct trends in Japanese popular retail brands have led to industry curiosity.

The Muji company's good quality plan recently released its latest financial results. Sales of the good plan increased by 5% to 112 billion 300 million yen, or 7 billion 100 million yuan, in the three months ended May. Net profit fell 31% to 6 billion 500 million yen, or 400 million yuan, the first decline since 2014. The group explained that it was mainly affected by the increase in labor costs and other factors.

Meanwhile, the fast selling group of UNIQLO parent company has continued its recent trend and its performance has gone up. In the first 9 months ended May 31st, group sales increased by 7% to 1 trillion and 820 billion yen or 115 billion 600 million yuan, operating profit increased 3.7% to 247 billion 600 million yen, or 15 billion 700 million yuan, and net profit rose 7% to 158 billion 600 million yen, or 10 billion yuan, all of a record high.

Although the sales of UNIQLO Japanese market dropped by 0.5% to 701 billion yen or 44 billion 500 million yen, the apparel retailer showed outstanding performance in the international market, with sales surging 14.6% to 820 billion 500 million yen or about 52 billion 100 million yuan. China is still the main driving force for the growth of international business, and the sales growth of the brand in the Chinese market during the period is double digits. News prompted XXX group's share price to rise, with a market value of about 7 trillion and 300 billion yen, or about 460 billion yuan, a new high since listing.

The two retailers, who also call the middle income group and the Japanese minimalist lifestyle, are at the bottom and at the peak. The industry has gone through a wider discussion of the reasons for the decline of MUJI products, especially in the Chinese market. Among them, pricing strategy was once the most criticized strategy of Muji in the Chinese market.

In fact, Muji realized this problem very early and responded. Since October 2014, the "high cold" Muji has been lowered and the price of products in the mainland market has been cut down. As many as 11 price cuts have been carried out in 5 years. MUJI stressed that "new pricing" is not simply a price cut, but through its own adjustment, reduce import tariffs, make products more cost-effective, and achieve the basic parity between China and Japan.

But it has proved that this move is not brilliant enough. 11 successive price cuts did not bring a significant boost to the performance, but diluted the brand value. In social psychology, the importance of first impressions is emphasized repeatedly. When consumers do not develop some brand buying habits at the beginning, then it is difficult to buy them simply because they are low priced. Especially in the Chinese market, consumers now have too many choices.

So where is the problem? I think the most fundamental thing is Muji without a moat. Cost performance and lifestyle of middle-income group have been regarded as the competitive advantage of Muji. But in the current market environment, these two points are not enough to support the long-term development of Muji.

In terms of cost performance, Muji is obviously not the imitators of the Chinese market. NetEase Yan Xuan, Taobao heart election, millet products, famous products. These local brands have mushroomed in recent years, relying on the advantages of manufacturing industry and local supply chain resources. China has rapidly copied "no logo" and high quality models, and has launched products with higher cost performance.

In the time when local brands have risen, Muji has gone wrong by competing with local brands through frequent price cuts. Nowadays, the rationality of consumers is not only the rationality of price, but also the harsh pursuit of quality and life. Blind price cuts will not only bring back momentum, but also damage the trust of the market. Compared with conquering the price, Muji will probably win more if it chooses to tamper with the product and enhance brand positioning earlier.

In this case, Muji has just lost its product. When the quality and cost effective brands are hit by quality accidents, they will shake the foundation. In 2017, the "3. 15" exposure of MUJI products came from Japan's nuclear radiation area. In January this year, Muji hazelnut oatmeal biscuits were found to contain carcinogens. In March, a bottle of water was found to contain over 590 thousand potential carcinogens.

Therefore, it is actually a mistake to regard the cost performance as the moat of Muji. No brand can survive only on the basis of cost performance. Cost performance is essentially a cost control. Few enterprises can consistently achieve optimal cost control in volatile markets.

On the contrary, in the new market environment, Muji's cost control capability has become its weakness. This has been reflected in the latest financial reports, labor costs remain high, profits hit.

The channel dilemma is undoubtedly the reason why Muji is entangled. Despite the opening of e-commerce channels, Muji remains the main selling channel. The latest report shows that Muji has 935 sales outlets worldwide, up from 18 at the end of February. Since 2005, the first store has been stationed in Shanghai, China. Japan's Muji has only opened over 200 stores in China in 14 years.

Unlike Japan as a "grocery store" set up at the subway station and street side, prudent Japanese Muji has always been a "boutique" image in China's large business district. According to the latest data, the number of famous and excellent products with 1 billion yuan financing has reached 2000 stores in China, 10 times the number of MUJI products in China. This means that Muji in China has neither launched physical outlet channels nor has online channels been further expanded. After all, young consumers' shopping habits have changed.

According to an article by Sun Yuan, a member of the WeChat trade union's good retail boss, focusing on the opening strategy and the high labor cost of a category business circle, the cost of MUJI products stores is very high. At the same time of the adjustment of the price system, the problem of high cost is still not properly solved, which is another reason for poor management. For Muji, the problem to be solved is not only one price system, but for the current comprehensive predicament, the current business adjustment is obviously insufficient and out of the rhythm of the market.

The implementation of cost performance requires a lot of technology and capital investment, and Muji has not made enough effort recently. UNIQLO has been keenly aware of the importance of improving efficiency. Due to the impact of weather conditions, recently, XXX group has launched the "Ariake Project" plan to solve the inventory problem that has troubled the apparel retailing industry for many years, which is cost control from the operational perspective, thereby improving the operational efficiency.

The group joined Google Cloud to set up Advanced Solutions Lab in Tokyo to enhance the capability of fast response based on consumer demand and achieve its goal of becoming an information production retail companies. At the same time, XXX group has also established a global strategic partnership with logistics company Daifuku Co to enhance the speed of product delivery and the automation of warehousing and logistics.

According to the list of the 242 generation factories announced by XXX group, 128 of the group's foundry factories in China accounted for 50% of the total. The group also has many factories in Southeast Asia, including 44 in Vietnam and 24 in Bangladesh. China is not only a major manufacturing country, but also a major market, which can save a lot of manufacturing and transportation costs.

Another market strategy for MUJI products, that is, selling the middle-income group's life ideal, is also not reliable in the current market.

Originally, Muji has ushered in the best period in China. According to the Research Report of Guoxin Securities, from the development experience of Europe and America, the trend of "no logo" often appears in the stage of GDP per capita reaching US $25 thousand, and Muji is born in the period when Tokyo's capital circle gradually entered the threshold of US $25 thousand per capita. At present, the per capita GDP of China's northern Guangzhou, Shenzhen and other first tier cities is gradually approaching this stage. The overall income level of these people gives people the basis for pursuing a better quality of life, but facing the high cost of living such as housing prices, the new middle class is pursuing quality and cost performance in the process of consumption upgrading.

MUJI was founded in the 80s of last century, and originally intended to be "quality goods without trademarks". Its birth and prosperity is the rebound of luxury consumption in Japanese society. Such a proposal is obviously very applicable to impetuous China at the moment.

But unfortunately, today's younger generation of consumers' expectations for Muji are not static Japanese advocates, but also hope that the brand can adapt to the localization context and the global perspective. With the gradual development of the local middle class in China, Muji as a Japanese brand did not make more efforts in localization, and therefore could not integrate into the current new middle class discourse in China.

Some analysts believe that Muji's first mistake is to mistake China for the three tier market. The best products are sold in Japan, then sold to Europe and the United States, and then to China. The second mistake is to copy the successful marketing strategy in Japan to the Chinese market. Today, China's new middle class consumers have formed their own brands and aesthetic claims.

The flourishing of the middle market can only be a brand addition. The brand of selling feelings always faces the risk of bubble burst. People often neglect the core status of products in terms of cost performance models and emotional barriers.

Referring to the fast fashion industry, Zara has long been ahead of many fast fashion brands, not only because of its high efficiency and cost-effective control, but also because of its "higher" fashion trend than other brands. The cleverness of UNIQLO is its technology as a new moat, which directly improves the product strength of the brand.

Some people once summed up the success of UNIQLO as "breakout of basic funds", but in the moment of consumers' pursuit of individuation, it is not enough to support the brand leap. At present, the excellent technology behind the basic fund has become one of the core competitiveness of the brand.

Beginning in 1999, UNIQLO began working with the Japanese high-tech enterprise Dongli group. Dongli group of Japan is a high-tech enterprise HEATTECH based on organic synthesis, polymer chemistry and biochemistry as the core technology, and consumers familiar with UNIQLO technology are all from Dongli group.

In 2003, the two parties signed a strategic partnership agreement with a term of five years to carry out new high technology cooperation. The two companies signed a partnership every five years. In 2015, they announced the signing of the "strategic partnership" agreement from 2016 to 2020, and welcomed the third phase of the partnership. The total volume of transactions planned by the two sides through the supply of materials and products will reach 1 trillion yen, or about 51 billion 700 million yuan, as of 2020.

In the 17 years of cooperation, Dongli group and UNIQLO fabric business value has reached more than 850 billion yen. Since the launch of HEATTECH technology in 2003, the series has sold 1 billion products worldwide.

In the past two years, XXX group has focused on strengthening the image of the group. This week, the group also held a media campaign jointly with its denim brand J Brand. For the first time, it opened a media innovation center to the media in California, USA, and demonstrated the sustainable innovative measures of using lasers instead of chemicals to do old treatment of denim and cleaning with nano bubble spray. The innovation center was put into operation in 2016.

UNIQLO breaks the fast fashion to speed up the "hero" situation. With science and technology, the breakthroughs of fast fashion are achieved. The change of industry rules is the result of natural achievements.

But what is more important is that UNIQLO's own efforts in science and technology are presented to the public through enhanced brand communication through a more transparent image, which reflects the excellent marketing capabilities of the brand. This is in sharp contrast to the elimination of marketing Muji.

In recent years, UNIQLO has been making topics with cross-border art. Last month, the "KAWS:SUMMER" series, which was co operated by UNIQLO and contemporary American artist KAWS, was officially launched. In addition to KAWS, NIGO also pulled the head of Murakami Takashi, Futura and Pharrell Williams into the UNIQLO camp, and seized a series of people with words to accelerate the invasion of the trend market. Earlier, there was an industry survey. Before NIGO became the creative director of UT series, the correlation between UNIQLO and the trend market was 30%. When NIGO took office, the index increased to 70%.

Last May, UNIQLO announced the appointment of Takahiro Kinoshita Kinoshita Hyoho, editor in chief of fashion and culture magazine POPEYE, to manage the overall creative dissemination of UNIQLO. Kinoshita Hyoho will work closely with UNIQLO's global marketing team and creative President John Jay at his headquarters in Tokyo to supervise and manage UNIQLO's brand promotion and product design creativity.

In addition, the cooperation series of UNIQLO and LVMH's luxury brand Loewe creative director J.W.Anderson, Chinese designer brand Alexander Wang and Hermes creative director Lemaire has also become a regular product launched on a quarterly basis, which has gained positive response from consumers.

Last month, UNIQLO launched #UTPlayYourWorld activities in the Chinese market, and invited users to share their favorite UT clothing, and share their creative, real and inspiring moments.

This marketing campaign aimed at the local market is precisely the lack of Muji in the regional market. MUJI has entered China for 14 years, and its brand image seems unchanged. It has not been enriched and updated.

Some analysts believe that brand is the best way to build efficiency. Only a few consumers will thoroughly and deeply compare and contrast products. Because of the need for psychological and fashion savings, business has evolved the concept of brand to replace the decision-making process. This is the necessity of brand communication and marketing, and this is particularly important in the age of social media.

The idea of selling middle class and promoting simple lifestyle does not mean that the brand's own business strategy is frugal. Instead, it is through marketing that the concept of brand is more deeply rooted in the hearts of the people. This is the truth of contemporary commerce.