What Uniqlo’s Success in China Can Teach Luxury

Uniqlo can teach luxury brands a thing or two. Not only did the Japanese casualwear company overcome strong headwinds from the closing of operations in Russia and the weakening of Japan’s currency, but it also outclassed more established rivals and local players. The reactive risk management approach embraced by most retailers has forced many of them out of business during the pandemic. But in a market that has brought Everlane, Selected, and Urban Outfitters to their knees and canceled a giant like Hamp;M, Uniqlo has continued to win over the young, trendy Generation Z and connect with new consumer segments. Breaking into the Chinese fast fashion market is especially challenging for global brands. Such clothes continue to be widely available in the domestic market and homegrown direct-to-consumer e-commerce outfits like Shein have become behemoths by leveraging social media and manufacturing disposable, trendy, and cost-friendly clothing. Nevertheless, Uniqlo has appealed to consumers' sensibilities and emotions and won the local market. Currently, it operates a staggering 869 doors in China and, counter to the global trend of shop closures, the Japanese retailer has launched an aggressive store expansion plan in the country. Only this month, Uniqlo plans to inaugurate 20 new brick-and-mortars, covering Yunnan, Sichuan, Anhui, Zhejiang, and other provinces. Uniqlo will also inaugurate its first new footprints in Shengzhou, Yueqing, and Yongkang in Zhejiang, Huainan in Anhui, and Jingmen in Hubei, according to EqualOcean. Two additional Shanghai stores will be opened on June 24. Why does Uniqlo prosper while other fast fashion brands fail? Here's what luxury can learn from the Japanese titan and how it works wonders in the mainland. Vertical integration Geopolitical conflicts and COVID have disrupted access to supply chains and served an important lesson on the importance of vertical integration. While outsourcing raw materials and moving manufacturing to workshops and ateliers in emerging markets, several brands have opened themselves up to substantial risks — reputational crisis, delays, cancellations, increased costs, and so on. Conversely, a luxury label like Hermès which is vertically integrated (having in-house tanneries, production sites, and its own crocodile ranches in Australia) has shown little wear from the pandemic. In the most literal sense, Uniqlo is a vertically integrated organization having full control of supply chain processes. This gives Uniqlo a competitive advantage over its rivals, as it can reduce the per-unit cost and achieve greater quality control. Elsewhere, all the Ramp;D processes and innovations are kept in-house; thus, Uniqlo can trademark its technical fabrics. Prioritizing technology over retail Tadashi Yanai, founder and chief executive of Fast Retailing, which owns Uniqlo, has said in the past, “Uniqlo is not a fashion company, it’s a technology company.” Similar to how Chow Tai Fook is more than a jewelry company, Uniqlo uses advanced technology including AI and blockchain to make the shopping experience seamless. Instead of manufacturing low-priced, trendy clothes like Shein or knock-offs of famous designer garments like Zara and Hamp;M, Uniqlo offers technical garments with universal appeal. In the past, the group has developed branded sustainable, high-tech performance fabrics like HeatTech, AIRism, 3D Knit, UV Cut, and LifeWear. Time and time again, technology is used to monitor production and transform supply chain management. For instance, last spring, Uniqlo announced it would bring an automated-warehouse network into China. In addition the company has experimented with tech-enabled kiosks and emphasized in-store tech like UMood: a wearable technology which suggests garments according to the consumer’s frame of mind. Collaboration and personalization Uniqlo has embraced celebrity collaborations and brand partnerships without failing into the influencer trap and constantly chasing the latest A-lister. So far it has released successful collaborative collections with Marni, Theory, JW Anderson, Ines de la Fressange Paris, and Mame Kurogouch. These design collaborations open Uniqlo to new demographics and markets, while also boosting the brand’s profile. Through partnerships with brand ambassadors and advocates, Uniqlo has promoted the values of the label while engaging its audience in a credible, trustworthy way. That tennis sensation Roger Federer and three-time Olympic medalist snowboarder and Olympic skateboarder Ayumu Hirano vouch for Uniqlo is a testament to its market value and success. As well as commissioning clever tie-ups, Uniqlo creates memorable and immersive shopping experiences for fans: from the UTme! customization program, to leveraging data to engage customers at all touchpoints and provide personalized in-store experiences. Ultimately, the chatbot that offers personalized recommendations and the Google-powered voice assistant connected to “Uniqlo IQ” are features that help Uniqlo understand its customer base and design hyper-personalized marketing campaigns. Steering clear of political controversies Ultimately, it is walking a clever tightrope. While Hamp;M and Nike faced backlash for their comments on Xinjiang cotton, Uniqlo avoided controversy by steering clear of politics. Despite pressure from the U.S., the Japanese firm refused to take a stand or prove its loyalty to the West. Uniqlo’s “sales continued to grow following the cotton incident, jumping 17 percent in 2021 and securing it as the biggest fast fashion brand in China,” says Bloomberg. Tadashi Yanai reinforced the ethos of independence and authenticity by stating in an interview with Nikkei, “the U.S. approach is to force companies to show their allegiance. I wanted to show that I won't play that game.” The stance is refreshing. Luxury brands need to learn how to become proactive businesses, ones that manage crises before they happen rather than after the damage has been done.

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What Uniqlo’s Success in China Can Teach Luxury