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In recent years, Uniqlo has developed quite well in the Chinese market, and even became one of its best-performing markets. However, recently Uniqlo's performance suddenly plummeted, and the head of Uniqlo Greater China even said that the mentality of Chinese consumers has changed. Has the mentality of Chinese consumers really changed suddenly? And where has it changed?

1. Uniqlo's performance suddenly declined

According to the Daily Economic News, "Let customers buy high-quality and low-priced casual clothes as easily and conveniently as they buy magazines at a book stall." This is the brand concept that UNIQLO founder Tadashi Yanai stated in his personal book. From a small clothing store to a household name clothing giant, the characteristic of "high-quality and low-priced" is almost engraved in the growth genes of UNIQLO, which is in its thirties.

According to the financial report recently released by Fast Retailing, the parent company of Uniqlo, in the first three quarters of fiscal year 2024, the revenue in Greater China was 522.469 billion yen (about 24 billion yuan), accounting for 22.1% of the total revenue. During the third quarter, the revenue of the Chinese mainland and Hong Kong markets declined, the operating profit dropped sharply, and the same-store sales shrank.

In response to UNIQLO's performance in the Chinese market in the third quarter, UNIQLO Greater China CEO Pan Ning specifically mentioned "parity" in his briefing. "The cost-effective consumption is particularly evident among the younger generation. Under the consumption value of 'parity', consumers no longer choose branded products, but choose more affordable products with little difference in quality." Pan Ning believes that UNIQLO has the potential to become the first choice brand for Chinese consumers.

Uniqlo, a Japanese clothing brand, was founded in 1984. It has grown from a small clothing store to a household name, and is a classic case in corporate management. In the 1990s, Japanese people's enthusiasm for consumption declined, and Uniqlo and Muji rose rapidly by downplaying their brands and emphasizing high cost-effective products. After implementing the globalization strategy, the overseas market growth rate of Uniqlo's parent company Fast Retailing Group exceeded that of Japan, and the proportion of revenue continued to increase.

According to the financial report of Fast Retailing Group, in the first three quarters of fiscal year 2024 (September 1, 2023 - May 31, 2024), the company's comprehensive revenue was approximately RMB 108.9 billion (an increase of 10.4% over the same period last year), and the total comprehensive operating profit (profit) was approximately RMB 18.5 billion, both of which increased significantly. Among them, UNIQLO's revenue in the Japanese market during this period was approximately RMB 33.2 billion, while UNIQLO's revenue in overseas markets during the same period was approximately RMB 59.5 billion, nearly twice that of Japan.

According to China Fund News, according to the plan, starting from the 2024 fiscal year, Uniqlo China will close and renovate about 50 stores each year. This includes closing stores with low sales, opening large stores in better locations, and increasing sales of each store by more than 1.5 times through store renovations. Pan Ning also said that the company will renovate flagship stores in Shanghai, Guangzhou and other places, and is considering opening flagship stores in cities with great potential such as Chongqing, Chengdu, Tianjin, Xi'an, Kunming, and Zhengzhou.

2. Has the mentality of Chinese consumers really changed suddenly?

As an internationally renowned casual clothing brand, UNIQLO has won the favor of consumers around the world with its high cost-effectiveness and simple design style. Especially in the Chinese market, UNIQLO once became the "price-performance king" in the minds of consumers. However, recently, UNIQLO seems to have suddenly encountered the dilemma of declining performance. What is going on?

First of all, Uniqlo's high cost-performance ratio is the core reason why it is so popular in China. The reason why Uniqlo has become so popular so quickly is mainly due to its high cost-performance ratio. In the eyes of consumers, Uniqlo's clothing provides products with big-name design at a relatively cheap price. In the past consumer environment, consumers' pursuit of fashion and quality was often limited by price. The emergence of Uniqlo broke this situation. It meets consumers' needs for daily wear with its simple and practical design style. For example, its basic T-shirts, shirts and jeans are classic in style, easy to match, and affordable.

Especially in recent years, reverse consumption has prevailed in China. Consumers pay more attention to the practicality and cost-effectiveness of products, and no longer blindly pursue brand awareness and high-priced goods. Uniqlo's product positioning just caters to this consumption trend and has become the first choice of many consumers. Take down jackets as an example. Uniqlo's lightweight down jackets have excellent warmth retention performance. At the same time, the design is simple and fashionable, and the price is much lower than that of other high-end brands of down jackets. Compared with traditional bloated down jackets, although Uniqlo's down jackets are not as fashionable as Canada Goose and Moncler, they have almost no competitors at their price. This allows consumers to show a certain sense of fashion while meeting their warmth needs, which is undoubtedly more popular with consumers.

Secondly, price increases have become the root cause of Uniqlo's declining performance. A careful analysis of Uniqlo's strategies in recent years shows that the root cause of Uniqlo's current poor sales lies in its price increase strategy. In fact, as early as the first quarter of this year, Uniqlo's performance declined, and one of the core reasons was price increases. With the continuous increase in raw material costs and labor costs, Uniqlo has to cope with cost pressure by raising prices. However, this price increase strategy has directly led to a decline in consumers' willingness to buy, because for consumers who pursue cost-effectiveness, price increases have undoubtedly weakened Uniqlo's competitiveness.

Not long ago, the topic of "You can't afford Uniqlo with a monthly salary of 20,000 yuan" was hotly discussed on social media, further exacerbating consumers' dissatisfaction with Uniqlo's price increase. The emergence of this topic not only reflects the magnitude of Uniqlo's price increase, but also reveals consumers' increased price sensitivity. Against the backdrop of slowing income growth, consumers are increasingly sensitive to prices, and any price increase may trigger consumer resistance.

However, in addition to rising raw material prices, Uniqlo is also facing cost pressures from salary increases. In order to maintain the enthusiasm and stability of its employees, Uniqlo has to increase its employees' salaries. However, this salary increase has further pushed up the company's operating costs, making Uniqlo even more stretched in the face of market competition. Under the dual pressure of salary increases and price increases, Uniqlo's profitability has been seriously challenged.

Third, the accelerated popularity of domestic substitutes has impacted Uniqlo's base. While Uniqlo's prices were rising, domestic substitutes quickly became popular. In recent years, domestic clothing brands have blossomed everywhere. With the help of advantageous e-commerce platforms such as Pinduoduo, many white-label products with good quality and low prices have quickly become popular. These domestic brands are not inferior to international brands such as Uniqlo in terms of design and quality, and even have more advantages in some aspects. They can quickly respond to market changes, launch trendy and affordable products, and meet the diverse needs of consumers.

The success of domestic substitute brands is not only reflected in sales, but also in the frequent appearance of hit products. These hit products often have unique design styles and good wearing experience, and are deeply loved by consumers. They are marketed and promoted through channels such as social media, and quickly accumulated a large number of fans and word of mouth. In contrast, Uniqlo appears to be relatively conservative and lagging in product innovation and marketing methods, and it is difficult to compete with these emerging domestic brands.

The rise of domestic substitute brands provides consumers with more diverse choices. In the past, consumers may only be able to satisfy their fashion needs by purchasing international brands; but now, they can find their favorite products among many domestic brands. This diverse choice not only improves consumers' shopping experience, but also promotes the intensification of market competition. In this competitive environment, if Uniqlo cannot adjust its market positioning and product strategy in time, it will easily be eliminated by the market.

Fourth, consumers have not changed, only the market has changed. In fact, the consumption concept of Chinese consumers in pursuit of high-quality and low-priced goods has not changed. For most Chinese consumers, they always hope to obtain high-quality and fashionable goods within a limited budget. In the past, Uniqlo was able to meet this demand of consumers and thus achieved success. However, with the changes in the market and the intensification of competition, there are now more and better channels to help consumers achieve this goal.

For example, the development of online shopping platforms allows consumers to easily compare the prices and quality of different brands and products. Consumers can more intuitively understand the actual situation of the product by viewing other consumers' reviews and sharing their orders, so as to make more informed purchasing decisions. At the same time, the rise of social media also makes it easier for consumers to obtain fashion information and shopping recommendations. Consumers can learn about the latest trends and find products that suit them by following fashion bloggers, Internet celebrities, etc.

Therefore, the mentality of consumers has not changed fundamentally, but with the intensification of market competition and the diversification of consumer choices, Chinese consumers' brand loyalty has gradually decreased. They no longer maintain long-term loyalty and dependence on a certain brand as in the past, and Uniqlo may not really grasp this trend.

In summary, the decline in Uniqlo's performance is not a sudden change in the mentality of Chinese consumers, but the result of market competition and changes in consumer demand. In the fierce market competition, only companies that constantly adapt to changes and meet consumer needs can remain invincible. For Uniqlo, the future development path is full of challenges. If it fails to truly win back the hearts of consumers, it will easily be eliminated by consumers voting with their feet. I wonder if Uniqlo understands this?