Brand Health Check: How can Uniqlo compete with affordable alternatives in China?

Between 2018 and 2022, Uniqlo has consistently claimed its spot among the top five retailers in the women’s clothing category in mainland China. According to Bloomberg, it stands out as the sole foreign brand that has achieved and maintained this position in China. This distinction showcases Uniqlo's unique ability to resonate with shoppers and help them adapt to their evolving needs.

However, in the past two years, Uniqlo has experienced a notable decline in mainland China, its second-largest market after Japan. This trend raises concerns about the brand's future in this important market. Over the last three years, Uniqlo's revenue share in Greater China has decreased, with percentages of 25%, 23.4%, and 22.4% respectively, indicating a continuous downward trend.

As of the end of August 2024, Uniqlo operates a total of 1,032 stores in Greater China, with 926 of those located in mainland China. In the new financial year of 2024, Uniqlo will open 80 new stores and close 50 stores in the region. This marks a significant decline in the number of new stores, as net same-store sales in mainland China dropped slightly. 

Over the past year, Greater China's growth has strayed far behind that of other markets, as the brand's other global markets have seen a double-digit growth rate. During the same period, Uniqlo's performance in Greater China only saw a year-on-year revenue increase of 9.2%, reaching 677 billion yen (US$4.26 billion), while operating profit rose by 0.5% to 104.8 billion yen (US$ 670 million), according to the financial reports from its parent company, Fast Retailing.

In the second half of the year, sales in the Chinese mainland and Hong Kong markets were disappointing. The company’s analysis reveals that several factors contributed to this decline in operating profit, including weak consumer demand, unfavourable weather conditions, and product misalignment. Consequently, both revenue and profit took a sharp hit. On a brighter note, the Taiwan market thrived during the same period, achieving growth in both revenue and profit. 

As reflected in Uniqlo's financial analysis, reports and analysis also suggest that Chinese consumers are buying Uniqlo products less frequently than in previous years. Surveys conducted by Chinese media reveal that the primary reasons for this decline are price, quality, and style. As a result, many consumers are choosing more affordable alternatives due to economic slowdowns and a trend towards reduced consumption.

In light of increasing price sensitivity among consumers in China, Uniqlo is adjusting its strategy. The company is moving away from heavy reliance on physical stores for growth and is instead placing greater emphasis on online channels, including live-streaming from its brick-and-mortar stores.

Campaign asked marketing and branding experts about Uniqlo's key marketing strengths in Greater China and their suggested strategies to help Uniqlo regain momentum.

Martin Roll
Business and brand strategist
Author, Asian Brand Strategy

The Uniqlo brand was set up to be all about the Japanese philosophy of simplicity and essentiality, and this is reflected throughout the brand’s marketing, communications, and operations.

It is impressive how Uniqlo has transformed from a single inherited men’s tailoring shop from Tokyo into a global casual wear giant and one of the most impressive brands from Japan and Asia today. Under founder Tadashi Yanai’s effective and visionary leadership, Uniqlo’s parent company Fast Retailing targets to become the world’s largest fast-fashion retailer.

One of the secrets behind Uniqlo’s success is its strong delivery system supporting a clear brand promise, and its relentless commitment to innovation. By clearly defining its brand promise to provide high quality, performance-enhanced, universal, basic casualwear at affordable prices and by running a robust and efficient supply chain to produce its apparel, the brand has created an environment where it continually exceeds customers’ expectations.

Building and sustaining a brand that is relevant and one that resonates with the customer base is one of the most difficult aspects of building a strong brand today. Uniqlo, with its presence in diverse markets, has managed to hold up well to this challenge of building a relevant and resonant brand personality.

The Chinese consumer shift

Uniqlo’s primary marketing strength in Greater China lies in its agile ability to respond to changing consumer behaviours and preferences. The brand has historically positioned itself as an affordable, high-quality choice with a strong focus on basics that appeal to a broad demographic. Uniqlo’s minimalist aesthetic and emphasis on comfort and functionality have consistently resonated with Chinese consumers, particularly within urban centres, where practicality is highly valued.

Its expansive physical presence, alongside a growing online strategy to complement the retail offering, has built a strong brand recall and accessibility among Chinese consumers.

However, recent shifts, such as increasing price sensitivity and the need for digital engagement, have tested the brand’s traditional model that serves it well globally.

To regain growth momentum in China, Uniqlo could explore several strategies:

• Enhanced digital engagement: Leveraging live-streaming, social media integrations, and partnerships with local influencers to drive online sales. Uniqlo could seek to deepen its connection with Chinese consumers through real-time interactions and by showcasing product features in a way that is engaging and relevant to a digital audience.
• Personalisation: Uniqlo could benefit from refining its product offerings to cater more closely to Chinese fashion trends and seasonal needs. Incorporating local tastes in style and colour schemes, and perhaps limited-edition collections inspired by Chinese culture, could resonate with consumers and create renewed excitement around the brand.
• Focus on sustainability: Chinese consumers are increasingly interested in sustainable and ethical brands. Uniqlo can strengthen its brand image by emphasizing its sustainability initiatives and making them a core part of its Greater China strategy. Uniqlo should communicate this effectively through marketing campaigns, packaging, and in-store experiences that could enhance the brand’s appeal.
• Enhance omnichannel: While digital channels are essential, blending online and offline brand experiences seamlessly will be key. For instance, Uniqlo could optimize its stores for a more immersive experience while linking it to the digital realm - offering services like click-and-collect, in-store virtual styling, or app-integrated loyalty programs. Initiatives that would be in line with the global brand position but adapted to the Chinese market.
• Pricing dynamics: Given the current consumer sensitivity, Uniqlo could explore more dynamic pricing models, seasonal discounts, or bundled offerings, especially targeting special Chinese holidays and shopping festivals like Double 11.

These strategies could help Uniqlo realign its brand with evolving consumer expectations, leveraging its strengths in quality and accessibility while addressing emerging preferences for digital engagement and personalization in the Chinese market.

Despite Uniqlo’s global reach and product standardisation, it still needs to constantly find new ways to serve the local fashion needs and preferences of its consumers across the globe. This will be a constant challenge for the brand’s leadership in the next decade.