Live streaming has become Uniqlo's lifeline in China

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The fact that "Uniqlo's sales are not good anymore" has been lamented by various media outlets in the past month or two.

According to the financial report of Fast Retailing, the parent company of Uniqlo, both revenue and net profit achieved significant double-digit growth in the third fiscal quarter (March 1 to May 31, 2024). The growth covered many regions including Japan, South Korea, Southeast Asia, North America, and Europe. Only the performance of the Chinese market was lower than expected . In the first three quarters of fiscal year 2024, revenue in Greater China accounted for 22.1% of total revenue, which was lower than in previous years.

Isn’t this story line quite novel?

After all, when the global economy was just recovering from the epidemic, the financial reports of foreign brands all showed a trend of "global decline, but only Greater China soared" . Now the situation has changed, and when the Chinese people are determined to hold on to their purse strings, no matter what brand comes, it will not work.

What's more, Uniqlo's price hike at this critical moment is really a blow to Chinese consumers. Chinese netizens are not tolerant of overseas brands at all: China's housing prices are falling, but you, Uniqlo, are raising prices, so don't blame me for not buying from you.

However, as a household name and international brand that has been established for 40 years and has gone through cycles, it will certainly not be abandoned by the market so easily. Therefore, in the unremarkable performance of Uniqlo in China, we still found a bright spot: live streaming.

A few numbers: During the 618 promotion, Uniqlo's Douyin sales increased by about 30% year-on-year and double-digit year-on-year in Q3. Among them, live broadcast sales increased by about 50% year-on-year, and transactions accounted for 20% of e-commerce sales.

In short, UNIQLO's online sales in China account for about a quarter of its regional revenue , making it the market with the largest online sales share in the world. If it maintains this growth rate, live streaming is likely to become the main channel for UNIQLO's online sales in the future.

Looking at the strategic development of Uniqlo, it has always been steady and conservative, which is largely based on the personality of its founder Tadashi Yanai. He once said: "DTC brands are just the personal hobbies of entrepreneurs" and "the annual sales are no more than 30 billion yen."

This directly led to UNIQLO being very cautious about expanding any new channels. For example, for a long time, UNIQLO’s only online third-party channel in China was Tmall.

However, after the epidemic, online transactions have almost reshaped the global consumption pattern, and live streaming has become the mainstream way to reach young people. Uniqlo is obviously also actively adjusting its strategic direction to adapt to market changes. Therefore, this article will focus on:

• How to understand Uniqlo’s growth in live streaming?
• Is the growth created by Uniqlo through live streaming sustainable?
• What impact will it have on Uniqlo's subsequent opening of offline stores?

1. Live streaming for UNIQLO China: a short-term panacea?

At the beginning, Uniqlo’s live broadcast was intended to make up for the shortfall in store revenue in China, but it was not until 2022 that live broadcast was truly normalized.

On September 13, 2022, Uniqlo began live streaming on the Douyin platform, using the Douyin account "Handheld Uniqlo" to broadcast its brand live. The live broadcast basically starts at 6 pm every day and lasts for 4 hours until the early hours of the next morning. Uniqlo's live broadcast staff are mainly existing store staff, and have never cooperated with external anchors.

Image source: Uniqlo Douyin account

At that time, the media reported that Uniqlo, as a "key brand" that Douyin e-commerce wanted to enrich its shelves, was poached from Tmall. This was because Tmall's traffic dividend had peaked, while Douyin e-commerce was still in the stage of going from 0 to 1.

Uniqlo, which finally entered Douyin after waiting for a long time, seemed to recognize this new channel. Unlike most big brands at the time, it did not dump its inventory in the live broadcast room, but sold the new products of the season on Douyin.

The financial background of this behavior is that Uniqlo's single-store sales in China have not returned to pre-epidemic levels after the control was lifted . According to Nikkei News, from December 2022 to February 2023, Uniqlo's average per-store sales in China (including Taiwan and Hong Kong) fell 12% from December 2018 to February 2019 before the COVID-19 pandemic, to 169 million yen.

During the same period, Uniqlo's domestic business in Japan grew by 6% to 315 million yen, exceeding 2019 before the COVID-19 pandemic.

This trend has basically continued to this day.

In April this year, Ken Okazaki, the chief financial officer (CFO) of Japan's Fast Retailing Co., Ltd., revealed for the first time that it would close stores with poor revenue in the mainland market and open large stores in advantageous locations. He also said that after fiscal year 2025, "the net increase in the mainland may be low for several years." This is a little further away from the "3,000 stores" goal set by Yanai Tadashi. In terms of transactions, the recovery of China's business after the price increase was put on hold. "Low consumer willingness" and "product composition that does not meet local needs" caused Uniqlo to rarely lose momentum in the mainland market.

In the 12 months ending in August this year, net profit and revenue in the mainland and Hong Kong both fell sharply, and the performance of Greater China was entirely contributed by Taiwan. Pan Ning, CEO of Uniqlo Greater China, admitted for the first time that "(in the mainland market) we are facing the impact of white-label products."

Even the traditionally advantageous Tmall channel is showing signs of decline. After hitting a sales peak of 1.2 billion during the 2019 "Double Eleven", Uniqlo's sales during the "Double Eleven" period fell significantly in 2022 and 2023, falling back to less than 800 million yuan.

One of the reasons is that the rise of some domestic brands has eaten into Uniqlo's market share in some niche categories: for example, sun protection clothing, light down jackets and underwear are all facing the impact from "new consumer brands" such as Jiaoxia, Bosideng and NEIWAI.

At the same time, Uniqlo's revenue in Japan has once again set a record. In the first 12 months of this year, the revenue of the Japanese market reached a new high since 2019. Part of this is due to the surge in tourists visiting Japan. They buy without waiting for discounts and tend to prefer winter clothing, which has greatly increased profits. In Tokyo, which has set a record high temperature for several days, the Ginza store is still selling the hot-selling "HeatTech" warm clothing and "Ultra Light Down" advanced lightweight down jackets in winter.

Thanks to the hot sales of off-season products in the Japanese market, UNIQLO's revenue increased by 23% in this fiscal year compared with the previous fiscal year, reaching 365 billion yen. This is 45 billion yen higher than the previous forecast, and it will set a new record for the highest profit for four consecutive fiscal years. Although the domestic market in Japan has been sluggish for a long time, it still accounts for about half of the total revenue. For a long time, UNIQLO's single-store sales in Japan (including e-commerce business) have been almost double that of domestic sales.

Once again, Uniqlo hopes to boost its performance in China through live streaming, with its main focus concentrated during major promotions. Its intention to seek short-term performance growth is very obvious.

Data shows that UNIQLO's Douyin sales in November 2023 increased by 171% year-on-year compared to November 2022, and in June 2024, they increased by 111% year-on-year compared to June 2023, with sales exceeding 50 million. Overall, UNIQLO's peak sales on Douyin are mainly concentrated in the two shopping carnivals of "618" and "Double Eleven".

2. Can e-commerce only serve stores forever?

Uniqlo has always been very cautious about e-commerce.

Uniqlo's e-commerce business is divided into self-owned and third-party. The former takes place on mini programs and apps, and can be picked up at stores or expedited, but its main function is to collect consumer information as a reference for store openings, and sales are not an assessment target. The latter is mainly based on Tmall, and transactions on other platforms are almost negligible.

In 2016, Hu Guoxun, then director of the EC division of Uniqlo, said that "we will never supply exclusively to e-commerce." He said, "Unless there are some special products that are different online and offline, so that consumers can rest assured that the quality of online products is the same as offline."

It had been seven years since Uniqlo entered Tmall. Compared with other brands that were focusing on e-commerce channels and shouting about complete O2O integration at that time, Uniqlo's calmness and conservatism seemed a little special:

One detail is that during the "Double Eleven" period in 2016, all the goods in Uniqlo's Tmall flagship store were sold out and taken off the shelves on the morning of November 11. Uniqlo later stated in an announcement that customers who still have demand "can go to Uniqlo physical stores to buy."

This news was once considered a marketing gimmick of Uniqlo, but upon closer inspection, it is discovered that Uniqlo has always relied on offline transactions as its cornerstone, and has consistently maintained a rational and pragmatic attitude in protecting profits.

In 2015, Uniqlo’s flagship store on JD.com was closed just one month after its opening. As for the reason for the termination of cooperation, Uniqlo’s official response was that the cooperation was still to be improved, but to this day, Uniqlo has not entered JD.com again. The main reasons were the “choose one of two” policy and Tmall’s dominant position in the e-commerce clothing platform at the time.

At the same time, it also highlights that Uniqlo is very cautious in examining third-party channels - this can be seen from the generous conditions offered by Tmall: building an official website for Uniqlo to sell online, providing offline market channel data to more accurately select physical store addresses, etc.

At that time, the IT systems of Uniqlo stores and e-commerce were not connected, and the number of stores in China was less than 500. Some O2O businesses of online transactions + offline self-pickup still rely on additional logistics and distribution, which actually increases costs from an operational perspective. In addition, Uniqlo stores have their own plans for the display of goods, and there is no extra space for e-commerce packages.

However, Yanai Tadashi foresaw that e-commerce would eventually change the way people buy clothes. In order to adapt to the changes in consumer shopping habits in advance, Uniqlo continued to accelerate the opening of large stores in China, using it as the main shipping base for its O2O business . On the manufacturing side, Uniqlo launched the "Ami Plan" in 2017.

The so-called Ariake Plan is to cooperate with technology companies such as Google to predict transaction data and customer needs, complete preliminary proofing and production at the Ariake headquarters in Tokyo, and pilot sales in Tokyo. If the local response is good, it will be introduced to more markets - similar to SHEIN's "small order quick response".

During a visit to the headquarters in Ariake, Tokyo last June, the head of Uniqlo said that in the past, the innovation process of Uniqlo was that people from the headquarters would propose specific requirements, send them to the factory for proofing, and then take them back to see what to do. But after the headquarters set up a mini workshop, Uniqlo can make proofs on site at the fastest speed. "It only takes 10 minutes to walk from the work area to this mini factory to see what needs to be improved."

Nikkei reported that after the implementation of the Ami plan, Uniqlo significantly reduced the amount of each order and increased the frequency of orders. A head of a contract manufacturer said that including fabric procurement, it takes three months to produce a product, "only half the time in the past."

The effect of "small orders, quick response" is remarkable. Uniqlo's e-commerce transactions have grown from 6% in 2016 to 25% today, of which 40% of e-commerce revenue comes from O2O, that is, transactions that ultimately occur in stores. On the other hand, the growth rate of stores has reached its peak. From 2017 to 2019, Uniqlo's net increase in stores was more than 70 each year, and the number of new stores reached about 100 until the outbreak of the epidemic.

During this period, the development of Uniqlo's e-commerce and offline stores has formed a multiplier effect. In the era of live streaming, can Uniqlo continue to dominate?

3. How will live streaming change Uniqlo’s “offline-based” approach?

Meticulous display, rich and complete size selection, spacious and bright stores and smiling staff... These impressions of consumers are all manifestations of UNIQLO's long-term adherence to store-based operations. In 2019, when fast fashion was in tatters, UNIQLO opened 22 new stores in just one quarter, more than the three brands of UR, GAP and MUJI combined.

"The store manager is the operator" has always been a phrase that Yanai Tadashi often says. Pan Ning, who was a store manager, once told reporters that the smallest Uniqlo store has a turnover of 20 million yuan a year, and the flagship store can "reach several hundred million yuan", so "there is no difference between a store manager and an entrepreneur."

Growth Black Box visited several Uniqlo stores in downtown Shanghai and found that the slogan "Scan the code in the store and buy online" can be seen almost everywhere. When shopping on the website, the slogan "Pick up in the store and choose as you like" can also be seen frequently.

In addition, mini-program QR codes can be found everywhere in the store , such as on product display racks, in fitting rooms, and at fitting room queues. Consumers can scan the code to enter the mobile mall and select the appropriate products to add to the shopping cart.

Photo taken at the Uniqlo Nanjing West Road store in Shanghai. In terms of staffing, the role of the store clerks has become more like that of warehouse stock clerks. They will only come forward to talk to customers when they have needs. The once famous "service with a smile" is rarely seen.

Strictly speaking, these "shift to online" changes are still based on the store setting. Whether customers scan the code or place an order, they will definitely establish a link with the store.

But this is not the case with live streaming - the hosts of Uniqlo's Douyin live streaming room are not from any particular store, the discounts offered are usually applicable nationwide, and the transactions generated do not support self-pickup.

This means that unlike traditional e-commerce (referring to Tmall, WeChat mini-programs and JD.com), Uniqlo has not connected the live broadcast data with store information, and the packages generated by the live broadcast will be delivered by warehouses rather than stores.

In other words, live streaming transactions have no reference value for store operations and implementation. It is a completely independent channel.

Uniqlo live broadcasts in Taiwan are based on specific stores, and the content is also recommended rather than selling products.

So, will live streaming replace stores and become Uniqlo’s new strategy for expansion in China?

At least that's what it looks like from lower-tier cities.

In 2022, Tadashi Yanai once announced a business target of 3,000 stores and 10 trillion yen. The outside world believes that store expansion in the sinking market will be the key.

In the following year or so, Uniqlo accelerated the pace of opening stores in third- and fourth-tier cities , "especially those in the central and western regions," but it turned out that these regions lacked consumption power, so Uniqlo subsequently closed stores in these areas . According to Pan Ning, there were "about 150" stores that were not performing well.

This is unprecedented for UNIQLO.

According to Growth Black Box, Uniqlo executives believe that compared to Xiaohongshu, Douyin has greater potential to promote transactions in third- and fourth-tier cities. Therefore, compared to advertising on Xiaohongshu, Uniqlo is more willing to do more live broadcasts on Douyin.

Pan Ning revealed that future stores will change from opening new stores to renovating old stores, mainly expanding the area, with the goal of increasing same-store sales by 50%.

It is not yet known how much of this 50% will be contributed by O2O business, but if Douyin's live broadcast data cannot be connected with offline like Tmall, there will still be many challenges in achieving this goal.

4. Final Thoughts

Ohara Yoko, who is “the woman most respected by Yanai Tadashi” and who proposed the concept of “fashion economy”, once admitted in an interview that the popularity of Uniqlo around the world (mainly in East Asia) is largely due to the fact that “the world still pays attention to the living conditions of the Japanese” and they believe that “Japanese consumers value product quality and cost-effectiveness, and what the Japanese buy must be good products.” [6]

UNIQLO's success overseas, especially in the Chinese market, is largely due to the reputation of Japanese manufacturing. Secondly, its marketing approach featuring store services has also successfully strengthened UNIQLO's position as a "must-have wardrobe item for the middle class."

Live streaming has changed the venue of transactions and the meaning of experience. According to Yanai Tadashi's traditional pragmatic attitude towards technology, there is still a long way to go to transform live streaming into a brand that conforms to UNIQLO's "Lifestyle" lifewear brand concept.