Uniqlo chief admits defeat on higher pricing strategy

Uniqlo: * Japanese casual wear designer, manufacturer and retailer. * Created in 1949 * The brand was a men’s shop at it’s beginning and started selling unisex casual wear in 1984. * Owned by Fast Retailing Co. since 2005 * Tadashi Yanai (Fast Retailing) / Japan’s richest person * They operate in 16 countries globally including Japan with almost 1,600 stores, Canada being the latest country Uniqlo plan to enter in Fall 2016, United Kingdom and China being the first. * Name UNIQLO : Unique-Clothing -> Uniclo -> However, in 1988, during work between Hong Kong and the brand, staff in charge of registration misread the "C" as "Q", and that is how the brand name was born, changes through all Japan

Strategy in Japan:
Evaluation of the company’s strategy in Japan:

What they did good * Uniqlo is known for Developing Products of Exceptionally High Quality * Product Development Based on Customer Feedback ex: HEATTECH products refined each year based on customer feedback * Material Procurement from Around the World high-quality materials at low costs

* Also known for their good consumer services / in-store experience is over-the-top ex: All retail associates at Uniqlo stores worldwide are trained to hand your credit card and receipt back with both hands, as it is common in Japan.

* Becoming Japan's Top Brand by Expanding Urban Market Share * Boost Market Share in Promising Urban Areas * UNIQLO's Successful Large-Scale Store Mode * Uniqlo brands its innovations
HeatTech, a thin, comfortable fabric developed with a material science firm that turns moisture into heat.

* Expanding UNIQLO International
- Expanding UNIQLO's Presence in Global Markets
- Building the Brand through Flagships

* Brand Image
Novak Djokovic; Pharell Williams

* Slogan (Made for all) and Color Bar

What they did wrong
Since years, Uniqlo was known by international press from bringing good news, with rising sales and profits each years.
But the news dropped : Uniqlo’s profits fell by 30% to 20% between 2015-2016. Therefore, Uniqlo’s auction fell by almost 13%

Strategic Mistakes

Price * Price Hikes (in the past 2 years), with prices rise by 5% (2014) and 10% (2015) : in part to reflect changes in foreign exchange rates & rising material costs
= proven to be a mistake: * company’s strategy of « price should reflect fair value » : Customer were drove away -> store customer traffic in Japan dropped by 6.3% (09/2015 - 02/16); lost its budget-minded consumers they didn't agree that products with higher prices reflect fair value; * Change of « simple and clear pricing » : consumer were used to 1,990yen and 2,990yen for most of the product -> price too different from what they were used to (2,490yen) * Try of Weekend-only discounts : didn’t worked because they were used to Low prices throughout the year * Problem Overseas strategy : Huge sales through months, including in France; winter products such as raincoat and sweater prices fell from 79euros to 49euros until they reach 29euros; it may seems great but that creates lose of confidence of the consumers; not enough renewal of it’s collections overseas; luxury line of products, didn’t work

Company * Lack of business owner’s perspective forgotten : * each section of the Uniqlo were focusing on themselves, separate divisions * Each focus on numbers to give to the headquarters
Saying what’s wrong means takes initiatives

Market * Market in tough situation (not well-made for raising prices) : 2014 already problems but were saved thanks to a cold winter, so strategy continues in 2015 -> Higher costs & Lower gross profit margins * Even T-shirts on sale for $5.90 on its website were struggling to be sold in Japan : cautious consumers, bracing for tougher financial times * Line of HeatTech products didn’t work as expected in Japan for 2015 / Winter came to late * No growth (Sep-Feb) * ecomerce profit plunged (2015-2016) * Competitor’s Muji : Rising in Japan / sells casual wears but also furniture and toiletries * Overseas market : losses due to a stronger yen in the US & Europe, slowdown in China & South Korea / When the yen decrease, the cost overseas rise

recommendations to the company: take the example of Uniqlo in other country

Changes * Return to low prices throughout the year / « because the Japanese economy is certainly not strong and people have been struggling for a long time » Yanai had said in April * Return to simple pricing * how can they sell value-added products for lowest possible price * Low prices side until they come up with products whose value justifies higher prices * Lower prices alone will be insufficient to win over shoppers; Uniqlo needs to make sure quality doesn’t suffer as it cuts prices. Deteriorating quality would likely increase customer defections. * Innovations * Reform in the Uniqlo’s organizational structure : no more separate division with their own executives managers. Now small team (5-6ppl) assigned projects held accountable (costs&training) : aim = business owner’s perspective in each workers

Payoff? * Fast Retailing auction rose to 3.9%