Uniqlo is a Japanese based casual clothing designer and manufacturer and became a fully owned subsidiary of Fast Retailing and has extended its operations in several countries such as Australia. The company has its origin as a Yamaguchi-based enterprise that was established in 1949 and only stocked men’s clothing in its shops. However, in 1984, the company started retailing casual wear that was unisex in Fukuro-machi. However, as of 2005, Uniqlo expanded in overseas territories in countries such as Australia and the United States of America with total sales scaling all the way up to the tune of $4 billion in 2006 and became number five among the top international retailers joining the list of other reputable companies such as H&M.
The Hennes & Mauritz AB commonly known as H&M is a multinational company in the clothing retail industry that has roots from Sweden. The company was established by Erling Persson in 1947 when it operated its first store in Vasteras. One particular shop referred to as Hennes was responsible for retailing exclusive women clothing. The company went further in acquiring Mauritz Widforss which led to the incorporation of menswear fashion in its product portfolio is popular for its fast-fashion apparel among women, teenagers, and men among other niches. H&M operates in more than 60 countries and has more than 4500 stores and employed more than 130,000 employees in 2015 (Duncan, 2017). The company has been ranked as the second largest global retailer in clothing. H&M has a substantial online presence with more than 30 countries having access to online shopping. The report analyzes the market rival of Uniqlo and H&M in the Australian market.
The first part of the report looks at the market structure of the clothing industry in which both Uniqlo and H&M operate. Issues such as barriers to entry such costs associated with land use and land prices in Australia are analyzed as one of the entry barriers. A detailed analysis of the market share by both companies is also looked in this part of the report. The second item analyzes the growth strategies employed by both companies where there were similarities in growth strategies by both companies as both aimed at increasing the number of stores as part of their growth strategy. Also, the use of online platforms as part of the growth strategy is looked at particularly in the case of Uniqlo. The last component in the first part is the pricing strategies used by both companies. H&M employs the cost-cutting pricing strategy enabling it to offer lower prices compared to those offered by its competitors. Uniqlo, on the other hand, uses non-pricing strategies such as media campaigns and promotions to lure and increase their sales target. The second part deals with the conclusion that highlights the summaries of other parts together with discoveries and recommendations that could help improve the market under which both companies operate.
The report uses secondary sources as sources of information. There has been the use of data from individual company websites entailing markets share, profitability and sales margins to support the information provided in the report. The report has adopted the descriptive design where other sources of information have given detailed information regarding Uniqlo and H&M.
Hennes & Mauritz commonly known as H&M is a Swedish based fashion retailer and adopts a pricing strategy that is based on the needs of customers and in this case uses low prices and quality fashion (Pandey, 2017). The main question is how the company manages to strike a balance between quality products and low price. H&M attains this through outsourcing production to nations where labor is cheap and readily available. The outsourcing is organized in different countries depending on the products and their lifecycle. For instance, for high fashion products that target the European market are manufactured in Turkey since the life cycle of such products in such countries is short. Also, other factors under consideration include short time involved in transportation and low levels of risk facilitate production of basic products in Asian countries (Pandey, 2017). H&M also conducts cost control mechanisms and measures. The brand by H&M is stocked in-house developed through fast fashion commodities and collaboration with designers in what is known as one-time collections. On the other hand, the large inventories comprising of basic products sourced from countries such as India and its surroundings come with a price that is much lower compared to its rivals enabling H&M charge low yet reasonable prices compared to the prices offered by its competitors.
Uniqlo one of the largest clothing store in Japan provided solid ground for its commercial incumbency in the global apparel market by producing a variety of casual wears that are trendy. In expanding its business operations locally and in overseas territories, the company established retail stores totaling over one hundred in other nations and Australia happened to be one of the locations (Huang, Kobayashi, & Isomura, 2014). The use of the SPA model as part of business strategy enabled Uniqlo to achieve substantial growth in both the Japanese and Australian market (Dutta, 2014). The prolonged deflationary situation in Japan and an increase in sales tax made Uniqlo adopt the inflated pricing strategy. The management recognized the need to use such a measure in business to combat the rising costs of production while aiming to boost revenue earning capacity and general profit levels for the company. The strategy has been on the use as management evaluates it to see if could revive commercial performance in the long-run
Uniqlo, on the other hand, uses non-pricing strategies such as advertising campaigns in its Australian stores hoping they will get viral thus lure customers to visit its stores. The first market campaign entailed the use of digital billboards carrying a number code that changed rapidly. Customers were required to take a picture of the billboard with their phones which captured the code and automatically connected them to the campaign’s website. It is upon redemption that the first 200 customers to engage the code every day in all billboards get awarded a free Heattech top that can be redeemed in a store having the coupon.
On the other hand, customers who fail to belong to the 250 get promo codes to be used in online stores, and they are gifted with finances for off purchases over $50 (Huang, Kobayashi, & Isomura, 2014).Such a company is stipulated to run for a particular time frame with the aim of enticing new clients to try Uniqlo products. The UMood is another campaign that was used in the past where customers were required to sit in booths that had brain detectors that could gauge reactions depending on a variety of photos. The mood of the customer would be predicted, and the color of the t-shirt would be recommended.
The pricing strategy adopted by the two companies are different as H&M uses the cost strategy where it manufactures its products where labor is cheap such as India for the basic commodities. However, for the high-quality fashion products, they are produced in Turkey as such products have a short lifecycle there. Using the reduced cost of production technique H&M can charge low prices for its high-quality fashions compared to its rivals who charge high prices for the same products yet the quality is identical. On the other hand, Uniqlo employs a series of pricing and non-pricing strategies for its products. One pricing strategy that Uniqlo is that of increasing prices to offset the increased taxes on the part of the company which has the effect of making Uniqlo products expensive. The non-pricing strategy entails the use of media campaigns such as digital billboards where consumers are awarded gift hampers and cash for buying more from the company.
The cost pricing strategy is recommended where a company should produce and manufacture its products from regions where production costs are low. This would help the company charge low yet reasonable prices due to the fact the costs of production are low. It is through low prices for clothing that many customers will be lured to purchase such products.
The Australian fashion industry in the short-run is characterized by constant disruption developed by new technologies and competition based on innovation (Mentha, 2016). Thus, there is no one prescribed formula to attain success in this context, and conventional retailers have to strive harder to unlock the physical store in a move to combat the online retailers and shops. The online retail stores continue to grow which has led to the loss of market share to retailers in the northern hemisphere and this calls for more radicalization in the Australian fashion industry. The big players in the market continue getting bigger while the smaller players are on the other side of the spectrum. This leads to a middle ground where it will prove hard for middle-sized retailers to trade. In such an environment, one of the riskiest ventures will be for wholesalers as retailers will eliminate the middleman and directly source the fashion ware from manufacturers.
The increased downward pressure on both profitability and sales will prompt large retailers to continue purchasing from local and global manufacturers cutting out wholesalers. As online retailing continues to gain momentum, it is important to think of the future of traditional retailing. The question of whether the physical store is dead is crucial in this matter. It is important to note that physical stores are not dead and they have the potential of becoming useful weapons available in the arsenal of traditional retailers. However, unlocking the potential of such stores will command substantial investment and innovation. The dependence of store to act as distribution centers for products seems to be diminishing in the advent of digital media in all forms. The future of the Australian clothing industry is based on the concept of adaption and change. The frequency of innovation and the disruption it brings along with it will continue, and customers’ demands will keep rising. To thrive in such an industry, retailers have to learn to respond fast enough to threats and opportunities by developing their innovations through strategy development, building capacities and adopting particular initiatives that are inspired by insights generated by market data.
Global retailers such as Uniqlo and H&M are experiencing lofty growth pass by in Australia together with the margins as they move to smaller regions. The advancement of such expansion plans along with the increase of offshore retailers translates to having incumbents such as Myer continue losing market share. The weakening of the Australian dollar in the past few years, coupled with a fall in demand over winter and spring have all led to the decline in margins. It is the strength of the Aussie against the pound following the UK moves to leave the EU that may raise the appeal for online retailers. Uniqlo and Zara alone account for 6% of growth in the apparel sales in Australia in 2016. However, the sectorial share by domestic retailers fell from 13% to 2%. In 2015, Uniqlo’s gross margins dropped from 55% to 53%. However, Uniqlo remained above the set average of 48% (Mentha, 2016). Part of this drop was linked to the decline of the Australian dollar against the greenback as most of Uniqlo’s products are processed in China.
Government regulation and intervention as essential elements of planning and zoning are crucial in creating a vibrant and healthy business atmosphere. However, the current system seems overwhelmed with inefficiencies that have led to sub-optimal results for both communities and business enterprises. Planning systems have been found to generate unnecessary barriers to entry, expansion or diversification. Restrictions or exorbitant land prices can limit the number operating model or size of businesses. The land is one of those costs of doing business that cannot be avoided. Implementing policies that raise land prices or having restrictions that limit the use of land are barriers to entry for many business enterprises in Australia. It is a cost that needs significant resources to overcome despite Australia having abundant land yet land prices in Australia are the highest in the world.
H&M has been able to grow successfully due to the robust product offerings which it avails to its consumers across the globe in both emerging and existing markets (Duncan, 2017). The company also takes pride in the growth of its brands through new concepts. In growing and expanding its operations in other countries, H&M has been using various expansion strategies depending on the nature of a political will in such countries (Anderson, 2008). In countries that are politically stable, H&M has managed to benefit from the competitive advantages associated with low-risk levels and constant revenue margins.one of the growth strategies that have enabled H&M to grow is opening close to 10% more stores annually. The current growth strategy by H&M entails increasing the number of stores that use its brand such as COS, Cheap Monday and Weekday among others.
Uniqlo claims the leading position in China in fashion retail for three consecutive years in a row. One of the factors that have led to such tremendous success is the use of local-store management policy which has not only successful but effective (Fast Retailing, 2018). In Australia, the company has also managed to be successful due to its stores being able to customize products that match the needs and climate of Australians, reduction of unnecessary inventory and general improvement in its profitability. The weekly meetings conducted in its stores have helped the company resolve problems and improve Uniqlo’s performance ratios (Fast Retailing, 2018). The Australian market has the potential and Uniqlo continues improving its operation structure in the past two years to tap into such benefits. The ongoing slowdown global economic performance led Uniqlo to set growth targets with a span of five years aiming to collect more than 1 trillion in its annual revenues. To ensure that such growth strategy comes to fulfillment, Uniqlo planned on opening more than 100 quality stores annually that aim at improving individual sales and profitability per store. Uniqlo also aims to create a network with more than 1000 stores in both China and Australia in the 2021 fiscal year. The company is also targeting to expand its e-commerce by having the proportion of online sales increase from 10% to more than 20%.
The business for both companies should grow by differentiation. Product differentiation is vital particularly in the field of clothing where different fashion should accommodate the tastes and preferences of different people. It is through product differentiation through customizing the fashion to cater to all genres that both companies will be better positioned to attract a new deal of customers while maintaining the existing ones. This could go a long way by also offering different prices for the products in different regions. For instance, in the affluent areas, the products should be charged higher while in places considered to be of low income they should charge reasonable yet low prices. Differentiation will ensure that all aspects of the market are incorporated enabling the companies to reach customers that would never be achieved thus opening up new markets for their fashion products which translate to the growth of such companies.
Conclusion
The Australian fashion retail market is highly competitive with companies such as Uniqlo and H&M striving to outdo each other by providing quality products and a variety of fashion ware to lure customers to purchase their products. The companies use a variety of pricing strategies to establish a competitive edge in the market where some such as H&M use cost-cutting price strategy to make sure that their products remain relatively low compared to those of its rivals. Uniqlo, on the other hand, employs media campaigns and promotions to lure customers to purchase its products alongside increasing the price of its products to incorporate increased taxes and increased the cost of business in its prices. The use of online platforms has to turn out to give such companies a competitive edge over their traditional retailers who use physical stores to sell their products. Both companies also increase the number of stores annually as part of their growth strategy and this has seen them command a large share of the market as customers that could not be reached can now be reached through such stores being established in remote areas and new countries. Differentiation in the clothing industry is highly significant as it will enable a company to customize products to satisfy the needs of local markets.
References
Anderson, S. (2008). International Growth Strategies in Consumer and Business-to-Business Markets in Manufacturing and Service Sectors. Journal of Euromarketing, 15(4), 35-36.
Duncan, E. (2017). H&M Group – Statistics & Facts. Retrieved from Statista: https://www.statista.com/topics/3733/handm-group/
Dutta, S. (2014). Uniqlo’s unique pricing strategy. Retrieved from The case center: https://www.thecasecentre.org/educators/products/view?id=124993
Fast Retailing. (2018). Uniqlo Business Strategy. Retrieved from Fast Retailing: https://www.fastretailing.com/eng/group/strategy/tactics.html
Huang, P.-y., Kobayashi, S., & Isomura, K. (2014). How UNIQLO evolves its value proposition and brand image:imitation, trial and error and innovation”. Strategic Division, 30(7), 42-45.
Mentha, K. (2016, June 10). Australia: Fashion retailing and wholesaling in Australia. Retrieved from mondaq: https://www.mondaq.com/australia/x/499340/Industry+Updates+Analysis/Fashion+retailing+and+wholesaling+in+Australia
Pandey, N. (2017, December 4). Pricing strategy of H&M. Retrieved from Linked in: https://www.linkedin.com/pulse/pricing-strategy-hm-naman-pandey/
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