Six years ago, the Japanese fast-fashion brand Uniqlo joined the largest online sales platform in China Tmall, which is affiliated to Alibaba.com. This year, Uniqlo has taken part in the “11th November” a.k.a “National Single’s Day” named by Chinese New Generation for the second time and made an incredibly great success: 100 million USD for one single day at its sales peak, which brought it to the champion of Tmall in fashion industry. Moreover, unlike other brands, Uniqlo attracted the largest customer group in their stores located in shopping malls as well. Uniqlo, therefore, has undoubtedly become a double ace both online and offline.
A Growing Trend in Offline Sales
Although more and more fashion companies are paying attention on online sales, Uniqlo is investing more heavily to its offline stores rather than reducing or neglecting them.
Regarding the “window shopping effect” of the offline stores, there have been a lot of discussions and it seems a consensus that online sales platform will leave those offline stores with poorly little space to stand a foot. Such point has been reconfirmed by the fact that many stores of world famous brands have been closed in recent years. Is the future for offline stores getting darker? Uniqlo says no.
Uniqlo is speeding up in opening new stores. In 2016, it is said that Uniqlo will expand its offline business at an unprecedented speed and the number of new stores will be increased by 30% compared to this year. This mainly resulted from the success of Uniqlo App and its O2O sales. By far, Uniqlo stores are almost located in tier 1 and 2 cities while the users of its App and those who visit its flagship online store on Tmall are from all around the country. So there comes an idea “App comes first, Store follow thereafter”. Through the promotion of App, the brand effect has been improved and customers are hoping that Uniqlo will open new stores in their cities. Besides, online data can also provide consulting information like the location and user activeness for Uniqlo staff to decide where and at what pace the new stores will be opened.
However, here comes another question, how can Uniqlo avoid the “internal competition” between its online and offline sales? Firstly, as we can see in both sales channels, there is no price difference. So unlike many other companies, there actually exists no real “competition” between these two modes. Secondly, there are many ways of attracting customers to go shopping in offline stores. Uniqlo App provides mini map to show the location of its offline stores nearby and its bar code is specially designed so that customers can only scan it in offline stores. Thirdly, Uniqlo adopts a specific discount rule: “Specific item plus specific time”. Specific item means discounted item both online and offline are specific and with different styles. Specific time means the time for online and offline discounting is not same, so if customers miss the time of online discounting, they will still have opportunity to get the same discount rate in offline stores.
Further Review on Uniqlo App
A not-so-accurate calculation shows that Uniqlo App has been downloaded and installed for approximately 3 million times. Supposed there are 50% active users who use this App once per month, this may probably bring a quite good sales volume. Nonetheless, Uniqlo never cares too much on the order conversion rate or real sales volume brought by App, its primary purpose is higher downloading and installation rate, especially in the regions where there is no offline store so that wherever its new stores are located, it will soon get a large fan group and therefore reduce the cost of early promotion and propaganda.
For this purpose, Uniqlo actively promotes its App to customers in its offline stores. Only in this year, in nearly each offline store, there have been three to four promotion activities led by store managers to promote the installation of Uniqlo App. This has been a general purpose for all Uniqlo staff.
As the data indicate, from 15th April to 1st May 2015, during which period Uniqlo App was started as an O2O tool, every 100 customers visiting Uniqlo stores have downloaded and installed its App and have actually purchased some items. The way of promotion is also quite interesting. Cashiers and in-store broadcasting constantly reminded customers of installing its App to get more discount and bar code is specially designed so it can only be scanned in store. To fulfill this aim, Uniqlo had made training courses for all staff in large scale before the App was brought into practice. It is also obvious, like what is mentioned above, there is no “internal competition” or complicated allocation of profit. With the application of Uniqlo App, both online and offline sales have been prominently promoted.
From the initial period, the founder of Uniqlo has believed that by simply “copying” other fast fashion brands like Zara or Gap, it would never get “real success”. Then came the unique Uniqlo brand value: “Made for All”, which means it would produce clothes with basic design style that everyone could afford to. This is almost totally different from the design idea “Always Innovative”, which is widely shared by fashion industry. This requires Uniqlo to keep improving its supply chain and application of new material. Meanwhile it brings a weird phenomenon that there is no membership system and no credit system in Uniqlo. For Uniqlo, all customers are same, are friends, if not God. No matter how many times a customer has visited its stores, he/she will be treated equally. This is the strangest but easiest logic to understand.
What Can We Learn from Uniqlo’s O2O Practice?
1. Online/offline order conversion rate is not high. Uniqlo has made an attempt to allow customers to place order online and receive the purchased items in offline stores but the real conversion rate was not high. It is mainly because the logistics cost in China is low and customers prefer to receive items at home or in office. Secondly, offline stores and online sales platform are not interconnected well enough and therefore from the operation point of view, the management cost would be even higher. Besides, the extra cost to set a specific space as warehouse for online purchased items was not a wise option for Uniqlo either.
2. Offline stores can promote the local customers to purchase online. Data show that where the number of offline stores is high, the online sales volume is large accordingly because of the in-store experience and higher acknowledgement of brand.
3. Online sales mode is pacing the way of opening new offline stores. Uniqlo opens 80 new stores per year on average, which largely needs the growing customer base online firstly.
4. There is no style for online sales only. Unlike other brands which provide special style for online platform, Uniqlo offers no special style or special discount to its online store, because it believes this is the best way to keep its customers’ loyalty to the brand.
5. The cost for online sales is very low. The cost for online regular promotion is no more than 1000 RMB (roughly 160 USD) per day. Even with the cost of Diamond booth of online exhibition, the cost is strictly limited to 100,000 RMB (roughly 16,000 USD) per month. Except for the promotion cost, its gross profit is also seriously controlled. During this “National Single’s Day” promotion period, Uniqlo has sold out 10 million items, but after 11th November, its sales speed was sharply slowed down. Why? Because its inventory for online sales is controlled to keep a reasonable gross profit. Generally, the cost of online sales is 5% lower than offline sales. What’s more, Uniqlo has kept a fast turnover rate. The average rate is 83.7 days, which is 50% less than its Chinese competitors.
6. The purpose of online sales is a doubled sales volume. By far, the online sales volume is just 6% of its total volume, but in future, this rate will be increased to 20% to 30%. Besides, Uniqlo is searching for new way of improving interaction among customers. As we have been told: “In future, customers can share their experience among themselves and this will be as effective as direct promotion for our good reputation, however on the other hand, bad stories will be spread quickly too.”
Edited by Mall China