Why Uniqlo is winning in China, while Zara is not

It has been one fiasco after another for foreign fashion brands in China. TOPSHOP, NewLook, Forever 21, etc, all eventually threw in the towel and fled the country. It does not mean the prominent players are not facing the headwind in this less crowded battlefield.

At a global level, the queen of fast fashion Zara has witnessed the decline of revenue growth since 2015. H&M shows signs of sluggishness and Gap performs the worst. But perhaps one silver lining here. Japanese giant Uniqlo made 16% uptick in 2018 after a severe plunge in 2016, mainly attributed by the robust gains from China.

Today if Europe is still the core market for Zara, China is already the crucial pillar for Uniqlo, representing 25% revenue share in 2018.

So how come Uniqlo is winning China, while Zara is not despite the fact that China is probably not the priority market for the Spanish brand? On the surface, especially in product design, Zara seems to do everything superior.

Fast fashion queen Zara is notable for its fastness in trendsetting. It takes only 25 days for a new piece of apparel to be flown to Zara stores around the world.

It even provides a wide range of categories, covering from apparel, shoes, bags, home decor, to perfume catering to men, women, and kids.

Local media discovered just by sampling the e-commerce data, Zara’s product types far outnumber Uniqlo’s across 6 categories.

The comparison of the top 10 best selling products online (albeit the monthly data could be biased) again indicates Zara offers more product diversity than Uniqlo:

  • 7 out of 10 top products from Uniqlo are just consistently T-shirt
  • 5 out of 10 top Zara products are T-shirt and the others could include perfume or piggy bag

So what could possibly go wrong? Local fashion experts tend to elaborate on reasons surrounding the fundamental difference in branding philosophy between the two.

They say Uniqlo’s products have no “personality”. They are so plain, simplistic, almost pyjama-like shape that you are unlikely making any fashion mistake by wearing them. It deeply strikes a chord with mass consumers in China, especially lazy men who hate to think about clothing mix&match (recall our above example:  5 out of top 10 Uniqlo products are men’s clothing) or women in older age group in bigger sizes.

Uniqlo also puts comfort in front of style. It does not care much about high-frequency fashion updates, but focusing on maintaining those few “Hero SKUs” which can generate sustainable sales revenues.

Though it holds the principle of “less is more” dearly, it creates an amazing variety for its Hero SKUs. For instance, it is said a very popular Uniqlo Polo shirt would have 18 colour choices whereas Zara’s colour selection is usually up to 3.

On the other hand, Zara is a brand brimming with “flowery personality”. It acts like a fashion playbook filled with cascading style themes which dazzle the eyes and trigger impulsive purchases. A typical Zara consumer journey might be:

  1. have a desire to buy apparel but no idea what to look for
  2. browsing the endless styling possibilities in Zara
  3. feel intrigued
  4. make the purchase
  5. but very likely end up hating it, which lead to high return rate or hide it somewhere into the closet as local fashion experts said most Zara styles would usually look attractive on a tall and thin body figure

In contrast, many Chinese consumers would easily fall under the charm of Uniqlo due to its convenience of one cookie cutter for all, then become repeated buyers. So their fashion tastes are stable and actually know what to expect or buy when they visit Uniqlo stores. And any fashion retailer would tell you the vital importance of the retention of your loyal customer as the costs of acquiring new customers rise steadily in China.

Although the theory of branding philosophy would not be able to explain the whole competitive dynamics between the two brands, it sheds some interesting lights on Uniqlo’s new found vibrancy in China.

By: Cecilia Wu