(Chinese Version)

Editor’s Note:

In its early phase, VANCL tried to imitate the operation pattern of UNIQLO. However, the operation system of UNIQLO is the aggregated result of more than 30 years, including its massive expertise to manage such a big commercial system. VANCL, on the other hand, has been too hasty to ignore the core value from three aspects, namely the production part in China, the consumption part in Japan and the global supply chain in Britain, United States, France and New Zealand. Thus VANCL had no ensured quality in the first place, and ended up being a bubble.

The famous clothing brand UNIQLO has just announced its cooperation with Jing Dong (JD). The announcement coincides with JD’s bonus period after it is listed on NASDAQ. The cooperation standard is very high. To deal with this big contract, Liu Qiangdong, founder of JD, showed up in the signature ceremony himself. It can be seen that JD puts great emphasis on their cooperation. UNIQLO has always been cautious in selecting the right distributing channel, and this timely entrance, in sync with JD’s fast development period, shows the decisiveness and shrewdness of the management team in UNIQLO.

Even though UNIQLO has abundant cash flows, it preserves a moderate attitude towards channel expansion and never makes any hasty decisions. When it has noticed the maturity of JD’s clothing market, UNIQLO cashes in to take advantage of the bonus of JD’s development. The market activity itself is steady and smart, but its decision-making process is insightful and decisive.

A few years ago, VANCL once claimed it would acquire UNIQLO at a certain point. Now, VANCL is launching its storytelling mode while UNIQLO remains steady and smart. As for the latter, there is no sparkling advertisements or sentimental storytelling campaign. Even though VANCL had started its cooperation with JD earlier than UNIQLO did, VANCL somehow disappeared during JD’s bonus period.

The god of operation is no bluffing: UNIQLO never misses a single bonus period

As the prototype in the clothing manufacturing and retailing industry, UNIQLO has its edge in terms of operation and management. It takes great effort to manage all its stores, factories and employees. VANCL mistakenly regarded UNIQLO as a bargain and leaned too much towards price rather than quality. While Tadashi Yanai, CEO of UNIQLO, stated in his autobiography that UNIQLO is no bargain at all. After all, it’s no easy job to copy UNIQLO’s business mode.

In Tadashi’s philosophy, companies that are conventional and plain will vanish first in the market. Most people tend to ignore the innovation and methodology behind the simple style of UNIQLO stores. The insightfulness of UNIQLO can be demonstrated by simply looking at its decision in cooperating with two big online retailers.

A few years ago, Alibaba noticed the fast development of JD. In order to catch up, Alibaba brought forth T-mall and utilized Taobao to inject a large number of online retailers into this new platform. As a result, a two-year-plus bonus period of T-mall ensued. Unlike other conservative companies, UNIQLO seized the opportunity to cash in. Years later, when many other big companies entered T-mall, UNIQLO had already captured a big portion of market. Of course, UNIQLO’s success is based on its solid supply chain. When many traditional companies suffer from the shortage of supply chain, UNIQLO has no such problem.

JD’s cooperation with Tencent allows it to enter WeChat and Mobile QQ. Later on, after JD had successfully made its way to NSADAQ, a new era came as well. With the help of Tencent’s communicating system, JD’s clothing market soared. UNIQLO seized this crucial opportunity and captured the bonus of this transitional period. In JD, the open POP platform develops at the highest speed and within this platform, clothing section is the most significant one. One is bound to be impressed by the sophistication and shrewdness of UNIQLO’s decision-makers.

 Unfocused marketing made VANCL lose opportunities

Compared with UNIQLO, VANCL failed to utilize such bonus because it focused more on sentimental narrative, and tried to regain trust from consumers by simple words. Chen Nian should have studied more from UNIQLO and Tadashi. Now his claim to purchase UNIQLO has become a joke. One can tell that from the gap between their management styles and insights.

When T-mall enjoyed its bonus period, VANCL put loads of money into advertising to build its own online retail empire. The high advertisement expense formed a stark contrast with minimal net profit rate. VANCL lavishly spent the investors’ money to gain exposure and the party went to the peak as Han Han and Wang Luodan appeared on VANCL’s posters. However, VANCL didn’t choose to enter T-mall immediately to utilize its bonus, while its edge in capital and advertising was bled dry by independent online retailers. Indeed, VANCL’s operation became an endless money-sucking black hole.

VANCL once put some advertisements on JD. In one salon, Liu Qiangdong asked Chen if he enjoyed it. Chen replied, yes. However, those advertisements were redirected to VANCL’s official website rather than retailer stores under JD, because Chen was so obsessed with developing his own platform, that he didn’t give enough attention to JD. In 2011, JD began to stand out among retailers and until 2014, when JD introduced its open platform and diversified the categories, VANCL still failed to observe the tectonic change in the market. Chen’s reliance on T-mall didn’t achieve much sales in return, and Chen seemed to neglect JD’s presence.

UNIQLO is more open-minded. The selection of retailer is profit-oriented. In this sense, even a Japanese company can do better than its Chinese counterparts. They, along with waned Japanese companies such as Panasonnic, should learn from UNIQLO and reflect upon their own problems. From my perspective, T-mall is already saturated while JD is the new market. Its bonus period may last for two to three years and those late-comers can still make some profit. Of course, things will definitely be easier for those early birds.

 Do you dare to follow UNIQLO？

Online retailing has become the mainstream of retail industry. In the meantime, JD and T-mall are becoming the two biggest platforms among all online retailers. UNIQLO is going to store its inventory in JD’s warehouse and such strategic entrance will guarantee UNIQLO a crucial position in this whole game. In return, JD has built a storehouse for UNIQLO that covers 10,000 square meters with a maximum capacity of a million piece of clothes, which means that these clothes can be delivered to customers within 24 hours across China. Such service will overshadow many Chinese manufacturers that don’t have much confidence in their operation capabilities. Even though they can improve customer’s purchasing experience, they are not confident enough to put inventory into JD’s main storehouses around the country and the core rub is insufficient supply chain.

Manufacturers and companies usually put particular products or brands online to protect their offline businesses. However, UNIQLO has adopted the same price, same type and same promotion policy. In this way, both online and offline markets are integrated into one asset. The thorough implementation of SPA model is indeed impressive.

It also shows that UNIQLO is trying to simplify its product management mechanism because complicated management can cause big chaos in supply chain. UNIQLO has succeeded in integrating online retailers and offline stores, removing their potential conflicts and increasing its share in the market.

The online retail map of UNIQLO also confirms what Tadashi has said about UNIQLO, and UNIQLO is no bargain at all. After all, UNIQLO has been loyal to its unique philosophy: steady and cautious, something worth learning for many Chinese companies. As online shopping boosts, customers are not solely looking for cheap price, while purchasing experience is gaining more weight. The core of online shopping experience is the supply chain. This time, Tadashi and Liu tacitly converged.

In this era when Chinese customers stretch their hands all over the world, when UNIQLO settles most of its factories in China, Chinese clothing companies should ask themselves: Why could UNIQLO seize the opportunities in bonus periods while they hesitated and why could UNIQLO put its inventory in JD’s storehouse while they are still looking for the right platform?

In order to learn from UNIQLO and even surpass it, we should first look at its operation philosophy and find out its core value. For example, focusing on quality, being smart in business and establishing one’s unique SPA. What UNIQLO has demonstrated can be learned and imitated. Online retailers and offline stores are not supposed to be mutually exclusive. Instead, they are just different shopping environments. UNIQLO successfully strike a balance between online and offline sales.

The secret of UNIQLO’s SPA mode

The SPA I am talking about here is not referred to as a form of message. It is actually an abbreviation for Specialty retailer of Private label Apparel. This concept was brought forward by GAP in the US and has been fully implemented by UNIQLO. This mode turns out to be very effective for UNIQLO and makes Tadashi the richest man in Japan. He is also named as the third generation of management icon. UNIQLO’s unique SPA mode consists of production, retail network, logistics system and product project. The whole system is based on the idea of sustainability. It has redefined garment industry with a standardized, industrial methodology.

Actually the SPA mode in UNIQLO is not simple at all. The whole system is fast and steady. R&D sector captures the latest trend and the product project sector is responsible for product and marketing planning. Production sector manages the factory while its logistics system delivers new products to the retailers. In this way, UNIQLO can accurately picture the customer demand and increase the efficiency of logistics by simplifying supply chains. In the meantime, its product projecting is able to set up a fashion trend while the effective management and strong executive team ensure rapid refund of capital.

To put it simply, the SPA in UNIQLO can be described as fast logistics, steady operation and accurate fashion perception.

In its early phase, VANCL tried to imitate the operation pattern of UNIQLO. However, the operation system of UNIQLO is the aggregated result of more than 30 years, including its massive expertise that serves such a big commercial system. VANCL was hasty in investment without a thorough understanding of the core idea in UNIQLO’s business. As a result, it suffered from its top-heavy system and almost killed itself. The price setting and choice of apparels was a total failure, since VANCL set the price only based on exchange rate, but ignored the production part in China, the consumption part in Japan and the global supply chain in Britain, United States, France and New Zealand, it had no ensured quality in the first place, and ended up being a bubble.

(The article is published and edited with authorization from the author @Liu Huafang, please note source and hyperlink when reproduce.)

Translated by Jackie Jia (Senior translator at Echo), working for TMTpost.