MKTG 90037 Managing for Value Creation

Introduction

Uniqlo is a Japanese company that entered the Australian market in 2014, which focus on selling basic clothing items that cater to longer-lasting trends. Uniqlo is now the second largest fast fashion retailer in Australia (Figure 1). According to the 2023 Uniqlo financial report (Figure 2),  Australia's receivables and profits increased significantly, and sales performance was strong during this period (Results Summary for Fiscal 2023 (Year to August 31, 2023) | FAST RETAILING CO., LTD., n.d.).

Figure 1. Biggest Companies in the Fast Fashion industry in Australia

Note. From IBISWorld - Industry Market Research, Reports, and Statistics. (https://www.ibisworld.com/au/industry/fast-fashion/4172/)

Figure 2. Uniqlo’s Revenue in Australia from 2019 to 2023

Note. From IBISWorld - Industry Market Research, Reports, and Statistics. (n.d.). (https://www.ibisworld.com/au/company/uniqlo-australia-pty-ltd/428584/)

Women’s wear is the most important part in Fast Fashion in Australia. As styles change frequently, women generally spend more of their disposable income on clothing than men. Meanwhile, the target group's lifestyle to keep up with the trend makes them have a strong propensity to consume. So, they are also very price sensitive. Consequently, fast fashion typically holds more significant appeal to women.

This report aims to conduct a critical analysis of the value proposition and business model of Uniqlo's women's clothes in the Australian market through customer segmentation, market driver and value proposition, besides, the analysis of gaps between company offering and customer needs is shown at the end of the report.

Customer segmentation

According to the analysis of Uniqlo, the customers could be segmented by the following factors.

Figure 4. Customer Segmentation

The target group of this paper is women aged 15-34. Women are the most important consumers of Australia's fast fashion industry. According to statistics (Figure 3), in 2023, 60.4% of the Australian fast fashion market serves products focused on women's clothing, far more than men's clothing (22.0%). They have not yet achieved wealth freedom, they are in the low to middle-income level but want to keep up with the trend(IBISWorld - Industry Market Research, Reports, and Statistics, n.d.).

Figure 3. The Products & Services Segmentation of Australia in 2023

Note. From IBISWorld - Industry Market Research, Reports, and Statistics. (https://www.ibisworld.com/au/industry/fast-fashion/4172/)

Customer Persona

According to the customer segmentation, the analysis of Uniqlo’s customer persona can be shown as follow.

Market Drivers

Uniqlo’s market driver mainly focuses on three parts: customer demand and preferences, social and culture factors, and technological factors.

Consumer Demand and Preferences

Given that Uniqlo’s primary consumer demographic consists of middle- to low-income females aged 15-35, who exhibit a preference for high-quality, fashionable, and affordably priced products, Uniqlo’s apparel caters to this target market by offering items characterized by high cost-effectiveness and enduring trends.

Social and Cultural Factors

Firstly, as environmental awareness among consumers continues to rise, there is an increased willingness to purchase eco-friendly products. In response, Uniqlo uses sustainable fabrics and packaging materials and offers repair and alteration services to extend the lifespan of its garments, which has garnered favor among environmentally conscious consumers.

Technological Factors

UNIQLO invests significant resources in fabric innovation to bring evolving wearing experiences to customers, such as HeatTech technology, which brings 1.5x warmer than regular wear in winter. Additionally, advancements in the internet and digital technologies have led Uniqlo to develop omnichannel shopping experiences and intelligent inventory management systems. These advancements have significantly transformed the company's operational model and consumers' shopping behaviours (UNIQLO Business Model | FAST RETAILING CO., LTD., n.d.).

Business model and Value proposition

The business model and value proposition of Uniqlo in the report can be divided into five parts: customer value proposition, customer value creation framework, value chain, value disciplines and core competences, Value Proposition Canvas and Business Model Canvas.

Customer Value Proposition

After analyzing Uniqlo’s customer, Internal skills & Capabilities and Competitors, the customer value proposition can be shown as follow (Figure 5). One of the most notable features that separates Uniqlo from its main competitors is the technological innovation aspect, as Uniqlo's technologically innovative fabrics and high quality is what allows consumers to choose Uniqlo over many other fast fashion brands.

Figure 5 Uniqlo’s customer Value Proposition

Customer Value Creation Framework

Based on the Uniqlo’s company and customer analysis, the customer value creation framework is created as follow (Figure 6).

Figure 6: Uniqlo’s customer Value Creation Framework

Value Chain, Value Disciplines and Core Competencies

Figure 7: Uniqlo’s Value chain

Data complied from Yang (2020), Mirza et al. (2020), Tan & He (2019), Cai & Lo (2020)

Figure 8: Uniqlo’s Value Disciplines

Through an analysis of the Uniqlo’s value chain (Figure 7) and Value Disciplines (Figure 8), Uniqlo’s competitive advantages mainly concentrate on product leadership and operational excellence, but it also stays competitive through customer intimacy.

The principal strengths of Uniqlo’s products can be divided into three parts: innovative products, constant innovation and high quality. Its innovative products include HEATTECH, AlRism, UV Protection Clothing, etc., which are tools to add value and give the company a competitive differentiation(Ceccanti, 2023). It also dispatches its engineers to the countries of contract factories to assist in improving product quality, production processes and transferring textile experience (Mirza et al., 2020) and has a Customer Center to receive suggestions and improve products(Elizaga, 2016).

Operational excellence is also a competitive advantage of Uniqlo due to its low costs and cost-effective products. In an article, Su (Su, 2020)compares 31similar products from Uniqlo and its competitors and calculates their average price, finding that products of Uniqlo are the cheapest

Uniqlo also has various customer services to maintain customer intimacy, such as the Customer Center, sustainable development initiatives and online-offline engaging shopping experience.

Value Proposition Canvas

Figure 9: Uniqlo’s Value Proposition Canvas

Note. From IBISWorld - Industry Market Research, Reports, and Statistics. (https://www.ibisworld.com/au/industry/fast-fashion/4172/)

This Value Proposition Canvas mainly describes Uniqlo that provides comprehensive technology investigation, innovative, robustbess, utility and affordable clothing, as well as convient online and various clothes in order to meet different needs of customers. At the same time, Uniqlo also solves customers’ pain points in finding high-quality products, basic practical clothing, durable innovative fabrics. And also, it responds to market changes and customer needs by flexible adjusting production and offering various designs.

Business Model Canvas

Through all the previous information sources and analysis, we can summarize a Uniqlo business modal canvas shown in the image below (Figure 10). It is worth mentioning that Uniqlo has constructed powerful corporations with many outstanding material providers, technology companies, factories, designers, and brands that can support Uniqlo’s operation strategy and convey their value propositions to target customers.

Figure 10: Uniqlo’s Business Model Canvas

Note. From Mirza, M., Verma, A., Kee, D. M. H., Awatif, A., Qistina, F. N., & Aswadi, M. K. (2020). The Key Success Factors: A Case Study of UNIQLO. Journal of the Community Development in Asia, 3(2), 1–10. (https://doi.org/10.32535/jcda.v3i2.805)

Uniqlo’s Limitations

Although Uniqlo’s business model and value proposition are well established, there are still some gaps between company offering and customer needs, include the confliction between fast fashion brand and environmentally friendly, high-performing markets are predominantly in the Asia-Pacific region and insufficient product differentiation.

Although Uniqlo has sustainable development strategy, it doesn't change the fact that it is a fast fashion brand that generates a lot of resource consumption and waste in the production process.

Uniqlo's target customers are more concentrated in the Asia Pacific region, which is mainly influenced by brand recognition and products. There are already very well-developed fast fashion brands such as Cotton on in Australia and Uniqlo's minimalist style may not match the trendy consumer's search for fashion.

Uniqlo's clothing style tends to be minimalist and mainly produces basic clothing, which may lead to a lack of product differentiation and failure to bring more fashionable or unique clothes to consumers.