Report on Uniqlo and H&M

The report analyzes the market structure of the clothing industry in which both Uniqlo and H&M operate. It also looks at the pricing strategies employed by both companies and recommends the best pricing strategy that would be helpful for the growth and success of such companies.

Running head: REPORT ON UNIQLO AND H&M 1
Report on Uniqlo and H&M
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REPORT ON UNIQLO AND H&M 2
Abstract
The increased globalization has led to companies operating beyond countries boundaries
this has led to intensified competition in both domestic and global markets. In this context a case
analysis of two companies, Uniqlo and H&M will be analyzed looking at the market structure of
the industry they operate in and the level of competition in the Australian clothing industry. The
report also looks at the pricing strategies employed by both companies and recommends the best
pricing strategy that would be helpful for the growth and success of such companies. The last
part looks at the growth strategy that both companies use in their daily operations.

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1.0 Introduction
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

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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.
2.0 Pricing and non-pricing strategies
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

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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

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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

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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.
3.0 Market structure
3.1 Level of competition
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

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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.
3.2 Market share
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

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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.
4.0 Growth strategies
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

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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

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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.

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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:
http://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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