In Times of Weak Consumption, Pursue 'Good Failures' Instead of 'Cost Reduction and Efficiency Enhancement'

In this sluggish business environment, anxiety is the main theme for entrepreneurs. By looking at how well-performing companies have weathered the storm, or even grown against the trend, we might find some 'certainty anchors.' Today, let's share Uniqlo's experience. During Japan's economic depression, Uniqlo's sales grew 160-fold in 20 years, and profits soared 1,500-fold! Some skeptics might say, 'Uniqlo's business in China is also declining now, so it's not worth studying.' Indeed, Uniqlo just released its Q3 earnings, with both revenue and profit declining. The head of Uniqlo's China operations even announced a change in store strategy: from adding 50-80 new stores annually to reducing or renovating 50 stores per year over the next three years... Why, under these circumstances, do I still study Uniqlo? If you truly understand Uniqlo's history, you'll find that most of its past businesses failed, and only a few succeeded. Its founder, Tadashi Yanai, has a classic saying: 'Business is about continuously challenging and trying what works when things aren't going well.' Yanai's Uniqlo rose against the trend during Japan's economic downturn to reach its current position, largely due to his own 'book of failures.' So, I've always harbored a hope: Uniqlo, accustomed to repeated failures and comebacks, might just climb another step. Today, through Uniqlo and Yanai, we'll analyze how a company can achieve sustained growth during weak consumption. The key is: in a sluggish consumption environment, Uniqlo's core strategy is not cost reduction and efficiency enhancement! On the contrary, Uniqlo ran ahead of the market by constantly experimenting, creating its early myth of counter-trend growth. Business is about continuously trying what works when things aren't going well Yanai often recalls, 'Most of my ventures failed, but it's because of these failures that I achieved today's success.' One year, Yanai opened a design company in New York to gather fashion information, then brought that information to his Osaka company for product design, and finally had it produced in an overseas factory, forming a 'three-in-one' business model integrating R&D and sales. However, under this model, almost all products they launched failed; none were bestsellers. First, let's explain why they adopted this model. The apparel industry differs from others; it's more like a 'futures business.' That is, clothing is fashionable for a period, but once that time passes, it becomes unsellable. To make clothing sell well, companies must keenly grasp fashion trends. Although Uniqlo made so-called fashion-free basics, it couldn't avoid industry characteristics, which is why Yanai opened the New York office. Later, Yanai concluded that the failure was mainly due to poor information flow between New York, Osaka, and overseas factories, leading to a disconnect between product planning and sales. For example, if New York thought a design would be popular and sent it to the factory, but the product underperformed, that data wasn't fed back to New York in time, so no adjustments were made for the next round—a failure of communication. This failure led Yanai to conclude that product planning must be linked with sales. Early on, Yanai also had an idea to sell specialized leisurewear for children and the elderly, so he opened two types of stores under different brands. He later realized this was a completely anti-consumerist decision. From the customer's perspective, they used to buy clothes for the whole family at one Uniqlo store, but now they had to visit three stores. Eventually, Yanai had to merge the brands back into one Uniqlo. Uniqlo also experienced failures in recruitment. In the early days, to grow quickly, Yanai hired a batch of senior talent. He placed public newspaper ads seeking directors and presidents, but those who applied were people seeking comfort and titles. Uniqlo's work style requires leaders to be on the front lines, feeling the market. Later, Uniqlo changed its recruitment strategy; over half of its directors and executive officers were recommended by acquaintances, and they stopped public hiring. Yanai said, 'Failure in practice is better than success in theory.' Yanai noted that he met many brilliant minds, but they often stayed in the planning stage without acting. Without practice, you can't know if something is right or wrong. So, most of Yanai's strategies came from practice, not planning. Yanai places great importance on the quality of failure; he believes not all failures are good, but entrepreneurs must know how to fail. Regarding how to handle failure, Yanai has two crucial principles. The first principle: After failure, admit it promptly and cut losses immediately. This sounds simple, but most people struggle to recognize true failure. The more confident you are, the more you believe your plans will work. When plans hit repeated setbacks, you keep thinking there's still a chance for a turnaround. This failure to correct course and stubborn persistence often drags you into a quagmire. This is Yanai's first attitude toward failure: once a decision fails, immediately turn around, change, and review, rather than blaming yourself or others. Quick recovery is more important than anything. The second principle: As long as the failure isn't fatal, it will surely breed the seeds of success; extract lessons for the next success from failure. Initially, Uniqlo stores were all in suburbs, and they were successful for many years, reaching a certain scale. But the problem was that while sales scale grew, brand awareness didn't. When people mentioned Uniqlo, they either didn't know the brand despite buying its products, or they thought it was a low-quality brand. So, Yanai decided to open a store in Harajuku, Tokyo. But the timing wasn't right before. Harajuku, a hub for major brands, had very high rents, and Uniqlo, known for low prices, couldn't afford them. Later, when Japan's economic bubble burst, rents in Harajuku suddenly dropped, and many clothing stores closed, giving Yanai the opportunity. However, Uniqlo's Harajuku store also faced closure; the so-called Harajuku 1st store was actually its 2nd store. The 1st store failed for two key reasons: First, Uniqlo applied the suburban store model to an urban store. Suburban stores printed all products on flyers and ran weekend promotions. For example, pants sold for 2,000 yen on weekdays and 1,500 yen on weekends. They also determined flyer quantities based on the potential customer base around the suburban store. But this model didn't work in urban stores. First, flyers were ineffective. Customers in Harajuku weren't local residents but trendsetters from all over Japan; flyers couldn't reach them. To advertise in Harajuku, you needed to use major media and bombard consumers. Second, in an area like Harajuku with many stores, products, and competition, printing all products on flyers and distributing them en masse confused customers about your store's specialty. You had to focus all energy on one hero product or service to succeed. Finally, you couldn't casually run promotional ads. In Harajuku, consumers care about quality, not just price. When you constantly promote, consumers think you're no different from a discount store, thinking, 'If I'm shopping at a discount store in Harajuku, I might as well go to a suburban store.' After recognizing these issues, Yanai quickly adjusted his strategy. Second, ordinary basic clothing couldn't attract customers in store-dense Harajuku. Uniqlo's basic positioning was derived from actual demand feedback during the process of opening suburban and urban stores. When he opened suburban stores, he initially thought customers were teenagers, especially boys. But coinciding with Japan's car boom, many people drove with their families to suburban stores. He discovered his target audience had shifted from teenagers to all demographics. So, he had to sell products suitable for all ages, occupations, and genders—all-people products—hence the basics. But when he brought this basic model to urban stores, he found another issue. In a place like Harajuku, you need strong differentiation, but basics are hard to differentiate; you must focus on one hero product. Later, in urban stores, Yanai focused on the famous fleece product. Marketing around this hero product helped Uniqlo make a name in Harajuku. The Battle of Legends: How the Bestselling Fleece Was Born Let's talk about how the bestselling fleece came to be. When fleece launched, it boosted Uniqlo's sales dramatically. After seeing the first month's sales data, Yanai thought: 'It's selling like crazy!' Why did fleece succeed so well in Japan's economic downturn? Several key reasons. Extreme cost-performance through supply chain model First, fleece material had huge potential. Before opening the Harajuku store, Uniqlo had already sold fleece clothing. Yanai keenly noticed a data point: every time he planned to sell 1 million units, he actually sold 1.5 million. This proved the product's market potential exceeded production demand. Fleece is lightweight and warm; many outdoor brands use fleece for inner layers, like Patagonia's fleece lines. But the problem was that the material was expensive. If you bought fleece from top brands, it cost about 10,000 yen. However, Uniqlo's fleece sold for only 1,900 yen. In today's Chinese livestream terms: Uniqlo brought the price down! Uniqlo managed to lower the price through a supply chain model: sourcing raw materials in Japan, spinning in India, and manufacturing in China. By orchestrating the global supply chain, Uniqlo reduced fleece costs, achieving extreme cost-performance. Moreover, Uniqlo innovated in colors. Early fleece came in traditional red, yellow, and blue, which were quite ugly. But how many colors did Uniqlo's fleece have? A full 51 colors! The stunning color palette displayed in stores was spectacular. To this day, Uniqlo's fleece has over 100 colors. Fleece Advertising Strategy: A Victory Against Japanese Ad Style Fleece's success wasn't just about the product; its advertising strategy also triumphed. Yanai thought, 'In an urban store, I can't succeed with flyers like in the suburbs; I need to advertise widely and link ads with products.' Initially, he approached many traditional Japanese ad agencies, but found their thinking rigid. Then he tried American agencies and met a creative director named Jay. After hearing Yanai's brief, Jay said, 'Your Japanese ads don't respect the audience audiovisually.' Japanese ads are exaggerated in audiovisual expression. Think about Japanese ads, films, and TV shows—actors' facial expressions and voices are very exaggerated. To Americans, this seems unnatural, and they feel uncomfortable watching or hearing such content. So, Jay said, 'If I make Uniqlo's ad, I'll give viewers a natural audiovisual experience, letting them accept Uniqlo's brand philosophy comfortably.' Yanai agreed, and they collaborated on an ad. The ad resembled today's street interviews on Douyin:

'A person on an American street holds Uniqlo fleece and asks passersby, 'Guess how much this costs?' Americans say, 'I guess $50.' The interviewer says, 'Actually, it's only $15.' The passersby are surprised: 'Ah, such good quality for only $15? I must buy it!' This ad seems simple today, but remember, it was 1999. Back then, it was a pioneering creative expression. Although fleece was a single product, it needed to appeal to different ages, occupations, and genders. So, Uniqlo featured actors, musicians, store clerks, housewives—people from various professions—in the ad. The tagline was simple: 'Uniqlo fleece, only 1,900 yen.' When the ad came out, Uniqlo's internal team opposed it because it was so different from previous ads. They asked, 'Should the font be bigger? Should the actor speak louder? Should the subtitles be more prominent?' But Yanai said, 'Creativity is either 0 or 100, with no middle ground. This creative concept is different from traditional Japanese creativity. Since we chose them, we must trust them. If the ad doesn't work, we just won't work with them again.' Ultimately, the ad aired unchanged and was a huge success. Uniqlo's sales soared 60%, and it crossed the 100 billion yen mark. More importantly, the ad boosted Uniqlo's brand awareness, transforming it from a successful retailer into a recognized innovative company in Japan. To this day, fleece remains Uniqlo's biggest hit. Plan the Next Hit While the Current One Is Hot Fleece's success brought Uniqlo great success, but this success also bred the seeds of failure. After the fleece craze faded, Uniqlo entered a period of stagnant growth, with many stores declining or even seeing negative growth. First, fleece sold so well that you'd often run into people wearing the same thing—at work, on the street, at school—causing embarrassment. So, people started mocking those who wore Uniqlo fleece. Second, fleece's popularity drove sales of other products, masking their issues. But these weren't the main reasons. Yanai said, 'Rather than saying it's fleece fatigue, it's that our new product development didn't keep up. We should have thought about the next hit while fleece was still hot, not waited for the craze to fade.' Later, Uniqlo developed more hits, most notably its Heat Tech thermal underwear line. This underwear incorporated various tech materials, and Uniqlo iterated on it like smartphones, from warmth to antibacterial, anti-perspiration, etc. Later, Yanai often called Uniqlo a tech company because they developed various tech-infused clothing, ensuring a continuous stream of hits. Fleece, a 'successful failure,' became a stepping stone for Uniqlo's next success. So, Yanai thoroughly mined failures because he firmly believed all failures yield lessons for success. Final Thoughts We often think a successful businessman must have high cognition, deep thinking, and the ability to see untapped market gaps and innovative business models that others miss. But all of Yanai's successes weren't thought up; they were tested. This 'test culture' extends to all of Uniqlo's operations. Uniqlo's success isn't because Yanai's strategies were brilliant, but because he dared to practice, adjust, review, and re-aim after failures! This is a management principle so simple it's almost absurd, but when applied to the extreme, it can build a great company like Uniqlo. Finally, I want to say: in a sluggish market, 'cost reduction and efficiency enhancement' is just passive defense; it won't get you out of trouble, and over time, it can make performance even worse. What can get us out of trouble is constant experimentation. As long as we don't die from it, the probability of success keeps growing! *Some content quoted from 'One Win, Nine Losses: The Secret of Uniqlo's Global Success.' PS: Click Read Original to view more about the 6th China FMCG Conference & 3rd China FMCG Hard Discount Conference & 3rd China FMCG Distributor Conference...