Case Analysis | How a traditional clothing company operates on the Internet!

Due to the impact of major e-commerce and shopping guide websites, most of the traditional clothing brands in China have not only experienced sluggish growth, but most of them have even experienced continuous declines in performance. The author starts with a real case to analyze how a traditional clothing company can operate well on the Internet, hoping to bring inspiration to everyone.

I had nothing to do on the weekend, so I went to a nearby shopping mall to stroll around and buy some clothes.

I walked into a Uniqlo and stayed on the first floor for a while but didn't find the clothes I liked, so I went to the second floor. However, the trademark on the second floor had become a brand called GU. After a round of shopping, I was amazed by it, not because of the clothes, but because of its business model.

At least from the perspective of an Internet person, many aspects are worthy of praise and learning.

ps: I checked after I got home, and found that usually GU stores are connected to UNIQLO, but their brands remain independent. The two are sister brands and belong to the Japanese retail giant Fast Retailing Group.

Scale Effect

Judging from its categories and attributes, GU (Excellent) undoubtedly belongs to the traditional clothing industry, but it is also very good at operating through the Internet model.

As we all know, Internet companies are not in a hurry to make profits. Instead, they tend to gradually expand their user base by providing free and high-quality services and good user experience. After their user base grows to a certain size, they use their economies of scale to develop the most suitable business model for the product based on its specific characteristics.

For example, 360 quickly acquired a large user base by providing free and high-quality antivirus services, and then launched a number of products such as 360 Games and 360 Browser . Through these products, it found a sustainable profit model and achieved large-scale profits.

Moreover, users acquired under this model tend to have stronger stickiness than users acquired under the traditional model. Because the traditional profit model is often a one-time deal with no continuity and scalability, while the development model of the Internet industry is often to first cultivate user usage habits and make them dependent, and then monetize through implicit or explicit means after the user base has grown to a certain level. However, most functions can be used by users for free, so users often have a high degree of stickiness.

In addition, the profit ideas between the two are also very different. Traditional companies try to maximize the profits of each product, and rarely consider reducing the profits of individual products. They achieve overall profitability by bringing about economies of scale through expanding the user base.

GU is a model of using Internet operation ideas in the traditional clothing industry:

The prices of its clothing are often only 60% to 70% of those of its sister brand Uniqlo. A large number of new products are launched every week, and most of the clothes are basic styles that can be adapted to a variety of combinations.

Due to its extremely high cost-effectiveness, most customers in the store will buy more than one piece, and buying four or five pieces is the norm, but this is rarely seen in traditional brand clothing stores.

In fact, this is very similar to the operating ideas of Xiaomi, which was also transforming from a traditional industry at that time:

While ensuring product quality or even providing product quality that exceeds user expectations, its product prices are significantly lower than those of products with the same performance. It does not pursue profits from a single product, but instead quickly acquires a certain user base through ultra-high cost-performance ratio, and then uses its good reputation and high-quality user experience to continuously expand its brand communication scope, ultimately achieving a user scale effect.

Don’t force users, focus on user experience

Since entering the mobile Internet era, the Internet sector has experienced explosive growth, users have more and more choices, and the cost of using and leaving is getting lower and lower. Therefore, if Internet products want to attract users, they must provide the best user experience on the basis of meeting user needs, retain users with good user experience, and form user habits.

The first rule of good user experience is not to force users.

When customers shop in a GU store, they are completely free to make their own choices. The store staff will never disturb them or follow them around, leaving customers with ample personal space. Of course, if customers encounter problems and want to consult the clerk, the clerk will respond promptly.

In traditional brand clothing stores, there are many sales clerks who will enthusiastically serve customers as soon as they enter the store. Although the service seems to be considerate, customers often feel disturbed and cannot choose goods freely.

For any product with good user experience, the user will never be excessively disturbed or forced during use; but once the user encounters a problem and needs feedback, they can easily find the corresponding feedback channel.

In addition, GU not only leaves ample space for users, but also has stringent requirements on user experience.

I had a strong feeling about this when I was at the cash register:

• Before checking out, the cashier bowed to me 90 degrees (really 90 degrees) with a smile on his face;
• While I was waiting at the checkout counter, I was handed a mobile phone with a customer opinion survey on it. It was all multiple-choice questions and could be completed in about 20 seconds.
• After paying, the cashier still bowed to me 90 degrees with a smile and handed me the items I purchased with both hands.

A good product is inseparable from a large amount of user feedback. Only by continuously iterating the product based on large amounts of accurate user feedback can the product be continuously improved. It is obvious that GU is well aware of this. It not only has a fanatical pursuit of user experience, but also attaches great importance to collecting customer (user) feedback.

Large traffic platform (Uniqlo) "diversion"

Although GU is already well-known in Japan and its sister brand Uniqlo are both known as Japan's national brands, GU is still a young brand in the Chinese market. So far, GU has only three physical stores in China, all in Shanghai.

In terms of the location of physical stores, GU is usually opened next to Uniqlo or connected to Uniqlo on the upper and lower floors to facilitate resource complementarity. More importantly, although Uniqlo and GU differ in their precise positioning, their target users are actually very similar. In addition, Uniqlo has been in China for many years and has established a good reputation and stable customer base (traffic) in the country.

Therefore, GU can rely on Uniqlo, a "big traffic player", to bring it stable and accurate (customer) traffic growth. In fact, this is a very common method in the Internet industry, especially in the early stages of product launch. If there are channels/resources that can obtain a certain amount of accurate traffic from a larger traffic platform, it will be very beneficial to the initial operation of the product.

When WeChat was first launched, it relied on QQ, a huge and stable traffic platform, to import 5 million precise seed users within three months of its launch, which played a very critical role in its initial product launch. I believe that with the support of UNIQLO, GU's steps in the future will become more steady.

Clear positioning and perfect online channels

GU's slogan is "Make fashion more free", encouraging customers (users) to dress in the way they like and see a different world from others. Compared with Uniqlo, GU's positioning is younger, freer and cheaper.

Because its target audience is extremely young, mostly born in the 1990s and 1995s, they have high personalized demands for clothing and are happy to show themselves. Based on this feature, GU found a photo social app that fits its brand concept very well: nice as the main partner of its online social networking site.

The reasons are probably as follows:

• As mentioned above: the target user match is very high, and the brand concept is also very consistent, both expressing the personalized needs of young people and satisfying their needs for show.
• Another major feature of nice is users’ preference for trendy brands. Entering nice is also a potential recognition of the GU brand, and it can also expand GU’s brand awareness among potential target users.
• One of the core functions of nice is the brand filter, that is, some features corresponding to the picture can be added to the picture as a label, and as the picture is spread, its brand characteristics can also be spread more intuitively.

In addition to in-depth cooperation with nice, GU is also actively expanding its online sales channels and officially entered Tmall last year.

Its entry into Tmall is far more significant than just online sales:

a. Tmall's official website has incomparable huge traffic, and its sister brand Uniqlo has benefited from it many times. For example, during Tmall's Double 11 in 2015, Uniqlo created a sales miracle in the history of global retail with "sales exceeding 100 million yuan in 2 minutes and 35 seconds", and also became the brand single store with the fastest sales of over 100 million yuan in clothing during Tmall's Double 11 in 2015. Since UNIQLO entered Tmall (formerly Taobao Mall) in 2009, it has been ranked in the top ten in sales on Tmall’s “Double 11” promotion day every year.

b. Enter Tmall and use Alibaba's big data intelligent algorithm model to screen potential customers who have a tendency to buy the brand, and achieve purchase conversion among potential customers, which will effectively increase transaction volume.

c. Similarly, with the help of Alibaba's big data, GU can also expand its offline presence. Many international brands that originally only opened stores in the most prosperous areas of first-tier cities, such as its sister brand Uniqlo, are also using Alibaba's big data to accurately match consumer demand and penetrate into China's third- and fourth-tier cities.

d. Tmall has had a good cooperative relationship with Fast Retailing Group (the parent company of UNIQLO and GU) for many years. In fact, the cooperation between UNIQLO and Tmall started in 2009. UNIQLO was also the first overseas brand to settle in what was then called "Taobao Mall". This cooperation is of great significance to both parties. For Alibaba at that time, the cooperation with Uniqlo opened a new chapter in the cooperation between Tmall and overseas brands. After Uniqlo, fast fashion brands such as Forever21 and Gap moved in one after another, and Taobao officially entered the "Big Taobao" era. There are even rumors that Jack Ma and SoftBank are both shareholders and important investors of Fast Retailing Group. As to whether this is true or not, it is unknown, but what is certain is that Fast Retailing has a close relationship with Alibaba.

The GU Tmall Mall redirection address on the in-store WiFi entry interface, the GU Tmall Mall QR code can be seen everywhere in the store, it is vigorously promoted on Weibo and WeChat, and even the shopping bags have the entrance address of the Tmall flagship store in addition to its logo, which shows how much importance GU attaches to the Tmall Mall.

Summarize

By lowering prices and continuously improving the cost-effectiveness of its products, it quickly acquired a certain user base through its super high cost-effectiveness, and then expanded its brand communication scope with the help of its good reputation and high-quality user experience. At the same time, it relied on UNIQLO, a "big traffic player", to continuously divert traffic to it, and its online channels also continued to make efforts. This series of operational methods enabled GU to be rated as an excellent brand in Greater China by its parent company, Fast Retailing Group, within just over two years of entering China. Its same-store sales and operating profit margins were far higher than expected, making it the best among similar brands under Fast Retailing Group.

Looking back at the majority of the current domestic traditional clothing brands, due to the impact of major e-commerce and shopping guide websites, not only are they sluggish in growth, but most of them have even experienced continuous declines in performance. Some of them are unable to sustain long-term losses and have no hope of growth in the short term, so they have to close down hastily; on the other hand, established brands with stronger financial resources have begun to transform to e-commerce, but due to many problems such as years of traditional operations that have led to the solidification of their operational ideas and lack of experience, the vast majority of them have failed. Only a few are still trying, and for these explorers who are still struggling, perhaps GU's model is worth a try.