Uniqlo misstep

Good morning everyone,

It may not seem like it right now (because it's absolutely pouring at the moment) but it will stop raining by around 9am and should be warm and sunny by noon. The nice weather should stick around till the middle of the week. From Thursday, it's looking a bit unsettled-we may see some rain again later in the week.

I don't know about you, but I've been feeling that Uniqlo had become really expensive over the past two years and was no longer the great value that it used to be. Because let's be honest-the clothes aren't the highest quality in the world. What always made Uniqlo so great was that the clothes were of a good quality for a reasonable price. Once the prices started creeping up, it was no longer the 'value' that it used to be.

And it turns out that it wasn't my imagination. Nor was I the only one to stop going to Uniqlo. And apparently the owner noticed.

The Uniqlo casual clothing chain will slash prices and return to its simple pricing system because price hikes in the past two years have proven to be a mistake, Tadashi Yanai, chairman and president of parent company Fast Retailing, said in a recent interview with The Nikkei.

"Customers didn't agree that products with new, higher prices reflect fair value," Yanai said. "The market was in a very tough situation. We made a mistake of raising prices under such circumstances. Consumer sentiment has turned out to be far worse than we thought."

Uniqlo raised prices 5% in 2014 and followed up with a 10% hike in 2015, in part to reflect changes in foreign exchange rates. The company's stated thinking was that pricing should reflect fair value, and retailers are being selfish when they avoid price hikes and force suppliers to endure thin margins.

But the price hikes drove away Japanese consumers. Same-store customer traffic in Japan dropped 6.3% in the September 2015 to February 2016 period. To lure back shoppers, Uniqlo shaved prices Y300 to Y1,000 on some of its products in early February. But this apparently did not stem the tide and customers haven't yet returned to the retailer. 

"Our products used to have simple pricing, such as 1,990 yen and 2,990 yen," the Uniqlo founder said. "The price hikes were a mistake also because they increased products with halfway pricing, such as 2,490 yen. We will bring back 1,990 yen, 2,990 yen and other simple and clear prices."

I have to say that I totally agree with him-on both accounts. He was right in saying that product prices should reflect fair value. However, he made mistakes on two fronts-one was a bit unlucky because just as he was raising prices, the global economy was falling and the other was in deciding what fair value for his products was. You can't just raise prices without justifying it-you need to convince people that the quality has improved as well. Why would we want to pay more for the same stuff?

Anyway, I'm looking forward to seeing what the new prices will be. How about you? Will you go back to Uniqlo?

Have a great day!

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