Summary of Key Points
In the past two years, Uniqlo China has closed 55 stores, yet its revenue has resumed growth, and its profits have increased by double digits. This is not a sign of contraction; rather, it represents a shift in strategy. The company has moved away from the approach of expanding by opening more stores to focusing on making each store successful. By closing less efficient, smaller stores and concentrating resources on larger, flagship stores that are closer to local consumers, Uniqlo has improved operational efficiency and profitability per store.
1. From "Crazy Expansion" to "Closing Old Stores to Open New Ones": Fewer Stores, but More Profit
Over the past 20 years, Uniqlo viewed China as a key growth market, aiming to expand from 370 stores to 3,000. However, between 2024 and 2026, the number of stores decreased from 926 to 871, with a net closure of 55. Which stores were closed? Those with low sales, poor locations, or small footprints. Which new stores were opened? Larger flagship stores in key shopping areas (for example, the Uniqlo store at Wuyi Square in Changsha, which covers 2,000 square meters and features local elements such as crayfish and Hunan embroidery). What was the result? According to Uniqlo, the monthly sales of the restructured stores have increased by 1.5 times compared to before. The Changsha store has even become a global flagship example, attracting more customers than simply replicating the Shanghai or Tokyo models. Now, Uniqlo focuses on factors such as location, customer traffic, and the profitability of each store.
2. The Failure of Standardization: A Unified Model Cannot Address China's Regional Differences
Uniqlo’s previous strength lay in standardization—selling the same products nationwide with consistent promotional campaigns. However, China’s vast size presents unique challenges: while southern regions may wear short sleeves, northern regions still need winter clothing; first-tier cities prefer new designs, while lower-tier cities are more concerned with prices. This standardized approach has become less effective:
- Popular items are out of stock, and unsold products have to be discounted, squeezing profits.
- Slow communication from headquarters results in stores missing peak sales seasons.
- Price cuts do not boost sales and instead reduce gross margins.
What is the new strategy? Store-level management—giving store managers more autonomy to make decisions based on local conditions (such as adding local elements like Hunan embroidery). Instead of simply issuing orders, headquarters use data to support these decisions. This shift moves from a standardized chain model to one where each store operates independently.
3. The Secret to Profit Growth: Not Selling More, but Reducing Waste
How did profits increase despite fewer stores? The key lies in cost reduction and efficiency improvement:
- Fewer discounts: Accurate inventory management reduces the need for price cuts, thus increasing gross margins.
- Inventory control: Ordering based on local demand minimizes overstocking and saves on storage and losses.
- Closing unprofitable stores: Eliminating unprofitable stores saves on rent and labor costs.
- E-commerce integration: Rejoining JD.com has helped online sales grow by double digits, but this is just a supplementary strategy; the main focus remains on improving offline store performance.
In short, although the number of products sold may not have increased significantly, less money is being wasted, leading to higher profits.
4. China Is No Longer the "Only Engine": The Group Has Other Growth Options
China used to be the main driver of Uniqlo’s international growth, but now the situation has changed:
- In the first three quarters of the 2026 fiscal year, the group’s global revenue grew by 17%, with profits up 33%, mainly due to growth in Europe, America (with large store openings in New York and London), Southeast Asia, and South Korea.
- Even with a slowdown in China’s business, the group is not worried, as other markets can compensate for it.
This development has both advantages and disadvantages for Uniqlo’s Chinese operations: less pressure to expand rapidly, but also less priority, as resources may be directed to more profitable markets. The new goal for China is stable profitability rather than rapid expansion.
5. Future Challenges: Can the New Model Be Replicated? Are There Enough Store Managers?
Initial results are promising, but there are still issues:
- Can the flagship store model be scaled up? While the Changsha store was a success, implementing local customization for hundreds of stores would be costly and challenging.
- Are store managers qualified? They need to understand local markets, manage inventory, and conduct marketing effectively—not everyone is suited for these roles.
- Will consumers continue to buy Uniqlo products? Uniqlo relies on basic and functional fabrics (like HEATTECH); will customers switch to more personalized brands in the future?
Uniqlo China has emerged from its toughest times, but it can no longer rely on the past strategy of opening stores solely for profit. Whether it can continue to grow depends on its ability to implement the new, store-level management approach effectively—turning each store into a profitable entity that understands local needs.
In summary: Uniqlo China has shifted from a strategy of rapid expansion to one of focused, efficient operations. With fewer stores, profits have increased, but challenges remain. It is no longer the company that used to expand recklessly; instead, it is learning to manage its stores more carefully and effectively.