Chapter I Introduction

CHAPTER I

INTRODUCTION

1.1 Research Background

The fast fashion industry is possibly one of the most recognizable industries in the world with business giants such as Swedish-born ‘H&M’ and Spanish-born

‘Inditex-ZARA.’ These firms are able to dominate the market due to their efficient supply chain which makes it possible to make their clothes available in stores quickly to keep up with the rapidly changing fashion trends (Kim et al., 2012).

To understand how giant these companies were, in 2017, Inditex-ZARA invested €1.8 billion towards their retail technology to further improve their supply chain and by 2017, ZARA is now present in 96 markets with over 7,400 stores all over the world and makes a net profit of €3.4 billion (Inditex, 2017).

With H&M, the Swedish-born company has various brands under it such as

H&M itself, COS, and Other Stories and Cheap Monday, amongst others. By 2018,

H&M received a net sale of $21.4 billion (H&M, 2018).

According to Morgan and Birtwistle (2009), the exceptional growth of the fast fashion industry can be attributed to three reasons. Firstly, it is the need felt by customers to always keep on purchasing – to keep up with the ever-changing trends.

Secondly, it is the increase in sourcing labor work from low-income and developing countries and lastly, it is due to the change in consumer attitude.

Morgan and Birtwistle (2009) further describes the change in attitude as consumers and fast fashion companies removing the stigma of buying clothing from retailers that offer clothes at a more affordable price range.

Another reason why this industry has grown so rapidly is due to its affordable price. When compared to high-end brands, fast fashion clothing is considered significantly cheaper. This affordable price allows customers to make

‘fashion mistakes’ (such as wearing clothing that are out of trends) because these so-called mistakes would not seem high cost at first glance due to the affordable price range (Gabrielli et al., 2012)

Despite knowing what fast fashion is in general, not many are aware of the actual definition. Guercini and Runfola (2012) explain how there is no exact definition for fast fashion as it depends on the type of business that implements the fast fashion formula (FFF).

Fast fashion can be defined from a manufacturing perspective where clothes have to be manufactured rapidly to quickly fulfill customer demands. It can also be seen from the retail companies’ perspective where one should possess an efficient supply chain in order to decrease the lead time between designing the clothes and making it available in store (Guercini and Runfola, 2012).

Further emphasizing the definition given by Guercini and Runfola, the fast fashion business model focuses on how to offer their clothing in order to stimulate more in-store visits by customers (Kim et al., 2012).

Due to this business model and the fast-paced nature of the fashion industry, the product life cycle of clothes within the fast fashion industry is extremely short

(Kim et al., 2013). This industry pushes the ‘scarcity’ mentality where, due to the short life cycle, the clothing that customers want to buy today might not be available the next day – this pushes them to shop more (Miller, 2012)

The fast fashion industry also emphasizes the need for speed as this industry uses the ‘speed to market’ approach where there is an emphasis on flexibility and quick responsiveness (Bhardwaj and Fairhurst, 2010).

With an affordable price attached to it and trendy designs, it is easy to understand why the fast fashion industry grew rapidly, but it should also be understood who are the target market of these big fast fashion retail companies because these people are one of the factors which drove this industry into enormous success.

According to Morgan and Birtwistle (2009), fast fashion companies target fashion conscious customers who want in on the latest on-trend clothes that are offered at an affordable price range – these fashion-conscious customers are generally the younger generations who tend to be more up-to-date with the trends because of the easy access to internet and how they are very much influenced by the media.

Aside from the younger generations, fast fashion companies also target those who are a part of the low socio-economic group who only have the funds to purchase affordable fast fashion clothing (Watson and Yan, 2013).

One example of a fast fashion brand who has left a mark in the industry is the Japanese-born brand, UNIQLO. Created under its parent company, Fast

Retailing Co., UNIQLO started with humble beginnings as a family owned shop

who created menswear in the Yamaguchi prefecture in Japan (Larke, 2015) and it is not only until the year 1984 when the name UNIQLO was born.

Labelling themselves as a SPA (Specialty retailer of Private Label

Apparel), UNIQLO is known for its casualwear. With over 1,920 stores in 18 countries and regions worldwide, UNIQLO generates great sales, not only at their home base in Japan but also internationally (Fast Retailing Co., 2017)

According to UNIQLO’s Yearly Review that was released by Fast Retailing

(2017), in the year 2017, UNIQLO Japan generated a revenue of $7.4 billion while

UNIQLO International generated a revenue of $6.5 billion and Fast Retailing predicted that in the year 2018, UNIQLO International’s revenue will surpass those of Japan’s.

Further noting from the 2017 yearly review, UNIQLO’s international presence is still considerably larger in Asia rather than in the Western countries. As of 2017, UNIQLO Asia’s revenue (South Korea, Greater China, Southeast Asia and

Oceania) generated a total revenue of approximately $5.2 billion whilst UNIQLO

North America (New York) and UNIQLO Europe (Paris and Barcelona) only generated a total revenue of approximately $1.2 billion.

Aside from selling casualwear that is catered to fulfill the customers’ needs for simple, everyday wear, UNIQLO is also known to have collaborations with famous public figures. According to an article written by High Snobiety, a German- based streetwear blog, media brand and production agency (2018), these collaborations are a way for UNIQLO to tap into different areas and market within the pop culture.

Examples of these collaborations include one with BT21 (a line of characters created by worldwide K-Pop star BTS, which is also in collaboration with the instant messaging application, LINE), a collaboration with KAWS x

Sesame Street and one with Pokemon, amongst others (High Snobiety, 2018)

Fast fashion companies have a bad reputation mainly due to two reasons

(Kim et al., 2013). Firstly, sustainability issues – the short product life cycle of its clothing leads to enormous clothing waste. Secondly, labor exploitation – due to its sourcing of labor from low-income countries, fast fashion retailers are known for not providing the safest working conditions (Kim et al., 2013)

Despite being a ‘fast fashion’ company, UNIQLO is a firm believer in how fast fashion does not have to mean clothing that are cheap in quality – they believe in simple clothing that is high in quality and is made sustainably (Fast Retailing

Co., 2017). Further noting from the same yearly review, UNIQLO is made up of a diverse range of workforce that works under conditions where their safety, health and rights are respected.

According to Su and Chang (2018), there are limited information available regarding the fast fashion industry - especially one that is seen through the consumer perspective. As explained earlier, the younger generations - such as college students, are the main target market for these fast fashion companies.

Despite being the main and feasible target market, Su and Chang (2018) further explains how there are limited information regarding these group of people such as what are their behaviors and attitudes towards these fast fashion companies and the industry in general.

The researchers’ aim with this paper is to solve the problem of what attracts the younger generations towards the fast-fashion industry through the consumer- driven perspective - towards the company, UNIQLO specifically. With this paper, the researchers also hope to add more information for this industry.

Another problem that the researchers are trying to tackle with this paper is the issue between millennials and brand loyalty. specifically, to fast fashion brands such as UNIQLO. According to Forbes (2017) and a survey done by SmarterHQ amongst 18-35 year olds, it is found that only 7% if millennials identify themselves as brand loyalists.

According to Michael Osborne, CEO of SmarterHQ, this is not surprising considering the era that we live in today. With the advancement of technology and easy access to the internet, it has become easier for customers to compare prices amongst different retailers.

The survey also further shows how millennials are price sensitive; it is found that 75% of the millennials tend to shop when there is a sale and 30% classify themselves as bargain shoppers.

The SmarterHQ survey is also further proven by another survey done by

Morning Consult (a market research company) in 2018. The survey was done amongst 2,202 internet users in the United States, mostly those who belong in the

Millennial and Generation Z age cohort.

The survey shows how Gen Z-ers and Millennials are not always ready to commit to a product; 51% of 18-21 year olds say they are willing to try new products and be adventurous despite having a product that they like.

Compared to the younger generations, Gen X-ers and Baby Boomers are not as adventurous. According to the survey done by Morning Consult, 67% of Gen X- ers and more than 75% of Baby Boomers say that when they find a product that they like, they tend to stick to it.

Morning Consult (2018) further adds that there is more nuance when it comes to brand loyalty. It is not always whether one likes a product or not but the company's vision, mission and even ethics can contribute whether a customer will be brand loyal or not.

With 3,445 stores worldwide, it can be understood on how large UNIQLO’s presence is globally and how it is automatically considered as a company that operates as an International Business. To further understand their global presence, in 2018, UNIQLO International’s sales have surpassed those of UNIQLO Japan for the first time – with a recorded revenue of $8.2 billion, which was a 26.6% increase from 2017 (Fast Retailing, 2018)

One of the main reasons as to why UNIQLO is able to resonate with customers worldwide is due to their focus on creating simple garments that can be worn by everyone of all ages. According to Fast Retailing (2018), UNIQLO has product development centers in cities such as London and Paris, in order to gather information regarding the latest fashion news that can further help UNIQLO’s research and design team.

Having a strong online presence is also another reason why UNIQLO is able to succeed globally. With the advancement of technology, shopping is not considered a hassle when one has a smartphone or a laptop. UNIQLO understands

this and therefore puts an emphasis on their presence online to help further expand their market and increase sales. According to Fast Retailing (2018), 20% of overall sales in Mainland China and the United States came from their online stores.

Having an efficient and reliable supply chain system is another key reason behind UNIQLO’s enormous global success. Takuya Jimbo, who is Fast Retailing

Co’s Group Senior Vice President, puts an emphasis on the importance of supply chain in order to increase sales.

Fast Retailing Co’s ability to reflect huge volumes of real time information, reducing lead times, having automated warehouses all over the world and the implementation of RFID are amongst the many reasons behind UNIQLO’s efficient supply chain which contributes to their customers’ satisfaction and success worldwide.

This global success can also be felt all the way to Southeast Asia, including

Indonesia. In 2018, UNIQLO Southeast Asia and Oceania contributed $1.2 billion in revenue and it further proves how profitable this region is (Fast Retailing, 2018).

This is due to UNIQLO’s understanding of different market needs and how

Southeast Asian countries have their own climates, cultures and personal tastes.

The presence of UNIQLO can certainly be felt in Indonesia. According to

Fast Retailing Co. (2013), UNIQLO Indonesia is a joint venture between Fast

Retailing Co. and Mitsubishi Corporation. It made its debut in 2013 by opening a store in Lotte Shopping Avenue in Jakarta, Indonesia (Fast Retailing, 2013). As of

2019, 32 UNIQLO stores have been opened in Indonesia (Fast Retailing, 2019) and

Fast Retailing have plans to open more stores in the future.

According to the Jakarta Post (2019), due to high demands, UNIQLO will make its debut in the Riau Island by opening a store in Batam. According to PT

Fast Retailing Indonesia’s President Director, Naoki Kamogawa, the reasoning behind this is due to how there’s a high demand for UNIQLO by the people of

Batam but despite the high demands, they have to travel outside the island in order to buy UNIQLO.

This research will study the factors affecting UPH students’ brand loyalty towards UNIQLO. This study is based on a research done by Jin Su and Aihwa

Chang in 2018 on the ‘Factors affecting college students’ brand loyalty towards fast fashion.

1.2 Research Questions

Based on the explanation about the background above, questions of the research are:

1. Does brand awareness influence UNIQLO’s consumer brand loyalty?

2. Does perceived quality influence UNIQLO’s consumer brand loyalty?

3. Does perceived value influence UNIQLO’s consumer brand loyalty?

4. Does brand personality influence UNIQLO’s consumer brand loyalty?

5. Does organization association influence UNIQLO’s consumer brand

loyalty?

6. Does brand uniqueness influence UNIQLO’s consumer brand loyalty?

1.3 Research Objectives

Based on the research questions above, the research objectives will be:

1. To identify the influence of brand awareness towards UNIQLO’s

consumer brand loyalty.

2. To identify the influence of perceived quality towards UNIQLO’s

consumer brand loyalty.

3. To identify the influence of perceived value towards UNIQLO’s

consumer brand loyalty.

4. To identify the influence of brand personality towards UNIQLO’s

consumer brand loyalty.

5. To identify the influence of organization association towards

UNIQLO’s consumer brand loyalty.

6. To identify the influence of brand uniqueness towards UNIQLO’s

consumer brand loyalty.

1.4 Research Benefits

There will be two beneficial applications that this research paper will contribute to the society:

1.4.1 Theoretical Implication

The theoretical benefit of this study is to observe and research

about the relationship between factors that affect UNIQLO’s consumer

brand loyalty. This research will provide a deeper and an understanding

about fast fashion, consumer brand loyalty, and its six variables which are

brand awareness, perceived quality, perceived value, brand personality,

organizational associations, and brand uniqueness. Furthermore, this

research provides a deeper understanding of fast fashion and the

relationship among consumer brand loyalty and its six factors.

1.4.2 Managerial Implication

This study will also provide benefits for UNIQLO and other fast

fashion companies in Indonesia. Through the result of this study, UNIQLO

and other similar fast fashion companies will be able to know the

significant impact of brand awareness, perceived quality, perceived value,

brand personality, organizational association, and brand uniqueness

towards consumer brand loyalty. Through this study, fast fashion

companies can understand which factor among the six variables mentioned

above that affects consumer brand loyalty the most.

1.5 Research Limitations

Due to the scope of research, this research will include some limitations.

The first limitation arises from the topic this study itself. For the fast fashion brands, the researchers decide to limit it to the brand UNIQLO. One limitation that is being introduced is the demographic restriction to make the data more accurate and reliable for this study.

The researchers have also decided to restrict the subject of the research, which will only be from the Pelita Harapan University Business School students - from batch 2016-2019, who is currently pursuing their undergraduate studies. Other limitations that will be imposed in this study is time and money limitation. This is due to how this study should be completed within four months and the limited funds available to conduct this research.

Last but not least, the limitation of this study is due to the location where the research is conducted, the response of the research will be based on people whom within the area of Lippo Karawaci, Tangerang, Indonesia.

1.6 Chapter Outline

Chapters outline is needed, so that it will be easier for the readers to understand the research. The outline will be divided into five chapters which are:

CHAPTER 1 INTRODUCTION

The first chapter will explain the background of the topic and its

phenomenon, research problems, research objectives, research benefit,

research limitations, and the chapter outlines.

CHAPTER II THEORETICAL BASIS

In the second chapter, the key and relevant variables of consumer brand

loyalty, brand awareness, perceived quality, perceived value, brand

personality, organizational associations, and brand uniqueness will be

explained further in terms of theories.

CHAPTER III RESEARCH METHOD

This chapter affirmed that researchers used quantitative research method.

Furthermore, this chapter will also include steps that were done in this

research which aims to create a systematic structure of the research and

organized. This chapter mainly consists of research methods such as data

collection process, the research design, the sample of the research, data

analysis, validity and reliability testing.

CHAPTER IV DATA ANALYSIS

This chapter includes an analysis and discussion of the data that has been

collected through surveys and by using several methods to test those six

variables, to find out whether there are any relation or influence from one

variable to others. The data processing method will be achieved through

an analysis tool.

CHAPTER V CONCLUSION & SUGGESTION

This chapter will show that the researcher will come to a conclusion on the

result of the data from this study. Result implication, suggestions, and

recommendations for further research on this study will also be included.