Japanese National Brand Expands Globally
Why is Uniqlo Opening Stores in Zara’s Territory?
Japanese apparel retailer Uniqlo keeps adjusting its global strategy as it grapples with slowing growth in China and experiments with new store concepts and sales channels.
Why is Uniqlo Opening Stores in Zara’s Territory?By Vero Chou
From CommonWealth Magazine (vol. 633 )
On September 20, the trademark red-white Uniqlo sign went up on the Paseo de Gracia, one of Barcelona’s most prestigious shopping streets, just a few corners away from the Antoni Gaudi’s famous landmark Casa Milà.
Since Uniqlo opened its first store overseas in 2001, the Spanish store represents the company’s latest and most direct move to take on Europe’s fast fashion industry.
Tadashi Yanai, founder and president of Uniqlo’s parent company Fast Retailing Co. Ltd., couldn’t hide his excitement when he announced during the grand opening of the four-story store “We do not only want to bring the Uniqlo shopping experience, products and customer service to the Spanish people, I also very gladly announce that our second Barcelona store will open in November.”
Uniqlo is in such a rush because it hopes the brand will be able to live up to the company’s “fast retailing” name by transforming into a true digital retailer. On the other hand, Uniqlo is facing challenges in its overseas markets.
According to the Bloomberg news agency, Fast Retailing aims to increase total revenue by nearly 70 percent by August 2021, with about two thirds of revenue coming from overseas markets, mainly Asia. The company registered revenue growth of more than 20 percent for three consecutive years, but growth slowed to six percent in the last fiscal year following price hikes.
Strategy Change, Refocus on US Market
According to Fast Retailing’s 2016 Annual Report, the Chinese market still contributed 9.3 percent growth in 2016, but this constituted a clear slowdown in comparison to the 46.3 percent revenue growth posted the previous year. As a result, further expanding outlets in Europe and repositioning the brand in the U.S. market are top priorities.
Earlier this year, Uniqlo’s fall winter 2017 collection was presented in a loft-style building in New York’s Lower West Side district, the first time a global preview took place outside of Japan. The LifeWear campaign was interpreted as a respectful bow to U.S.-invented streetwear and casualwear as well as a demonstration of Uniqlo’s resolve to make another attempt at penetrating the U.S. market.
When presenting the new collection, John C. Jay, president of global creative at Fast Retailing, said frankly that the company could only advance or vanish. In volatile times, all familiar things undergo massive changes, including clothing, he also noted.
Uniqlo entered the U.S. market with the opening of a flagship store in Manhattan’s Soho neighborhood in 2006, focusing on its trademark clean, understated Japanese design. A decade later, Uniqlo has expanded to just 40 outlets across the United States.
One of the stated reasons why Uniqlo does not do well in the U.S. market is a poor store location strategy. Therefore, Uniqlo began to close its stores in shopping malls in second- and third-tier cities earlier this year to move them to prime locations in major metropolises to improve its brand image.
Another reason analysts cite for Uniqlo’s lackluster situation in the United States is the company’s failure to truly understand American customer tastes, which resulted in the ordering of the wrong inventory both in terms of styles and sizes. Many slim-cut Japanese-style garments simply did not fit well the average American customer, who tends to be taller and bigger. In Japan, Uniqlo sells its apparel from sizes XS to XL, but now in markets abroad, sizes up to 4XL are offered.
Realizing ‘Unmanned Retailing’ Opportunities
This autumn, Uniqlo began to test the waters for apparel vending machines in the United States. The “Uniqlo to Go” kiosks are another attempt to adjust to changing consumer behavior and explore new sales channels.
(Source: Uniqlo USA Facebook)
The vending machines have been placed in airports or shopping malls with high foot traffic in Oakland, California, Los Angeles, New York and Houston.
The vending machines are comparatively low-cost and can serve a wide array of travelers. “We are looking forward to introducing a new and easier way of shopping,” says Hiroshi Taki, chief executive officer of Uniqlo USA. The first batch of vending machines offers only two items from the LifeWear collection, warm down jackets and Heattech shirts.
According to the Global Powers of Retailing 2017 report by market research firm Deloitte, Fast Retailing posted a compound annual growth rate of 15.6 percent between 2011 and 2016. This puts Fast Retailing at rank 31 of the Top 50 fastest growing retailing companies worldwide, several slots ahead of luxury brand Hermes International SCA.
International media believe that Uniqlo’s expansion into Spain, where it will directly compete with European fast fashion brands like Zara and H&M, was probably triggered by the desire to prevent an overdependence on the Chinese market and generate revenue growth in other markets, given that Uniqlo is not yet profitable in the United States.
“The growth focus lies abroad,” Yanai told the Japanese daily newspaper The Nikkei. Already last year, Yanai had to adjust the company’s global sales target for 2020 downward from its original 5 trillion yen to 3 trillion yen when the Japanese market stagnated and overseas markets were below expectations. Still, he plans to bring the number of Uniqlo outlets in Europe to 100 within three years.
Translated from the Chinese article by Susanne Ganz
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