WHEN ASKED what guides his vision of UNIQLO, Tadashi Yanai, its founder and chief executive, pulls off the shelf the 1987 autumn/winter collection catalog of Next, a mass-market British retailer. All of the clothes are so classic, he says, that they could be worn today. While Inditex of Spain, which owns Zara, and Hennes Mauritz of Sweden, the world's two largest clothing retailers, slavishly follow fashion trends, UNIQLO, the main brand of the third-largest, Fast Retailing, of Japan , sticks to timeless basics.
When Uniqlo founder and CEO Tadashi Yanai was asked what guides his vision for Uniqlo, he pulled down from his bookshelf a 1987 autumn/winter collection by British fashion retail giant Next. Fashion Catalog. He said that all the clothes in the catalog are classic and not out of style now. While Spain's INDITEX (which owns the Zara brand) and Switzerland's HM, two major fashion retail giants, are blindly following trends, Uniqlo, the flagship brand of Japan's third largest retailer, Fast Retailing Group, has consistently persisted across time. basic model.
Mr Yanai has a solid base at home from which to expand into his Western competitors' main markets of Europe and America. But instead his priority remains Asia. He wants to turn UNIQLO into the world's largest clothing retailer by becoming the first Asian “SPA” or specialty store retailer of private-label apparel. “Asia is the engine of growth today,” he says, pointing to the millions of consumers across the region who are reaching the middle class. UNIQLO will open its first shop in India this year and is considering whether to expand into Vietnam and other countries (it has already opened networks of shops in Indonesia, Singapore and Thailand).
Yanai is based on the Japanese domestic market and then penetrates the main markets of its European and American competitors. However, Yanai Tadashi still focuses on the Asian market, hoping to build Uniqlo into the world's largest clothing retailer, and hopes to realize this wish by becoming Asia's first private label professional clothing retailer. "Asia today is the engine of business growth," says Yanai, where millions of consumers are entering the middle class. This year, UNIQLO will open its first branch in India and is considering expanding the market to Vietnam and other countries (UNIQLO already has online stores in Indonesia , Singapore and Thailand).
The success or not of UNIQLO's overseas operations matters greatly to investors at home. Fast Retailing's shares—Mr Yanai owns just over 20% of the firm—have been rising since 2015, largely, analysts reckon, owing to its international expansion and improved logistics. At home the firm is closing stores because the population is shrinking. Fast Retailing's operating profit in the year to August 2018 was ¥236.2bn ($2.15bn), the bulk of which is made up by UNIQLO. Last year UNIQLO's international revenue overtook its domestic sales for the first time and its foreign operating profit almost equalled its Japanese equivalent.
The success of Uniqlo's overseas operations is crucial to Japanese domestic investors. Some analysts believe that Fast Retailing Group's share price has been on an upward trend since 2015, largely due to its international market expansion and improvements in logistics. Tadashi Yanai owns more than 20% of Uniqlo. Uniqlo is closing its domestic stores as Japan's population shrinks. As of August 2018, Fast Retailing Group's operating profit reached 236.2 billion yen (or US$2.15 billion), with most of the profits coming from Uniqlo. In 2018, Uniqlo's global revenue exceeded Japan's domestic revenue for the first time, and overseas operating profit was almost the same as Japan's domestic operating profit.
UNIQLO has a strong Asian foothold by way of China, home to over half its overseas shops. China contributed around 70% of total international revenues last year. This success has surprised some, and not only because of ill-feeling towards Japan from many Chinese because of the latter's wartime record. China is not an easy place to work, and, in clothing at least, Chinese consumers tend to revere brands. But even the label-obsessed need plain bits and bobs for layering or co-ordination. are after quality, and UNIQLO's special fabrics, especially its Heattech range for cold weather, function well. Above all analysts point to the company's savvy Japan-educated Chinese executives who understand both the culture of the Japanese business and that of China.
中国是Uniqlo has a strong foothold in Asia, with nearly one-half of its overseas stores. In 2018, China's revenue accounted for approximately 70% of total international revenue. Many people are surprised by this, not only because the history of Japan's invasion of China makes many Chinese people hostile to Japan. It is not easy to gain a foothold in China. At least in the clothing industry, Chinese consumers tend to respect brands. However, even those who are obsessed with brands occasionally need simple matching in order to coordinate their outfits. Chinese consumers pursue quality, and Uniqlo's special fabrics, especially the Heattech series of thermal clothing, are very effective in resisting cold weather. In addition, analysts also pointed out that the company's Chinese management was educated in Japan, well-informed and familiar with the business cultures of both countries.
But the rest of Asia may be harder to crack. For one thing, a warm climate in several countries means that UNIQLO cannot rely on its cold-weather products as a main driver of sales. It may have to tweak its formula, which could be Risky, says Takahiro Saito, a fashion-retail analyst and author of a book comparing UNIQLO and Zara.
But capturing markets in other Asian countries may be more difficult. On the one hand, the warm climate in some countries means that Uniqlo cannot rely on winter products as its main sales force. Takahiro Saito, a fashion retail analyst who has written a book comparing Uniqlo and Zara, said Uniqlo must change its product plan, but this may be very risky.
Though they are very different markets, Europe and America offer a cautionary tale. UNIQLO in America struggled outside the big cities of the east and west coasts. Growth in the heartlands remains elusive for UNIQLO both there and in Europe. In part that is because the same business model exists there already with firms such as Gap, says Mr Saito. But UNIQLO could do better at explaining what it does. Well thought-out partnerships with ambassadors, such as tennis player Roger Federer, and collaborations with designers, like Jil Sander , are starting to help.
Although Europe and the United States are different markets, they have both taught Uniqlo a lesson. Uniqlo plans to find its way out in large cities on the east and west coasts of the United States. Uniqlo has struggled to boost sales in central America and Europe. Saito said that on the one hand, the reason is that the same local business model already exists, such as GAP. However, Uniqlo can still do better. Deepening cooperation with brand ambassadors such as tennis player Roger Federer, and cooperating with designers such as Jil Sander have begun to work.
Mr Yanai, an ardent fan of globalization unlike many Japanese executives (the firm's working language is English and many employees, even in Japan, are foreign), is confident that he can guide UNIQLO through the changes needed. He also talks of expanding into shoes as well as dresses and skirts, where UNIQLO currently has only slim offerings.
Unlike many Japanese executives, Yanai is an enthusiastic supporter of globalization. (UNIQLO’s working language is English, and there are many foreign employees, including many in Japan). He firmly believes in guiding the company to make the changes it needs. He also mentioned expanding into footwear in addition to tops and skirts.However, the first two categories of items are only available in size S at Uniqlo.
The backlash against globalization is the biggest risk to UNIQLO's Asian plans, he says. It could limit free movement of goods and people, disrupting both supply chains and workers. Still, a Japanese firm that has managed as much foreign success as UNIQLO should be able to cope.
This could restrict the free movement of goods and people, disrupting supply chains and employees. Still, Japanese companies like Uniqlo that have been successful in overseas markets should be able to cope.
Compiler: Fang Xueqing, Xu Jiabao, Xi Xiaotian, Hao Peixuan
Editor: Fanbajun
Source: The Economist (2019.02.03)
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