UNIQLO: Re-Evaluating American Expansion

UNIQLO: Re-Evaluating American Expansion

Introduction

Uniqlo Co. Ltd (UNIQLO) was launched in 1984. It has emerged as the number one apparel brand and retailer in Japan, established to deliver basic casual apparel of high-quality at lower prices that were acceptable to everyone anywhere across the globe. Japanese consumers needed to economize even though they are meticulous when it comes to quality. UNIQLO had to combine this, which fitted into its value proposition of offering products at low prices and of high quality. The company managed to launch priced products, which broke the apparel sector’s sales records(Chan, 2015). UNIQLO was even capable of introducing fleece jackets for $14.5 each that was less than half their competitors’ selling price for the same product. In 1999, the company managed to sell 8.5 million jackets of this kind while in 2000 it sold 26 million. It had to set a pace, which no other company in the apparel sector has ever sold such pieces. In 2003, they introduced notable products such as Heattech and cashmere sweater. The case selected is the Japanese apparel industry expansion. UNIQLO had to invest in opening locations of retailing to optimize sales from its product from 1990 to 2010, the company managed to increase its sales to 160 times (NEGISHI et al., M2013).

Uniqlo’s growth and development

The parent company to UNIQLO, Fast Retailing Co. Ltd, was holding a double-digit share of the market in Japan. The company goals were becoming a number-one retailer of apparel in the world. Fast Retailing Co. Ltd has continued to report a growth in sales of $17.6 billion in 2016. However, the company had set a target of achieving total global sales of $29.1 billion by 2020(NEGISHI et al., M2013). Besides, Fast Retailing had focused on European and American markets that comprised 20% of its global sales.

However, Japanese apparel is considered unique since its markets varied from other large economies. Although the Japanese enjoyed long life expectations and highly educated, Japanese also their culture valued conformity and diligence. Besides, their population was relatively consistent in culture, race, and income levels as compared to other nations. It can be noted that Japanese consumers are considered the most critical based on the quality of the products across the globe. They anticipated high-quality levels despite levels of price (Claveria, 2015). They might spot blemishes and faults, which customers from other nations could have missed. It leads to many other Asian nations’ consumers feeling that any brand, which has gone through the hands of the Japanese market test, is of high quality. The Japanese customers had high preferences and expectations concerning the dyeing, fabric, durability, and stitching of products.

Further, the Japanese apparel retail industry mainly depended on buying goods manufactured and designed by external suppliers. Generally, apparel clothes had to go through the trading house that purchased from a manufacturer, then to the wholesalers who could either be 2 or 3  before getting to the retail outlet. The process was sophisticated and expensive, and this limited the control of a retailer over the goods it stocked. However, they find it challenging to have effective management of inventory for apparel retailers. It compelled them to create orders before getting into the next season even though this was challenging to determine in advance that apparels would sell (Chan, 2015). This had to put retailers to losses due to stock out of the most popular products losing on sales. It left them with less popular products, which required to be liquidated at low prices for clearance when the season ends.

Value Positioning of Uniqlo

The different strategies to retailing from their Japanese counterpart practice in the outlets shocked many companies. Consumers might comfortably enter the outlet, look at what they needed, and choose items freely, not need to engage a salesperson. The strategy had to influence Yanai’s to think about the way UNIQLO outlets should operate. It fostered Uniqlo to commence off by selling apparel manufactured by other companies even though later developed a vertically incorporated model of business (Chan, 2015). However,  Fast Retailing had to introduce another strategy SPA that maintained control and not necessarily ownership at all levels. Starting with the initial product plan, moving through fabric expansion and then designing the product, manufacturing of the product, and distribution, which ended up at the retail outlet. They only outsource manufacturing even though the firm kept strict control over plans of manufacturing. UNIQLO was tough on the quality of apparel produced while at the same time were hard on bargaining the cost of the products. It enabled them to sell their products at low prices while being of high quality. Elimination and simplicity of many margin layers were the SPA model benefits.

Further, the SPA model significantly increased product control and inventory, which provided the conventional approach. The corporation could design the apparel, which is needed to sell and determine the price it needed to sell this product in the market. Besides, the SPA model permitted UNIQLO to accomplish higher standards of quality whereas aggressively controlling the costs of production. The SPA model’s basic concept was the same as that of other foreign nations’ retailers’ apparel; UNIQLO’s practice was unique in many ways. The company had to use production experts of Japan who were working with the vendors to enhance processes, which would decrease cost and enhance quality. The other unique factor was the relationship of UNIQLO with vendors of fabric and other primary inputs that permitted it access to specific inputs even though maintaining low costs. For instance, the relationship of UNIQLO with Toray Industries Incorporation, the Japanese Chemical Corporation that is well known for its technology of synthetic fibre, promoted the development of the new fabrics, which feature enhanced cooling or heat retention (Fast Retailing, 2014). The low-cost chain of supply of Uniqlo permitted the company to deliver products integrating the benefits at a proportion of the price probable via its competitors. However, it took the company close to ten years to implement the model of SPA completely. It enabled UNIQLO to establish its new product growth and capabilities of purchasing in dealing with mass production outsourcing applying low-cost global producers. It also enabled the company to create its brand sales and equity.

Further, the physical outlets were critical to the growth of Uniqlo as outlet location and design transformed over the years. In 1998-1999, the company had to open many stores due to the fleece jacket boom focusing mostly on the roadside locations. Uniqlo continued to open up different stores moving from such as flagship outlets for its G.U. and Uniqlo brands in the Ginza shopping area in Tokyo. However, product lineup of Uniqlo centered on high-quality and low prices, daily causal essential apparel items that fulfill the needs of a majority of income and age groups. The company strategy of pricing that purposed to have many products in a range of $9.2 to $17.5 depicting intention of Uniqlo to attract consumers from the wider society section (Fast Retailing, 2014). The company focused on basic causal than the trendy fashion products permitted Uniqlo to restrict the number of stock units and to sell many items. Their stock was at 300-500 products in the Uniqlo stores at any time. The sales in high volumes provided the company with economies of scale according to them robust bargaining power with their manufacturing collaborators. Having smaller SKUs had to simplify management of inventory; hence, Uniqlo had to eliminate or decrease mid-season production relying on its sales.

Analysis of Uniqlo’s Competitors

In considering competitors of Unique, its competitors comprised many mass-market, essential apparel-clothing brands, and fashion-focused and many competitors following the model of vertical integration even though they varied in other factors. For instance, some companies had large SKU numbers, whereas others had comparatively few. Besides, some companies followed models, which actively managed stock and replenishment across the apparel season. In contrast, others deliberately developed relied on or scarcity more on the sales of the end of the season. The closest rivals of Uniqlo comprised outlet chains Muji for Short (Mujirushi Ryohin) and Shimamura (Shimamura Co. Ltd.)That was an increasing low-priced, fashion-centered apparel retailer in the business. The largest global competitors of Uniqlo included Gap, Forever 21, Zara, and H&M (Hennes & Mauritz AB) (Fast Retailing, 2014).

Uniqlo has increased its growth in the new markets having a high share of the market in its local market, where Fast Retailing required getting new areas for development. The corporation had to pursue new development of the brand in Japan, acquisitions of overseas brands, and globalization of Uniqlo. Acquisitions of Fast Retailing of global brands comprised J Brand (the U.S.) and Comptoir des Cotonniers (France, Theory (U.S.), and Princesse Tam (France) they primarily dealt with premium brands.  Besides, Fast Retailing Corporation initiated a new fashion-centered brand at a low price called G.U., a name that was enthused by the Japanese “jiyu” word that implies freedom. The company’s intended message was consumers to dress freely; this placed this brand with a distinct value proposition and unique product lineup. However, Fast Retailing had to use the experience of Uniqlo, the SPA model, and the operational knowledge of this new brand. G.U. was developed for a low pricing strategy in the Japanese market. It introduced low priced jeans at $10.67(“UNIQLO: From Tokyo to New York to Global Brand: Articles: Multimedia: Japan Society,” n.d.). Its sales increased due to the popularity and credited for declining sales of the competing brands comprising Levi’s Japan, showing the G.U. was positioned to serve the segment of the market, which had not been established in Japan but was successfully established in other nations comprising the U.S.

Globalization of Uniqlo

In 2000, the company stated its purpose of becoming a global brand, and in 2001, the U.K. became its first global market. Uniqlo outlets in the U.K. selling products applying similar materials as those sold in the market of Japan even though the sizes and styles customized to the needs of the Westerners. Uniqlo had to set its price between 30-40% below the prices of competitors. However, the company had to shut some of the stores down since they were prone to losing money due to practices of store management in the U.K. (Tomioka, 2016). Besides, Uniqlo decided to open up stores in the Chinese market even though there was potential the company still faced some risks. Its brands in China were respected due to their quality.

Nonetheless, the Japanese image among the Chinese people might be volatile, leading to the eruption of anti-Japanese demonstrations. In the period running 2006 up to 2013, the company has managed to enter close to eight other markets of the Asian region. Besides, Uniqlo has been actively entering the markets of continental Europe, opening up locations in the Paris suburb, and later ventured into the Belgium and German markets. Despite the new activities of the company, Uniqlo Japan has continued to remain the most significant business of Fast Retailing Co. Ltd, amounting to over 69% of its operating income in the 2016 annual year (Tomioka, 2016).

Experience of UNIQLO in the United States

The company started planning its U.S. market entry in 2004. It had to open up its first three outlets in 2005 in malls within the suburbs of New Jersey even though these stores turned out not to be successful because they had no name recognition making them challenging to sell the products overseas. However, the company had to recoup and launch a flagship outlet in the New York City, SoHo area. Uniqlo had to plan this well through the earlier launch of critical campaigns to create awareness. Their products received mixed reactions after the launch, with some consumers characterizing the clothes as essential while others are noting the unique and high quality in the clothes (Tomioka, 2016). The company had to maintain its SoHo presence until 2011 when it had to open two other stores in the city of New York and New Jersey. Besides, the company is aggressively planning to develop its presence in the shopping malls in the United States due to its unique value position of low priced and high-quality casual essential.

Currently, Uniqlo has increased its stores’ locations to 45 locations within the U.S. surpassing those it started in Taiwan despite venturing there earlier than in the U.S. However; the company has continued losing its money in the market of the U.S. Uniqlo has still experienced challenges in fitting into the U.S. local market. For instance, its workers at the outlets in the New York City have been nicknamed “Uniqlones” due to the rigid practices of the company for greeting consumers, folding of clothes and merchandise organization.  Despite having many attempts to create hit products in the U.S. market like Oxford shirts, and lightweight down jackets, success for Uniqlo had stayed elusive(“UNIQLO: From Tokyo to New York to Global Brand: Articles: Multimedia: Japan Society,” n.d.).

Recommendations

For Uniqlo’s success, based on the report, I would propose in the short-term, the company should be fast and efficient in the delivery of its product, focus more on operations costs cutting, and decrease inventory shortages. The second is to the medium-term goal, and the corporation must examine its financial performance by growing net profits and reducing debts. Therefore, training H.R. productivity may be enhanced in the case of globalization, mostly in the U.S., the U.K., and other nations. Lastly, for achieving long-term objectives, the corporation needs to plan by commencing product enhancement or introducing new products as per the value of consumers, which is affecting them in the global markets currently. The company practices are rigid, and they need to be flexible to accommodate all customers. Assess and strengthen its sustainability geared towards learning perspective and innovation concerning the 2020 expansion goal of the market. Alternatively, the company may fail to attain its goals projected, and they may face tight competition in both local and global markets.

Conclusion

However, Uniqlo Co. Ltd is going forward, whereas its endeavor to dominant the world in terms of apparel is relevant. Besides, competitors are keen on catching up with the company quickly, and Uniqlo should move faster and evade trap by some creative destruction direction that could be obvious. The hiatus or hesitation in conquering the market of North America may be crucial unless the corporation increases its innovative digital plan as primarily the only primary of its present position in the market.

References List

Chan, A. (2015). The reality behind Uniqlo’s Corporate Social Responsibility. War OnWant News (Investigative Report on the Working),http://www.waronwant.org/media/reality-behind-uniqlos-corporate-social-responsibility-promises.

Claveria, K. (2015). Here’ show Uniqlo plans to dominate the fashion retail world.

Vision critical.

Fast Retailing. (2014). UNIQLO Business. Retrieved March 25, 2014, from http://www.fastretailing.com/eng/group/strategy/

NEGISHI, MATTIOLI and DEZEMBER, M. (2013). Uniqlo Sets Goal: No. 1 (FastRetailing Co.’s Growth Ambitions Indicate Need for Deals). The Wall Street Journal.,ASIAN BUSINESS NEWS.

Tomioka, K. (2016, January 1). Tokyo Business Today. (Uniqlo’s Yanai Says Japan Needs Immigrants to Stay Competitive), Reporter of Toyokeizai.

UNIQLO: From Tokyo to New York to Global Brand: Articles: Multimedia: Japan Society. (n.d.). Home: Japan Society. https://www.japansociety.org/page/multimedia/articles/uniqlo_from_tokyo_to_new_york_to_global_brand

http://www.fastretailing.com/eng/group/strategy/tactics.html#tac01

http://www.fastretailing.com/eng/group/strategy/uniqlobusiness.html

http://sacom.hk/wp-content/uploads/2015/01/2014-UNIQLO-Investigative-Report_final_20150109.pdf

http://www.fastretailing.com/eng/csr/community/emergency.html