Setting its sights on the U.S. market, discount retailer Uniqlo is revising its strategy to accommodate the American consumer. Apparently, this means the price of its apparel will contract while its sizes expand.
Uniqlo chief executive Tadashi Yanai believes a more aggressive positioning in the U.S. is a central feature of its intention to become the world’s largest retailer by 2020. Currently, Uniqlo maintains seventeen stores in the U.S. and intends on launching as many as thirty more annually to reach 100 in the next few years. Globally, there are over 1,300 Uniqlo stores. Executive vice president Yoshihiro Kunii said, “New York, London, Paris – these are at the forefront of the fashion industry. To establish ourselves in these markets is crucial.”
The problem for Uniqlo is that its core business model hasn’t been gaining the traction among U.S customers that it hoped for. The Tokyo-based retailer has previously relied upon an approach it called “Made for All,” which markets the same product lines, priced and sized the same, to all consumers regardless of location. This model has allowed them to streamline their supply chain and keep costs down.
The U.S. market, however, has prove resistant to this strategy. Kunii said, “There are many different ethnic groups in the United States, and this makes it tough to come up with the optimal range (to match the fit). But we need to do this, and want to come up with a solution as soon as possible.”
Kunii continued to explain that the American consumer generally wants a more generously sized garment than his or her Asian counterpart. Speaking to Reuters, he said, “This is going to be our next challenge in the United States: how to adjust our clothes for a more ‘3-D’ fit, particularly for women.” In the future, Uniqlo plans to customize approximately 10 percent of its apparel to suit local demand.
Uniqlo is owned and operated by Fast Retailing Co. which sees further penetration into the U.S. market as one part of an ambitious plan to expand globally. Business for Fast Retailing Co. has been booming. Its sales surged 22 percent to 389 billion yen ($3.76 billion) in the last three months ending in November. Net income leapt 8.8% to 41.8 billion yen ($398 million) for the same period. The company’s shares grew an astonishing 99 percent in Tokyo trading for 2013, swelling its market value to 4.6 trillion yen.
In 2013, Uniqlo opened new stores across the U.S. and in Indonesia, Paris, and Shanghai and plans to open more in Australia, China and Berlin. As it stands now, Fast Retailing Co. has 2,327 stores globally with 847 Uniqlo outlets in Japan and 359 abroad. It has plans to keep a pace of 200 to 300 store launches annually.
Uniqlo also intends to grow in minor Asian cities outside of Japan, like Thailand’s Chiang Mai. Since the average consumer in these cities have less access to disposable income, success in those markets require offering even cheaper apparel lines. “There’s a difference in the amount of money that customers can spend on clothes,” said Kunii. “So we need something that’s more within reach, even though that might mean a slight drop in quality. It would be reasonable and affordable, but maintain Uniqlo’s quality.”
Many experts see Uniqlo’s continuous international expansion as a hedge against sluggish domestic sales, missing already modest projections by 0.6%. The fast fashion retailer also ran into trouble particularly in the second half of 2013, due to a variety of contributing factors, including unseasonably warm weather that hurt sales of its autumn and winter clothing lines, steep discounts designed to attract more volume and basic operational and logistical problems that made it difficult for Uniqlo to keep its shelves adequately stocked with core products. In an attempt to revitalize slackening sales, Uniqlo announced its intention to scale down both its labor costs and sales promotion costs by 7 billion yen for the fourth quarter of 2013.
Still, the main pillar of Uniqlo’s strength is overseas sales, which have skyrocketed 77 percent in the three months leading up to November, forty times the pace of domestic sales growth.
According to the Bloomberg Billionaires Index, Yanai has assembled a net worth of $19.3 billion. He is forthcoming about his ambitions to surpass Inditex SA, owner of Zara, as the world’s premier global retailer.