UNIQLO, JAPAN’S STAR RETAILER, AND ITS OWNER TADASHI YANAI

UNIQLO

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billionaire owner of Uniqlo
Uniqlo, short for Unique Clothing Warehouse, is a chain of clothing stores that sells cheap but fashionable clothes and is somewhat similar to international “fast fashion” brands like The Gap, Sweden’s H&M, and Spain’s Zara chains. Regarded as the moving force behind the “cheap chic” movement in Japan, Uniqlo has been immensely successful, racked up huge profits and revolutionized Japanese fashion. Many young people buy cheap sweaters and shirts at Uniqlo and match them with expensive accessories such as Hermes scarves and Gucci leatherware.

Uniqlo is Japan’s biggest clothing company and Asia’s largest clothing chain with sales of about $9 billion in 2010. In 2009 sales grew 17 percent despite a recession. It is now regarded as one of Japan’s most valuable brands according to Interbrand. Regarded by some as Japan’s answer to Gap, it has roots in suburban outlets and is owned by Fast Retailing. As of 2010, Uniqlo had 800 stores in Japan and 140 abroad. [Source: The Economist, July 2010]

The first Uniqlo opened in Hiroshima in 1985. At first the store had difficulty drawing attention because it clothes were regarded as too cheap, The chain took off when a Uniqlo store opened up in the hear of trendy Harajuku in Tokyo. Shoppers and reporters swamped the grand opening and suddenly it was fashionable.

The store chain really got going in the 1990s as Japan entered its long period of stagnation. The company saves money by buying clothes directly from suppliers and is able to get picky Japanese consumers to overlook the fact that 90 percent of the clothes were made in China. These days Uniqlo generates interest with trendy print and television ads, some designed by the same advertising company that launched the Nike "Just Do It" ads. Its make huge profits by keeping it costs down and attracting lots of customers.

In 2000, Uniqlo did $2 billion worth of business, double what it did the year before. Most Uniqlo's 18,000 employee are part timers who start working at $8 an hour. In recent years it has made an effort to hire more full time workers at higher wages

Uniqlo did well during the economic crisis in 2008 and 2009, posting increases in sales and profits by attracting thrifty consumers with its cheap but relatively high quality products. In the business year that ended in August 2009 Fast Retail had sales of $6.82 billion and a profit of $1.08 billion. Uniqlo has set the goal of increasing sales 1.7 fold to ¥1 trillion in two years by 2011. In 2009, Uniqlo said it aimed to boost sales seven-fold to $20 billion by 2020. Sales in 2010 was around $10 billion and profits and stock prices were down by around a third.

Tadashi Yanai, chief executive of Fast Retailing, has said he hopes to build it into the world’s biggest apparel company, with sales of 5 trillion yen in 2020. “We are part of a global economy,” Mr. Yanai said at a recent forum. “We cannot look inward.”

Tadashi Yanai, Rich Owner of Uniqlo

Tadashi Yamai---the president of Fast Retailing, the owner of the Uniqlo clothes store chain---was at the top of Forbes ranking of Japan’s richest people in 2009, with a net worth of $6.1 billion. He was in sixth place the year before. Robust sales at Uniqlo during the economic crisis in 2008 and 2009 increased his worth by $1.4 billion over 2008 while the net worth of most other super rich people in Japan fell during the same period. Today, Yanai is worth around $9 billion. He is paid a salary of about $3 million a year.

Yanai, according to the Economist, is regarded as a brilliant strategist with keen fashion sense but he has also been accused of micro managing and meddling. He makes most of the decisions himself even about colors and individual items. His domineering style has caused some talented executives to leave the company. In any case he plans to down step as boss (but not chairman) when he turns 65 in 2014 and promised not to hand the reigns over to his sons.

Asked what sets Uniqlo apart Yamai told the Yomiuri Shimbun, “Each chain has a unique characteristic, H&M and Zara sell fashionable goods. Gap provides a taste of the American lifestyle. Our selling point is the balance between price and quality. We must differentiate ourselves from other companies...with our own special way of doing business.”

Uniqlo’s Overseas Ambitions

Fast Retailing has been expanding aggressively overseas. According to the Economist: Uniqlo “has roots in suburban outlets and does not have the level of respect among young fashion fans that many of Japan’s hipper brands do. But with ample funds and aggressive pricing on its fleece jackets and shirts, Uniqlo has expanded, with 92 stores worldwide.”

Uniqlo has stores in Britain, Japan, South Korea, China, France and the United States. It opened its first store in Paris in 2007 and opened a global flagship store, with a 20-meter-wide entrance and clothes in cylindrical showcases on Oxford Street in London. It opened a global flagship store in Soho in New York City and its largest shop in Asia in Shanghai in 2006. It opened flagship stores in Shanghai and Paris in 2009 and entered the Russian market in 2010 and has plans for the Indian market in 2011.

Uniqlo has plans to open 500 stores a year for three to five years, with many of the new shops in Asia, particularly China, which had 5 stores as of 2010. Even though sales outside of Japan only made up 10 percent of sales in 2010 the company hopes to have foreign sales surpass domestic sales by 2015.

It is not clear if Uniqlo will be able to succeed abroad. Strategies that worked in Japan such opening many shops in the suburb have not worked as well abroad. Overseas it is opening up more high profile stores and trying to tailor its goods for local markets. Uniqlo opened flagship stores in Shanghai and Paris in 2009 and entered the Russian market on 2010. In New York, Uniqlo paid $300 million for the 15 year lease for space on Fifth Avenue, the world’s most expensive shopping area, setting, some said, the city’s retail record.

Compared to rivals like America’s Gap, Sweden’s H&M and Spain’s Zara, Uniqlo keeps its clothes on the shelves longer and sells fewer items, which allows it to work out larger-volume deals with suppliers and sell its stuff at cheaper prices. It get around its limited choice of items by offering them in a wide variety of colors. Some stores sell the same socks in 50 different hues.

In July 2010, Fast Retailing announced a tie up with Grameen Bank, which pioneered micro-loans to poor people.

Despite aggressive efforts to expand abroad Japan still accounts for 80 percent the company’s global sales.

Yanai on Uniqlo’s Global Ambitions

“When asked by the Yomiuri Shimbun about the goal of globalization for Uniqlo, Tadashi Yanai said: “We intend to increase overseas sales from the current 15 percent to more than 50 percent by 2015. For fiscal 2012, we'll hire only 200 to 300 Japanese among the 1,500 new employees in our group. In about five years, we'll increase the percentage of foreign employees to 50 percent at our Tokyo office. We plan to make our Tokyo office employees and store managers across the country work abroad at least once. [Source: Yomiuri Shimbun, November 4, 2011]

“When asked about the globalization of other Japanese companies, Yantai said: They're lagging too far behind. Today, issues in the United States and European nations have a bigger influence on Japanese companies' management than domestic ones. But [Japanese] top executives tend to see only successful past experiences.The time long gone when there were boundaries on the economy. Top executives will remain out-of-touch if they don't embrace an international system. Our company started as a local textile retailer, so our only choice was to go abroad for development. But in the future, a company won't be able to survive without expanding internationally, regardless of size or business area. Looking at movements regarding the Trans-Pacific Partnership agreement, it seems like Japanese are too lackadaisical [and don't acknowledge the severe state of the economy]. What will they be able to achieve if they say "we can't do this or that" even before starting negotiations. “We have no option but to open our country for further development. A country without growth will eventually fail.” [Ibid]

“Uniqlo can develop globally because our company has [strong] DNA as a Japanese company. But we don't care about the nationalities of employees: As long as a person shares the DNA with us and is good at their job. If a company promotes globalization, there is a good chance it will have a non-Japanese top executive. It's unavoidable. What is important for Uniqlo to survive globally? We have to create products which are accepted all over the world, rather than making country-specific products. We'll strive to prove the value of Uniqlo products in the global market. [Ibid]

“On concerns that Japanese industry hollowing out, Yantai said: Once a company is bankrupt, it can't employ anyone. I want people to clearly understand one point: Despite a lack of natural resources, Japan has managed to survive up until now thanks to the efforts of large, internationalized companies. China and India have a combined population of 3 billion. Within 10 years, the two countries will have a larger middle-income population than the United States and Europe. This is like a "gold rush" for me. Japan still has everything--human resources, goods, money, information and technology. Given Japan's massive debt, I don't think the yen's appreciation will continue for long. Unless something is done before the yen collapses, Japan will become a second-class country. We must have more of a sense of crisis. [Ibid]

Uniqlo, English and Yanai’s View on Japan Youth

In March, Uniqlo introduced English as the company's official language. On this Yanai told the Yomiuri Shimbun: “Our Japanese employees will be allowed to speak Japanese among themselves, but they'll have to use English for meetings with foreign participants and for documents to be read by foreigners. We want Japanese staff to score at least 700 on the Test of English for International Communication (TOEIC) by March. [Source: Yomiuri Shimbun, November 4, 2011]

“It may not make sense to require Japanese employees to speak in English to each other. But close communication is needed for an internationally expanding labor-intensive retail business. It's difficult to convey one's true thoughts through interpreters. [This principle is] applied not only to English [but also Chinese]. At our company in China, those who are unable to speak Chinese after a one-year stay are sent home. [Ibid]

“When asked about his the idea that young Japanese are be inward-looking and reluctant to go abroad, Yantai said: All we can do is to make them go abroad to learn, even if we have to force them. What is important is to immerse them in foreign communities and let them work using their individual skills, without flocking together [with other Japanese]. Foreign language skills are also necessary for this. [Ibid]

Uniqlo as a Business Model for Japan

“Japan has been on a downtrend for 20 years,” Uniqlo’s Tadashi Yanai said. “We are at a critical moment.” William Pesek wrote in Bloomberg, “What is he doing about it? Opening 200 to 300 new stores worldwide each year. When I chat to Japanese executives about Uniqlo, many are dismissive. Responses are often some variation of “it’s a Japanese version of Gap Inc., not so impressive.” Or Uniqlo represents a race to the economic bottom, while Japan needs to move steadily upmarket. Yet Yanai understands that deflation isn’t a cyclical phenomenon, but a secular one. Rather than sit around and hope consumer prices will suddenly rise and growth returns, Yanai is reshaping the retailing world. [Source: William Pesek, Bloomberg, September 20, 2011]

“Uniqlo has brought more “kaizen” -- the process of continuous improvement -- to the apparel industry than meets the eye. Its underwear that helps wick away sweat has been a godsend to those struggling through sticky summers from Tokyo to New York. Call it Japan’s underwear model of economic growth. [Ibid]

“The company breaks any number of hidebound Japanese traditions. Meetings are held in English, a very rare practice in Japan. Fast Retailing isn’t hung up on seniority-based hiring; if you’re 26 and smart, the job can be yours. The company has few qualms about poaching talent from competitors, which can run afoul of local etiquette. It is working to increase the ratio of foreign staff and employs edgy advertising campaigns. [Ibid]

“The company seems more serious than most about corporate social responsibility. This year, Yanai joined hands with Nobel Peace laureate Muhammad Yunus to create a textiles company in Bangladesh to help poor women gain the financial independence society often keeps beyond their reach. It was an early and generous provider of aid after Japan’s devastating earthquake. [Ibid]

Uniqlo Opens 5th Ave. Flagship Store in New York

Jessica Dickler of CNN Money wrote: “While other retailers are shuttering stores and laying off workers, Japanese clothing company Uniqlo is boldly expanding its presence in the U.S.” with “a flagship store on New York's most famous shopping strip: 5th Avenue. The store -- a whopping 89,000 square feet -- is the largest retail location on the avenue and the biggest Uniqlo store in the world. Stacked floor-to-ceiling with multi-color sweaters, jeans and cotton shirts, the new store will boast 100 dressing rooms and 50 cash registers so lines are kept short. "We're really excited," said U.S. CEO Shin Odake "We have a great store on the best shopping street in New York." [Source: Jessica Dickler, CNN Money, October 13, 2011]

“In 2010, Fast Retailing Co. paid $300 million for a 15-year lease on the 666 Fifth Avenue space, which is located near competitors Gap and Zara, setting a retail record in New York. "It's a complete statement of confidence," said C. Bradley Mendelson, the Cushman & Wakefield broker who represented the landlords in the deal. [Ibid]

“That confidence, according to Odake, lies in the fact that the company sells "core basics" rather than trendy knock-offs. Uniqlo's clothing is "made for all" and doesn't cater to one specific age group or demographic. And, at a time when consumers are tightening their belts, it also helps that the clothing is affordable, with jeans that cost as little as $9.90 and cashmere sweaters that go for $49.90. Although Fast Retailing does not break out Uniqlo's specific sales figures, the company did say it's Soho store generated double-digit growth last year. [Ibid]

“But the 5th Avenue store -- Uniqlo's second store in the U.S. -- is just the beginning of the company's ambitious expansion plans. The retailer, which specializes in affordable slim cut jeans, puffy coats and thermal tees, is banking on becoming a widespread hit on American soil. [Ibid]

“Yanai indicated that sales at the outlets on Fifth Avenue and 34th Street are expected to achieve surplus from the first business year, while suggesting the company will promote mergers and acquisitions of U.S. corporations. The company opened its first U.S. Uniqlo store in 2006 in New York's Soho district. [Source: Kyodo, October 14, 2011]

“It's no coincidence that Apple's landmark store is also on the same stretch of 5th Avenue. The prime property draws massive crowds throughout the year, eager to spend money -- even if the area lacks the cachet it once commanded. Previously the exclusive home of many of the world's top luxury brands, like Cartier and Prada, now more mainstream brands like H&M, Hollister and Abercrombie & Fitch (ANF) have moved onto the avenue.Across the street from the new Uniqlo, Forever 21 took over a space that was the former home to ultra high-end Japanese department store Takashimaya. With the addition of Uniqlo "that two-block stretch block with Zara, Hollister and Swatch could be the highest grossing clothing block in the city," he said. [Ibid]

“In October 2011, Kyodo reported: “Fast Retailing Co. plans to open more than 1,600 Uniqlo stores in the United States. its chairman and president Tadashi Yanai said. "We can open at least twice the number of 800 stores that we currently operate in Japan," Yanai told reporters prior to the opening of its second Uniqlo store in the United States, which is located on New York's Fifth Avenue. He also said that sales in the country will likely surpass those in Japan in 10 years. Fast Retailing will also open a new Uniqlo outlet on 34th Street in Manhattan on Oct. 21, while flagship shops are being planned for other big cities such as Chicago, Los Angeles and San Francisco, it said. [Source: Kyodo, October 14, 2011]

“In 2010 Yanai said the goal for Uniqlo is to reach $10 billion in sales by 2020 in the U.S., and he plans to open 200 to 300 stores a year worldwide, including locations in all major U.S. cities. "There's a lot of potential in this market," U.S. CEO Shin Odake added. "We want to open our store in every city in the U.S. eventually." [Source: Jessica Dickler, CNN Money, October 13, 2011]

“They are going to do very well in other markets around the country because there are still shoppers and they are looking for something new and different," said Tom Julian, president of Tom Julian Group, a retail consultancy in New York. With consumers cutting back on spending, Odake said the company must compete against all retailers for those sparse discretionary dollars, not just those in apparel. "We are competing against other innovative services," he said, "things like iPhones.” [Ibid]

“Uniqlo's innovation is most noticeable in its Heattech apparel, Odake said, which is a line of thin thermal t-shirts and leggings that claims to raise body temperature using Japanese technology. "We expect this merchandise to sell out completely every four weeks," he said. Although Odake says he's "not too worried" about the economic slowdown that has put a stranglehold on spending, he is wise to characterize Uniqlo's offerings alongside the hottest selling tech gadget on the planet. "Customers will always look for innovative merchandise," Odake said, "whether it is an iPhone or clothing.” [Ibid]

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Daily Yomiuri, Times of London, Japan National Tourist Organization (JNTO), National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

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© 2009 Jeffrey Hays

Last updated August 2012

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