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Yanai differentiates Uniqlo from fast fashion chains like H&M and Zara.

While
other apparel companies try to find or follow the latest fashion trend, Yanai
believes that customers care more about quality and value than
about a quick response to changing styles. So, Uniqlo uses long
development cycles in which they test new materials and designs.
They create long-term partnerships with vendors. This strategy is
similar to that of car manufacturers, who spend months or years in
product development to create a new product.
Uniqlos topline has grown almost 67% in the post-Lehman four-year period
from 2009 to 2013, whereas Inditex has grown about 50%, H&M 26.4% and
Gap less than 19% during this period.
Tadashi Yanai, CEO of Fast Retailing and the wealthiest man in Japan, looks
mild, but has ambitions of conquering the world. His goal is to turn Uniqlo into
a company with $50 billion revenues by 2020, selling low priced yet
fashionable, basics like Oxford shirts, V-neck cashmere sweaters, T-shirts,
jeans and down jackets. Hes planning to open 1000 stores in the US market.
Currently, hes got just 17 there.
At the other end of the spectrum is Zara, which has built its strategy
around consumer trends, embracing the fast-changing tastes of its
customers. Zara has developed a highly responsive supply chain that
enables delivery of new fashions as soon as a trend emerges.

Zara comes up with 36,000 new designs every year, and it delivers new
products as many as 2-6 times each week to its 1900+ stores around the
world. Store orders are delivered in 24-48 hours. It takes the company only
10-15 days to go from the design stage to the sales floor. How is Zara able to
do this? By being fast and flexible.

Rather than subcontracting manufacturing to China, India or


Bangladesh, Zara built 14 automated factories in its home country
Spain, where robots work 24/7 cutting and dyeing fabrics and
creating semi-finished products, which are then finished to suits,
shirts, dresses and the like by about 350 finishing shops in
Northwestern Spain and Portugal.

Imagine the foresight robots dont (yet) form a labour union and also don't
take the weekend off. Some American apparel companies are now partly
following the Zara model, getting their longer-lead-time goods
manufactured (semi-finished) in Asia and doing the finishing work in
the US.

H&Ms approach is somewhat of a hybrid of the Uniqlo and Zara models. It


manages to merge a commitment to longevity while staying responsive to
fashion trends. The clothing collections are created in Sweden by 200-odd
designers. H&M outsources production to a network of more than 500
suppliers. About a third of their products are made in Europe, whereas
almost two-thirds are made in Asia. Generally, the items with very short lead
times are manufactured in Europe, with longer-lead items manufactured in
Asia. Like Zara, this allows H&M to be more responsive to trends.

In 2005, the company launches in the United States opening 3 stores in


New Jersey shopping malls. In 2006, the company was forced to rebrand their
American stores due to dwindling sales. Through communication with
employees and customers, mid-management discovered that the low sales
were due to the unpopularity of the loose fitting apparel. Typically at the time,
apparel brands like The Gap and banana republic catered to a universal fit,
with a looser, relaxed-in-the-middle fit. UNIQLO decided to experiment
introducing slimmer Japanese sizes. As a result, brand equity and location
sales rose. The company is not usually concerned with to change their
brand line for fads or short-term trends, but the skinnier and slimmer fits
demand in apparel has now become a new universal fashion norm. UNIQLOs
timeless, functional apparel, with its combination of superior quality and low
prices, has proven recession proof on two major occasions

Aggregate factor and logistic costs


Compared to current distribution most likely from China, the US and Mexico
are more promising as a manufacturing location for several reasons. Because
of its closeness to US market, transportation cost from factories either in the
US or Mexico to warehouses in the US will be significantly lower than that
incurred from China to the US. Moreover, it will contribute to being more
responsive to the demand in the market compared to current distribution
from China. For instance, UNIQLO can adjust production according to the
actual demand. In addition, this can reduce excess inventory that UNIQLO is
facing now as well as inventory cost. According to China importal website, it
takes roughly one month to deliver products from China to the US. This
means manufactures need to produce at least 1-2 months before UNIQLO
stores in the US start to sell them. Therefore, there is a big time lag between
production and sales. This time lag has a negative impact on the companys
cash flow. As for raw material, taking cotton as an example, the US is the 3rd
biggest cotton supplier and Brazil is the 5th biggest in the world according to
the The Statistic Portal. Consequently, the shipping cost will be inexpensive if
UNIQLO can find a good supplier at a reasonable price either in the US or
Brazil rather than buying from Asian countries such as China, and India.
Tariffs and tax incentives suppose current products sold in the US are made in
China, and that the US government imposes 15.9% tariff on womens or girls
blouses, shirts and shirt-blouses, knitted or crocheted according to the article
in Examine China. The duty rate varies according to commodity; for example,
the rate for mens or boys shirts, knitted or crocheted items is 19.7%.
Furthermore, these tax system and regulations could significantly change in
the future. However, if UNIQLO produces either in the US or in Mexico, the
company can enjoy advantages that NAFTA brings to the company
and minimize the risk of changeable tax systems and regulations controlled
by other

Fashionable or Not?

Instead of producing clothes that reflect the latest fashion trends, Uniqlo
focuses on bringing the latest technological innovations to everyday
clothing for all ages and types of people. This is reflected in its business
model, with apparel stock being designed well in advance and
remaining constant throughout each season, and by the fact that its
products are targeting a large audience, transcending barriers of taste
and style and aiming for superior functionality. In the fashion industry,
however, toning down fashion can have detrimental effects. The
company has launched lines with the signatures of famous designers,
but in all respects has remained faithful to its philosophy of giving
priority to functionality and innovation versus style and fashion. The fact
that Uniqlo defines Apple as its direct competitor, rather than companies
in mass fashion retailing, like H&M or Zara, speaks volumes about its
self-perception. It also reveals that Uniqlo might be misinterpreting
Apples role in the consumer electronics industry. In contrast to Uniqlo,
Apple is a trendsetter, not only in functionality, but also in style. Indeed,
Apples products are generally prized for their advanced, elegant
design, especially in comparison with equivalent competitors products,
in an industry where technology, functionality and services play a
decisive role. Uniqlo, on the other hand, while not neglecting fashion
altogether, creates products with a more generic style, and relies on
functionality and technology for high sales.

What Uniqlo chooses to downplay is the force of style in its customers,


personal statements, or their desire to conform to social and cultural
standards. Consumers buy clothes making choices that reflect their
personal cultural and social values. Mainstream generic apparel with
commendable qualities can serve a range of clothing needs, especially
for those opting for more affordable products. It cannot provide the level
of styling sophistication and uniqueness that a big portion of the public
seeks in at least part of its wardrobe the feature that has driven
apparel evolution since antiquity. Given that profit margins are small for
the type of clothing Uniqlo sells, fabric and production technology
becomes easily accessible over time to competitors, and infrequent
alteration of styles and trends in available stock deters customers for
returning quickly for new purchases, Uniqlo may find itself needing to
look for more sources of revenue sooner rather than later
While Uniqlo has been extraordinarily successful so far, it faces
significant future challenges to reaching its overall company goals. The
management team may be considering a variety of options to address
these challenges. Should Uniqlo abandon its one-size fits all model to
deal with the differences in Western markets? Should they focus more
on fashion when designing new clothing or stick with the minimalist
designs that have been extremely popular? How can they make a
bigger splash in the market using their technological advantage?

More production closer to end consumers (adaptability) (shortest possible


lead time) IN THE US
Keep production and enhance transporation (cheap production) (ship by air)
Keep production and focus on omnichannels (ship by sea) (economies of
scale, quality) (integrate on/offline)

Stronger resence
Lead time delivery time
Technological/fashion capitals
Cheaper transportation fees
Faster response tmes when ur in the mix