Uniqlo Reexaming American Expansion

W18233
UNIQLO: RE-EXAMINING AMERICAN EXPANSION1
Derek Lehmberg wrote this case solely to provide material for class discussion. The author does not intend to illustrate either
effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying
information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.
Copyright © 2018, Ivey Business School Foundation Version: 2018-04-11
From its launch in 1984, Japan’s number-one apparel brand and retailer, Uniqlo Co. Ltd. (Uniqlo), built
its business by delivering high-quality basic casual clothing—“made for everyone, everywhere”2—at low
prices. After growing rapidly in the 1980s, the Japanese economy entered an era of stagnant growth in the
1990s. Japanese consumers wanted to economize but were still picky about quality. This combination fit
with Uniqlo’s value proposition of high quality at low prices.3
Uniqlo repeatedly launched attractively priced products that broke industry sales records. In 1998, it
introduced a fleece jacket for US$14.50,4 less than half the price offered by its competitors for a similar
jacket. Uniqlo went on to sell 8.5 million pieces of fleece clothing in 1999 and 26 million in 2000. No
other company had ever sold so many pieces of a single kind of clothing in Japan.5 Other notable product
launches included the $77 cashmere sweater and Heattech products in 2003, and the bratop in 2004.6 The
company rapidly invested in opening retail locations to maximize sales from its hit products. Between
1990 and 2010, Uniqlo’s sales grew 160 times.7
Fast Retailing Co. Ltd. (Fast Retailing), Uniqlo’s parent company, held a double-digit market share in Japan.
Its stated goal was to become the world’s number-one apparel retailer.8 In 2016, the company reported sales
of $17.3 billion (see Exhibits 1, 2, and 3).9 Tadashi Yanai, Fast Retailing’s founder and chief executive
officer, set a target of $29.1 billion in total global sales by 2020.10 According to an earlier Fast Retailing
target, American and European markets were to comprise 20 per cent of global sales by 2020.11
Fast Retailing acquired several international brands in France and the United States, and its globalization
strategy focused on growing Uniqlo into a leading global brand. However, Uniqlo’s international
experience was mixed. It realized rapid sales growth in Asia but encountered difficulties in the United
States and Europe. Yanai argued that success in the U.S. market was crucial to becoming a successful
global brand.12 Yet, in mid-2017, after more than a decade of efforts, Uniqlo USA’s relatively few stores
continued to lose money. As the gap between its goals and performance continued to diverge, the
company needed to re-examine its U.S.-based business and potentially its globalization strategy altogether.
APPAREL RETAILING IN JAPAN
An island country, Japan was sometimes called “Galapagos” because its markets differed from those of
other large economies. The Japanese people were highly educated and enjoyed long life expectancies.
This document is authorized for use only in Chang Joon Choi's Fall 2023 Asian Case Study at SolBridge International School of Business from Sep 2023 to Dec 2023.
Page 2 9B18M067
Japanese culture valued diligence and conformity. Indeed, compared with most other countries, the
populace was relatively uniform in race, culture, and income levels.
Japanese consumers were among the world’s most critical in terms of quality. They expected high levels
of quality regardless of price level, and could spot defects and blemishes that consumers from other
countries might easily have missed. Many consumers in other Asian countries felt that if a brand passed
the test of the Japanese market, they could also depend on its high quality. Where apparel was concerned,
Japanese consumers had high expectations for the fabric, dyeing, stitching, and durability of products.
Japanese consumers readily recognized even minor differences between products.
The Japanese apparel retail business was highly fragmented at the time Uniqlo was launched in 1984.
Several formats were common in the business, including department stores and small family-owned stores.
Discount mass merchandisers were also growing. Retail clothing stores were primarily full service, with
salespeople playing a central role.
Japanese apparel retailers primarily relied on purchasing products designed and manufactured by outside
vendors. Typically, apparel items went through a trading house, which purchased from the manufacturer,
and then on to two to three different wholesalers before they arrived at a retail store. The system was
costly and complex, and it limited the retailer’s control over the products it carried.
Effective inventory management was difficult for apparel retailers. Orders were made prior to entering the
next season, but it was difficult to judge in advance which products would sell. Retailers often found the
most popular items stocked out quickly, resulting in lost sales, while less popular items often needed to be
liquidated at clearance prices at the end of the season.
UNIQLO’S DEVELOPMENT AND GROWTH
Fast Retailing’s roots were in a small family-owned clothing store that Yanai had inherited.13 He gained
valuable managerial experience in the store but sometimes at significant expense. For example, at one
point, all the employees quit the company because they found Yanai too unreasonable to work with. This
situation left him to take on by himself all the different activities they had previously performed,
including negotiating with vendors, purchasing, pricing, sales, inventory management, and accounting.
Yanai acquired a detailed understanding of key business functions as a result.14
Uniqlo took its name from an English language conceptualization of the brand as a “unique clothing
warehouse.”15 It opened its first store in Hiroshima in 1984.
In 1986, Yanai was impressed by the rapid growth of several U.S.-based apparel chains, including The
Gap Inc. (Gap). When he visited these stores in person, he was struck by how different their approach to
retailing was from Japanese practice. Customers could comfortably enter the store, look at what they
wanted, and select items freely, without a salesperson being involved. This approach influenced Yanai’s
thinking about how Uniqlo stores should operate.16
Uniqlo started off by selling clothing produced by other firms but later built a vertically integrated
business model. Fast Retailing called it the SPA (specialty retailer of private label apparel) model. The
company maintained control but not necessarily ownership at all stages, beginning with initial product
planning; moving through fabric development and then product design, manufacturing, and distribution;
Page 3 9B18M067
and ending at retail. Manufacturing was mainly outsourced, but the company maintained tight control
over manufacturing plants. It was strict on quality, and at the same time, it drove a hard bargain on cost.17
Simplicity and elimination of multiple layers of margin were benefits of the SPA model. However, more
important was the increased control of products and inventory that the SPA model offered over the
traditional approach. The company could design what it wanted to sell, and set the price it wanted to sell
the product at.18 The model also allowed Uniqlo to achieve higher quality standards while aggressively
controlling production costs.
Although the basic concept of the SPA model was similar to that of some foreign apparel retailers, Uniqlo’s
approach was unique in several ways. Uniqlo’s model used Japanese production experts—called takumi—
who worked with suppliers to improve processes that would reduce cost and improve quality. Another
unique aspect was Uniqlo’s relationship with suppliers of fabric and other key inputs, which allowed it
access to specific inputs but maintain low costs. For example, Uniqlo’s relationship with Toray Industries,
Inc., a Japanese chemical company known for its synthetic fibre technology, facilitated the development of
new fabrics that featured improved heat retention or cooling. Uniqlo’s low-cost supply chain allowed it to
deliver products incorporating these benefits at a fraction of the price possible through its competitors.
Implementing the SPA model was not easy, and took Uniqlo nearly 10 years to fully achieve. In the process,
Uniqlo built its new product development and purchasing capabilities to deal with large-scale production
outsourcing using low-cost overseas producers. Uniqlo also developed its brand equity and sales.19
Physical stores were essential to Uniqlo’s growth (see Exhibit 4). Store design and location changed over
the years. During Uniqlo’s fleece boom in 1998–1999, the company opened many stores, often in
roadside locations, following a standardized layout scheme.20 In 1998, Uniqlo opened its first flagship
store in Harajuku, a high-profile, trendy Tokyo neighborhood. In 2005, the company switched from
primarily focusing on roadside stores to a large store model.21 Later, Fast Retailing gathered attention
when Uniqlo opened a joint store with an electronics retailer (Bic Camera Inc.) in the bustling Shinjuku
area of Tokyo, and new flagship stores for its Uniqlo and G.U. brands in Tokyo’s Ginza shopping area.22
UNIQLO’S VALUE PROPOSITION
Uniqlo’s product lineup focused on high-quality, everyday casual basic clothing items, suited to the needs
of many age and income groups. The pricing strategy, which aimed at having many products in the
$9.20–$17.50 range, reflected Uniqlo’s intention to attract customers from a broad section of society.23
Focusing on basic casual instead of trendy fashion items allowed Uniqlo to strictly limit the number of
stock-keeping units (SKUs) and sell more of each item. Uniqlo stores tended to stock 300–500 items at
any one time. High volumes gave Uniqlo economies of scale and strong bargaining power with its
manufacturing partners. The small number of SKUs also simplified inventory management. Uniqlo
increased or eliminated mid-season production depending on its sales.
TADASHI YANAI
Tadashi Yanai was a prominent and vocal leader of Uniqlo and Fast Retailing. His approach to business
focused on sales growth and profitability. He argued that “a company is as well as dead without
growth,” 24 and was known for setting seemingly unachievably aggressive goals. Yanai thought these
goals needed to be ambitious enough that they were unreachable by simply following business as usual
Page 4 9B18M067
with minor tweaks.25 He was critical of the company’s performance when profits did not grow, attributing
the outcome to the firm paying insufficient attention to the details necessary to realize its profit
potential.26 This strong emphasis on profitability was uncommon in Japanese business. It was one reason
why outsiders often viewed Fast Retailing as being more like a foreign company than a Japanese one.27
Yanai was critical of Japanese business culture, which he thought overemphasized analysis and internal
reporting, and resulted in employees waiting for orders rather than proactively engaging customers and
markets. He disliked the idea that companies should try to realize “stable growth.” In his 2009 book,
Yanai commented, “Markets and change are violent,” and argued that firms needed to meet customer
needs in these changing circumstances rather than try to focus on stability.28
As Fast Retailing grew, Yanai became ever vigilant of stability, seeking big-company mentality inside the
firm. In an e-mail Yanai sent to employees at the beginning of 2009, he asked them to destroy
bureaucracy, elitism in management, big company consciousness, and management focused on analysis
and reports.29 Rather than rest on the laurels of their success, each employee should be their own harshest
judge and look for ways to improve.
Yanai was not without his critics. His focus on performance outcomes made Fast Retailing a stressful company
to work for. Yanai was known for saying “those who can’t swim should sink.”30 He was considered to be poor
at delegating, and his attempts to develop a successor to the firm’s top management failed.31 However, others
noted that Yanai’s strong control and top-down approach allowed the company to make quick, decisive
changes that traditional Japanese companies—with more powerful middle management—could not.32 Yanai
remained the company’s largest shareholder, which further cemented his power.33
UNIQLO’S COMPETITORS
Uniqlo’s competitors included several mass-market, fashion-focused, and basic clothing apparel brands.
Most competitors followed a vertical integration model, but they differed in other aspects. For example,
some firms had large numbers of SKUs, while others had relatively few. Also, some firms followed
models that actively managed inventory and replenishment across the clothing season, while others
deliberately created scarcity or relied more heavily on end-of-season sales. Uniqlo’s closest Japanese
rivals included store chains Shimamura Co. Ltd. (Shimamura) and Mujirushi Ryohin (Muji for short).
Shimamura was a rapidly growing, low-priced, fashion-oriented apparel retailer that had been in business
since 1953. In 2016, it had 2,015 stores and $4.8 billion in annual revenue.34 It held a 4.3 per cent share of
the Japanese domestic market in 2015.35 Shimamura purchased apparel items from manufacturers in high
volumes and bargained hard.36 Its president, Masato Nonaka, described the company’s approach this way:
“We don’t gamble, we only go into what we are certain we can win, and do what we understand.”37 The
company had locations in Taiwan and China in addition to Japan.
Muji was started in 1980 as a private brand for the supermarket chain Seiyu and became an independent
company in 1990. Muji’s product lineup was broad; it included household items, foods, stationery, and
clothing, with only a few products in each category. The brand emphasized simplicity and high quality at
low prices. Muji’s parent company reported $3.1 billion in revenue for the year ending February 2017.
Muji had 418 stores in Japan and 821 in total, worldwide. It had been building an international network
since 1991; however, the vast majority of the company’s sales were in Japan and East Asia.38
Page 5 9B18M067
Uniqlo’s largest international competitors comprised Forever 21, Gap, Hennes & Mauritz AB (H&M),
and Zara (see Exhibits 5 and 6).
Forever 21
One of the most popular clothing brands among U.S. teens, Forever 21 had $4.4 billion in sales in 2016.39
The company was located in Los Angeles and owned by two immigrants from South Korea.40 Forever 21
followed a vertically integrated business model, with production outsourced. It originally bought from
plants run by other Korean immigrants in the Los Angeles garment industry but later moved production
offshore to low-cost Asian countries. Forever 21 clothing was inexpensive and trendy, but the company
had a reputation for selling knock-offs of designer clothes and had been sued on numerous occasions.41
The company sold a large variety of clothes in small lots, quickly. Forever 21 stores could turn over 20
per cent of their inventory in a week.42 In 2016, Forever 21 had 790 stores in 48 countries.43
Gap
Founded in 1970, Gap was a U.S. based firm following a vertically integrated model with outsourced
manufacturing. The company had several brands aimed at different customer groups and needs: The Gap
brand focused on high-quality American-style casualwear; Old Navy was a low-priced casual clothing
brand that Gap launched in 1994; Banana Republic offered contemporary classic style men’s and
women’s apparel; and the Athleta brand sold women’s fitness apparel.44 Gap operated 3,200 stores in 11
countries, including over 200 stores in Japan. Approximately $12 billion of the company’s $15.5 billion in
sales in fiscal year 2016 were in the U.S. market. Old Navy represented roughly half of the company’s
U.S. revenue.45
H&M
H&M, based in Sweden, was founded in 1947. The company was known for trendy, inexpensive fashion
apparel. It also followed a vertically integrated model—keeping planning, design, distribution, and retail
functions in-house, while outsourcing manufacturing to independent suppliers in Asia and Europe.46 Its
business model focused on fast inventory turnovers and large volumes; however, it did not replenish items
that sold out. Customers had to buy items they liked quickly because they might lose the opportunity if they
waited.47 H&M operated or franchised a total of 4,351 stores in 64 countries under several different brands.
In the U.S. market, H&M had 468 stores and reported $3.1 billion in revenue in fiscal year 2016. The
United States was H&M’s second-largest market in terms of annual sales after Germany.48
Zara
Started in 1975 in Spain, Zara was a rapidly growing global brand with a vertically integrated supply chain.
Zara’s business model was designed around speed. New products went from the design stage to store
shelves in as little as four weeks, and additional production rounds of fast-selling items could reach stores in
as little as two weeks.49 At company stores around the world, new styles arrived twice a week. Because the
product lineup changed rapidly, customers had to make up their minds quickly since they might lose the
opportunity to purchase the item in question if they waited.50 Zara was higher priced and more fashion-
conscious than Uniqlo but offered high-quality items at much lower prices than its direct competitors. Zara
offered a large variety of items with around 18,000 SKUs per year.51 It was owned by Inditex, which also
had numerous other brands. Inditex had 224 stores in eight countries across the Americas, and a total of
Page 6 9B18M067
7,292 stores worldwide. The Americas were responsible for $3.9 billion in sales, or 15 per cent of the
company’s 2016 worldwide revenue. In the United States, the company had 81 stores.52
GROWTH IN NEW MARKETS
Given Uniqlo’s high market share in its home market, Fast Retailing needed to find additional areas for
growth. The company pursued new brand development in Japan, acquisitions of foreign brands, and the
internationalization of Uniqlo. Fast Retailing’s acquisitions of international brands included Comptoir des
Cotonniers (France), J Brand (United States), Princesse Tam (France), and Theory (United States). These
were primarily premium brands.
In 2006, Fast Retailing launched a new low-priced, fashion-focused brand called G.U. The name “G.U.”
was inspired by the Japanese word jiyu, meaning freedom. The intended message was for customers to
“dress freely.”53 G.U had a distinctly different value proposition and product lineup from Uniqlo. The
retail distribution of the two brands was also separate. However, Fast Retailing applied Uniqlo’s
experience, operational knowledge, and the SPA model to the G.U. brand. Comparing Uniqlo and G.U. in
Fast Retailing’s 2006 annual report, Yanai commented:
We created G.U. to develop the market in Japan for “absolutely low prices.” In contrast to our
quest with UNIQLO to enhance added value with high-quality, fashionable merchandise, we
are going after rock-bottom prices with G.U.54
In 2009, G.U. introduced jeans priced under $10.67. The popularity of these jeans drove G.U.’s growth
and was credited for sales declines of competing brands, including Levi’s Japan.55 Yanai felt that G.U.
was well positioned because it served a market segment that had not yet developed in Japan but had been
successfully developed in other countries, including the United States.56
INTERNATIONALIZATION OF UNIQLO
Uniqlo announced its aim to become a global brand in 2000. The United Kingdom became Uniqlo’s first
international market in 2001. Uniqlo stores in London sold products using the same materials as sold in
the Japanese market, but with styles and sizes tailored to Western needs. Uniqlo’s prices were 30–40 per
cent below competitors’ prices.57
After opening 21 stores in two years, Uniqlo closed most of them because they were losing money. Store
management practices were blamed for Uniqlo’s failure in the United Kingdom. Initial attempts to follow
local practices in the United Kingdom led to messy, disorganized stores that put off customers. After
changing to Japanese store management practices, the store experience and results improved.58 Despite
setbacks in the United Kingdom, Uniqlo continued its international expansion (see Exhibit 7).
Uniqlo entered the Chinese market in 2002, opening its first store in Shanghai. The Chinese market had
great potential, but there were also risks. In China, Japanese brands were respected for their quality.
However, the image of Japan among the Chinese populace could be volatile, and anti-Japanese
demonstrations sometimes erupted. By 2016, Uniqlo had 472 stores in China. Over the period 2006–2013,
Uniqlo entered eight other Asian markets.
Page 7 9B18M067
Uniqlo was also actively entering continental European markets. In 2007, it opened a location in a suburb
of Paris. Then, in 2009, it opened a global flagship store in the high-profile Opera area of Paris, near
major department stores. Later, it entered Germany and Belgium.
Store locations were not the only area in which Fast Retailing was internationalizing its business. In 2005,
the company announced it was moving to a global research and development approach, with offices in New
York, Tokyo, Milan, and Paris. In 2012, the company adopted English as its official business language.59
Despite these new business activities, Uniqlo Japan continued to be Fast Retailing’s largest business,
accounting for 69 per cent of operating profits in 2016. Uniqlo International and G.U. were growing
significantly, and G.U. reported an operating profit of ¥22.2 billion60 in 2016. Of the international brands
Fast Retailing acquired, Comptoir des Cotonniers, J Brand, and Princesse Tam posted losses, while
Theory reported operating profits in 2016.61
U.S. APPAREL MARKET
The United States was the world’s second-largest market for apparel and accessories, with annual sales
estimated in the range of $225 billion to $267 billion in 2015.62 By comparison, Yanai estimated Japanese
apparel sales to be around $82 billion.63
Brick-and-mortar apparel and footwear specialist retailers represented 57.9 per cent of U.S. sales in 2015,
but this segment was shrinking. The number of U.S. shopping malls was expected to decrease by as much
as 25 per cent in the next decade. 64 Internet retailers were increasing their penetration of the apparel
market, expanding from a 7.5 per cent market share in 2010 to 13.6 per cent in 2015. These trends were
similar in Japan; however, grocery retailers, mass merchandisers, and warehouse clubs held a
substantially larger part of the market in the United States than in Japan.65 Walmart Inc. was the leading
apparel retailer in the United States in 2015, with a 7.5 per cent market share. Target Corporation was the
fourth largest with a 5.2 per cent share.66 Off-price retailers, which purchased unwanted inventory from
apparel manufacturers at deep discounts and sold it to consumers at low prices, were a large part of the
U.S. market. This segment included Ross Stores, Inc., TJ Maxx, and Marshalls; it represented just under
10 per cent of the total market in 2015.67
Fast Retailing’s direct competitors had varying experiences in the U.S. market. In 2015, Gap brands held a 4.4
per cent market share, while Forever 21 had 1.3 per cent, and H&M 1.0 per cent.68 Japanese firms had never
played a major role in the U.S. apparel market. In 2016, Muji had 15 U.S. stores and $50 million in revenue.69
Sports product companies such as Nike Inc. (Nike) had strong positions in the U.S. apparel business. Nike
sold $4.7 billion in apparel in North America in 2016.70 In 2015, it had a 2.7 per cent market share in the
U.S. apparel market, putting it among the top 10 brands. By comparison, the largest athletic wear brand in
Japan had only 1.1 per cent of the Japanese market. A relative newcomer, U.S.-based Under Armour was
growing rapidly and had a 1.2 per cent market share. Under Armour sold high-performance fabrics geared
toward managing body temperature, similar to Uniqlo’s Heattech products but priced higher.71
UNIQLO’S U.S. EXPERIENCE
Uniqlo began planning its entry into the United States market in 2004.72 In September 2005, it opened
three stores in malls in New Jersey suburbs, which were part of the greater New York metropolitan area.73
The stores were not successful. In Fast Retailing’s 2006 annual report, Yanai commented:
Page 8 9B18M067
We learned from opening Uniqlo stores in shopping malls in the United States that it is difficult to
sell products in new overseas markets where we do not have name recognition. Taking this lesson
to heart, we have switched to a strategy of opening flagship stores in local fashion centers to
dramatically boost name recognition.74
Nobuo Domae, chief executive of Uniqlo USA, discussed the failure of the brand’s New Jersey stores:
We tried to imitate the Japanese model as much as possible. And that was not very good. We used
metal shelving that was very efficient and functional, but we didn’t know that was only used for
discounters. People might have thought our product was like Wal-Mart.75
In 2006, Uniqlo opened a global flagship store in the SoHo area of New York City.76 In preparation for the
launch of the store, Uniqlo launched a major marketing campaign to generate awareness—with pop-up
stores, collaborations with the Museum of Modern Art, and other activities designed to gain public attention
in Manhattan.77 Domae commented, “People in SoHo are more open to new things, but customers in New
Jersey are more conservative. It’s easier to communicate new things here [in SoHo].”78
The new flagship store was a bold move, considering the company’s initial entry into New Jersey had
been characterized by Fast Retailing as “careful.”79 According to Yanai, “If I opened a very small store,
no one would ever pay attention. We want to sell basics to everyone, so to make people notice us we have
to open in a big way, to make people recognize who we are.”80
Reaction to Uniqlo in the New York market was mixed. Gabrielle Kivitz, a retail analyst, characterized
Uniqlo’s clothes as being “very, very basic—unusually basic.” Observers noted that the quality of Uniqlo
products was high. One journalist commented, “The Uniqlo goods don’t feel like throwaway pieces. They
feel more like things you’ll keep a long, long time.”81
On the other hand, the differences between Uniqlo and other brands were subtle and easy to miss. 82
Regarding the Uniqlo value proposition of high-quality casual basics at a low price, Kivitz commented,
“It had me a little concerned. In this market, that will not fly.”83 However, Yanai believed that Uniqlo’s
value proposition was more suited to Americans’ needs than the brand’s fast-fashion competitors, arguing
that such competitors “copy fashions from the runway and get it out into the stores as soon as possible.
That is not what we do. The typical American consumer doesn’t need or want runway fashions—they
might find them ‘difficult to wear.’”84
Uniqlo maintained its SoHo presence but waited until 2011 before opening its next two American stores,
one on Fifth Avenue in New York City and one in New Jersey.85 The following year, Uniqlo USA hired
an American executive from Forever 21 as its chief operating officer.86 It also announced an aggressive
plan to grow its presence in U.S. shopping malls at a rate of 20 to 30 new locations per year. At about the
same time, brands such as Gap and Abercrombie & Fitch were closing mall locations.87
UNIQLO’S FUTURE IN THE U.S. MARKET
At the end of the 2016 fiscal year, Uniqlo had 45 locations in the United States. This number was fewer
stores than Uniqlo had in Taiwan, despite having entered Taiwan five years after entering the United
States. Uniqlo continued to lose money in the U.S. market, as it had since entering the market.
Uniqlo still had difficulty fitting into the local market. For example, its employees at stores in New York
had been called “Uniqlones” because of the company’s rigid procedures for greeting customers, folding
Page 9 9B18M067
clothes, and organizing merchandise.88 Despite several attempts at making hit products for the American
market such as lightweight down jackets and Oxford shirts, success remained elusive. Some of Uniqlo’s
innovations gained press coverage—for example, the announcement that Uniqlo would sell jackets in
airport vending machines. 89 However, even if these experiments bore fruit, they would not have the
impact the company needed to become a major player in the U.S. market as it had hoped.
Uniqlo was not the only large apparel company having difficulty in the United States. Gap, similar to
Uniqlo, was experiencing declining U.S. sales. Also, American Apparel and Aéropostale, two other
U.S.-based casual brands, had recently gone bankrupt.
As Yanai had commented, “One’s strengths can be one’s weakness: basics can be boring.”90 Yet, in mid-
2017, Yanai remained determined to crack the U.S. market, noting, “We’re going to bring all of our best
practices from across the globe to bear in the American market.”91
Page 10 9B18M067
EXHIBIT 1: FAST RETAILING’S INCOME STATEMENTS, 2013–2016
Units: Million ¥ 2013 2014 2015 2016

Revenue 1,142,971 1,382,935 1,681,781 1,786,473
Cost of sales 577,826 683,161 833,243 921,475
Gross profit 565,145 699,773 848,538 864,998
Selling, general, and
426,177 549,195 671,863 702,956
administrative expenses
Other income 4,050 7,025 8,782 2,363
Other expenses 8,916 27,200 20,992 37,112
Operating profit 134,101 130,402 164,463 127,292
Finance income 22,269 6,001 17,354 2,364
Finance costs 638 933 1,141 39,420
Profit before income taxes 155,732 135,470 180,676 90,237
Income taxes 48,257 56,133 63,287 36,162
Profit for the year 107,474 79,337 117,388 54,074
Note: Fiscal year end is August 31; ¥ = JPY = Japanese yen; US$1 = ¥100 on March 31, 2016.
Source: Fast Retailing, 2016 Annual Report, accessed June 10, 2017, www.fastretailing.com/eng/ir/library/annual.html.
EXHIBIT 2: FAST RETAILING’S CONSOLIDATED BALANCE SHEET. AS OF AUGUST 31, 2016
Page 11 9B18M067
EXHIBIT 2 (CONTINUED)
EQUITY Million ¥
Capital stock 10,273
Capital surplus 13,070
Retained earnings 613,974
Treasury stock, at cost (15,633)
Other components of equity (47,183)
Equity attributable to parent 574,501
Non-controlling interests 23,159
Total equity 597,661
Total liabilities and equity 1,238,119
Note: ¥ = JPY = Japanese yen; US$1 = ¥100 on March 31, 2016.

Source: Fast Retailing, 2016 Annual Report, accessed June 10, 2017, www.fastretailing.com/eng/ir/library/annual.html.
EXHIBIT 3: UNIQLO’S SEGMENT INFORMATION, 2006–2016
Revenue (Billion ¥) Operating Profit (Billion ¥)

Fiscal Uniqlo Uniqlo Global Uniqlo Uniqlo Global
Year Japan International Brands Japan International Brands
2006 393.6 8.7 45.0 68.8 –1.4 1.9
2007 424.7 16.9 82.7 64.0 –1.1 3.7
2008 462.3 29.3 93.1 86.4 0.3 4.9
2009 538.1 37.7 107.0 110.7 1.6 3.1
2010 605.5 72.7 134.8 129.5 6.3 5.9
2011 600.1 93.7 124.0 106.2 8.9 8.7
2012 620.0 153.1 153.0 102.3 10.9 14.5
2013 683.3 251.1 206.2 96.8 18.3 17.4
2014 715.6 413.6 251.2 11.0 20.5 –4.1
2015 780.1 603.6 295.3 117.2 43.3 14.4
2016 799.8 655.4 328.5 102.4 37.4 9.5
Note: Global Brands is composed of G.U., Comptoir des Cotonniers (France), J Brand (United States), Princesse Tam
(France), and Theory (United States).
Source: Compiled by the case author based on Fast Retailing’s annual reports, accessed June 10, 2017,
www.fastretailing.com/eng/ir/library/annual.html.
Page 12 9B18M067
EXHIBIT 4: GROWTH OF FAST RETAILING’S OUTLETS, 2005–2016
3,500
3,000
2,500
Number of Stores
2,000
1,500
1,000
500
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Uniqlo Japan Stores Uniqlo International Stores Global Brand Stores
Note: The Global Brand segment is composed of G.U., Comptoir des Cotonniers (France), J Brand (United States),
Princesse Tam (France), and Theory (United States).
EXHIBIT 5: ANNUAL REVENUE OF FAST RETAILING AND FOUR COMPETING COMPANIES, 2006–
2015
Source: Compiled by the case author using data from Mergent database, accessed September 16, 2017, Mergent.com.
Page 13 9B18M067
EXHIBIT 6: WORLDWIDE STORE COUNT OF FAST RETAILING AND

THREE COMPETING COMPANIES, 2006–2016
Source: Compiled by the case author from annual reports of Fast Retailing, accessed June 10, 2017, www.fastretailing.com/eng/ir/li
brary/annual.html; Gap Inc., accessed June 10, 2017, http://investors.gapinc.com/phoenix.zhtml?c=111302&p=irol-sec; H&M,
accessed June 10, 2017, https://about.hm.com/en/investors/reports.html; Inditex, accessed June 10, 2017,
https://www.inditex.com/investors/investor-relations/annual-reports.
EXHIBIT 7: UNIQLO’S INTERNATIONAL STORES, BY COUNTRY (END OF FISCAL YEAR, AUGUST 31),
2006–2016
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
China 7 9 13 33 54 80 145 225 306 387 472
Hong Kong 1 4 8 11 13 15 16 18 22 25 25
Taiwan 1 17 37 46 55 63
South Korea 10 14 18 30 48 62 80 105 133 155 173
Singapore 2 3 5 7 12 18 23 24
Malaysia 2 5 10 21 25 25
Thailand 4 10 20 23 32
Philipines 1 6 16 23 32
Indonesia 1 4 8 9
Australia 1 6 12
United States 4 1 1 1 1 1 3 22 25 42 45
United
Kingdom 8 11 13 14 14 11 10 10 10 9 10
France 1 1 2 1 2 5 6 8 10
Russia 1 3 2 4 4 8 11
Germany 1 1 1 3
Belgium 2
Page 14 9B18M067
ENDNOTES
1
This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in the case are not necessarily those of Uniqlo or any of its employees.
2
Fast Retailing, 2016 Annual Report, 30, accessed June 10, 2017, www.fastretailing.com/eng/ir/library/annual.html.
3
Ibid; Kotaro Kawashima, Zukai Yunikuro (Tokyo: Kadokawa, 2014), 22.
4
All currency amounts are in US$ unless otherwise specified.
5
Kawashima, op. cit., 54.
6
Tadashi Yanai, Seiko ha Ichinichi de Sute Sare (Tokyo: Shincho-sha, 2009), 56–57, 143–145. US$ amounts are calculated
at an average exchange rate of ¥115.9 to US$1 for 2003; ¥ = JPY = Japanese yen.
7
Hiroshi Tsukiizumi, Yunikuro Sekai-ichi wo Tsukamu Keiei (Tokyo: Nihon Keizai Shimbun Shuppan-sha, 2015), 44.
8
9
Fast Retailing, 2016 Annual Report, op. cit., 60–62, 65. US$ amounts calculated at an exchange rate of ¥103.19 to US$1
as shown on page 61 of the annual report.
10
Fast Retailing, 2016 Annual Report, op. cit.; US$ amounts are calculated at an average 2016 exchange rate of ¥108.7 to US$1.
11
12
Fast Retailing, 2016 Annual Report, op. cit., 12.
13
However, Genichi Tamatsuka served as president and chief operating officer of Fast Retailing from 2002–2005. Takahiro
Saito, Yunikuro tai Zara (Tokyo: Nihon Kezai Shinbun Shuppan-sha, 2014), 17; Kawashima, op. cit., 50–52.
14
15
Fast Retailing, 2016 Annual Report, op. cit.; Kawashima, op. cit., 22.
16
Saito, op. cit., 17–20; Kawashima, op. cit., 50–52.
17
Tsukiizumi, op. cit., 117.
18
Kawashima, op. cit., 80–89.
19
20
21
Fast Retailing, 2006 Annual Report, 16.
22
23
Saito, op. cit., 21. US$ amounts are calculated at an average 2016 exchange rate of ¥108.7 to US$1.
24
Fast Retailing, 2005 Annual Report, 6.
25
Saito, op. cit., 28–29.
26
Yanai, op. cit., 69–70.
27
Yanai, op. cit., 118
28
Yanai, op. cit., 74
29
Yanai, op. cit., 263–264.
30
31
“Uniqlo: Uniquely Positioned,” Economist, June 24, 2010.
32
33
As of August 31, 2016, Yanai owned 21.67 per cent of Fast Retailing shares, and his sons Kazumi and Koji owned 4.51
per cent each.
34
Mergent Online.
35
Euromonitor.
36
37
Grace Huang, “No-Frills Clothier Shmamura Finds Favor in Sluggish Japan, Tops Uniqlo in Income Growth,” Japan
Times, November 21, 2016.
38
Ryohin Keikaku, “Corporate Information: History,” accessed March 13, 2018, https://ryohin-
keikaku.jp/eng/corporate/history/.
39
Annalyn Kurtz, “These Are Teens’ Favorite Brands of 2017,” Fortune, May 1, 2017; Grace Chung, “Exclusive Interview
with One of America’s Most Successful Immigrants: Forever 21’s Do Won Chang,” Forbes.com, October 5, 2016.
40
“America’s Richest Self-Made Women,” Forbes, June 21, 2016.
41
Susan Berfield, “Steal This Look!,” Bloomberg Businessweek, January 24, 2011.
42
Ibid.
43
Chung, op. cit.
44
The Gap Inc., 2016 10-K Report, 1–2.
45
The Gap Inc., 2016 10-K Report, 1, 12, 14, 71.
46
H&M, 2016 Annual Report, 10, 72, accessed June 10, 2017, https://about.hm.com/en/investors/reports.html.
47
48
H&M, 2016 Annual Report, op. cit., 52.; kr = SEK = Swedish krona; kr1 = US$0.12 on March 31, 2016.
49
Saito, op. cit., 84.
50
51
52
Inditex, 2016 Annual Report, 6, 260, 303, accessed June 10, 2017, https://www.inditex.com/investors/investor-
relations/annual-reports; US$ amounts are calculated at an average 2016 exchange rate of US$1.11 per €1.
53
Fast Retailing, 2006 Annual Report, op. cit.. 29.
Page 15 9B18M067
54
55
Kawashima, op. cit., 66. US$ amounts are calculated at an average exchange rate of ¥93.7 to US$1 for 2009.
56
57
Fast Retailing, 2000 Annual Report, 10, accessed June 10, 2017, www.fastretailing.com/eng/ir/library/annual.html; Fast
Retailing, 2001 Annual Report, 11, accessed June 10, 2017, www.fastretailing.com/eng/ir/library/annual.html.
58
Tsukiizumi, op. cit., 219–221.
59
60
¥1 = US$0.01 on March 31, 2016.
61
Fast Retailing, 2016 Annual Report, op. cit., 62, 65.
62
“Largest Apparel and Accessory Markets Worldwide, 2015,” in Market Share Reporter 27th ed., eds. R. Lazich and V.
Burton (Farmington Hills, MI: Gale, 2017); Euromonitor Passport database, www.euromonitor.com;
http://find.galegroup.com/gdl/start.do?prodId=GDL.
63
Yanai, op. cit., 58. US$ amounts are calculated at an average exchange rate of ¥121.5 to US$1 for 2015.
64
Derek Thompson, “What in the World Is Causing the Retail Meltdown of 2017?,” Atlantic, April 10, 2017.
65
Euromonitor Passport database, www.euromonitor.com.
66
“Leading Apparel Retailers, 2015,” in Market Share Reporter 27th ed., eds. R. Lazich and V. Burton (Farmington Hills, MI:
Gale), 2017.
67
Ibid.
68
Ibid.
69
Ryohin Keikaku Co., Ltd., Ryohin Keikaku Co., Ltd. Data book: 1st Mar. 2016 ～ 28th Feb. 2017, accessed September 8,
2017, http://v4.eir-parts.net/v4Contents/View.aspx?template=ir_material_for_fiscal_ym&sid=36854&code=7453.
70
Nike Inc., 2017 10K Report, 75, 80.
71
Under Armour Inc., 2016 10-K Report, 1–2, 37; Euromonitor.
72
73
74
75
Eric Wilson and Michael Barbaro, “Basic Chic from Japan. But Will It Sell?,” New York Times, November 10, 2006.
76
77
Yanai, op. cit., 179, 191.
78
Wilson and Barbaro, op. cit.
79
80
81
Alex Kuczynski, “Service with a Motto: A Japanese Chain Arrives,” New York Times, October 6, 2005.
82
83
Ibid.
84
Ibid.
85
86
Joan Verdon, “Uniqlo’s Top American Exec Talks about Growth Plan,” Tribune Business News, May 7, 2012.
87
Stephanie Clifford, “As U.S. Retailers Retreat, a Japanese Chain Sees an Opening,” New York Times, May 23, 2012.
88
Joan Verdon, “Uniqlo—Changing the World? Or the Workplace?,” Tribune Business News, September 9, 2012.
89
Safdar Khadeeja, “Uniqlo Puts Jackets in Vending Machines,” Wall Street Journal, August 3, 2017.
90
“Uniqlo: Uniquely Positioned,” op. cit.
91
Junichi Sugihara, “Yunikuro no shinka tamesu beikoku shijo,” Nikkei Business, October 23, 2017, 11.

Uniqlo Reexaming American Expansion

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Uniqlo Reexaming American Expansion

Uploaded by

Copyright:

Available Formats

W18233

UNIQLO: RE-EXAMINING AMERICAN EXPANSION1

Copyright © 2018, Ivey Business School Foundation Version: 2018-04-11

APPAREL RETAILING IN JAPAN

UNIQLO’S DEVELOPMENT AND GROWTH

UNIQLO’S VALUE PROPOSITION

GROWTH IN NEW MARKETS

U.S. APPAREL MARKET

UNIQLO’S U.S. EXPERIENCE

UNIQLO’S FUTURE IN THE U.S. MARKET

EXHIBIT 1: FAST RETAILING’S INCOME STATEMENTS, 2013–2016

Units: Million ¥ 2013 2014 2015 2016

EXHIBIT 2: FAST RETAILING’S CONSOLIDATED BALANCE SHEET. AS OF AUGUST 31, 2016

Note: ¥ = JPY = Japanese yen; US$1 = ¥100 on March 31, 2016.

EXHIBIT 3: UNIQLO’S SEGMENT INFORMATION, 2006–2016

Revenue (Billion ¥) Operating Profit (Billion ¥)

EXHIBIT 4: GROWTH OF FAST RETAILING’S OUTLETS, 2005–2016

EXHIBIT 6: WORLDWIDE STORE COUNT OF FAST RETAILING AND

You might also like