Uniqlo expansion plans

Davide Lentini prepared this case under the supervision of Professor Benjamin Yen for class discussion. This case is not intended to show effective or ineffective handling of decision or business processes. © 2016 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be reproduced or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise (including the internet)—without the permission of The University of Hong Kong. Ref. 15/562C

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BENJAMIN YEN

UNIQLO: A SUPPLY CHAIN GOING GLOBAL The growth and expansion of Uniqlo seemed unstoppable. With its founder and CEO Tadashi Yanai at the helm, the company grew in the span of 20 years to become the fourth largest fashion retailer in the world, with over 1,550 stores worldwide as of February 2015.1

Yanai took over the family business, Ogori Shoji Co., in 1984 and radically changed it right away. The company went from selling ready-made men’s suits to affordable basic casual wear under the “Unique Clothing Warehouse” brand. The first store was opened in urban Hiroshima, and a year later, the second followed at a roadside location. The latter format proved successful and became the template driving store expansion across Japan up until 1998. That year, the company opened a flagship urban store in the fashionable Harajuku district of Tokyo and “Unique Clothing Warehouse” was incorporated into the Uniqlo brand. The opening of the flagship store and simultaneous introduction of a new polar fleece jacket marked the beginning of a very rapid expansion for Uniqlo, which became one of the hottest clothing brands in Japan and the number-one fashion retailer in the country.2

Since day one, Uniqlo focused mainly on price and quality, adopting a counter-current approach and not relying entirely on fashion trends in developing and marketing its clothes. Direct customer feedback, based on practical every-day needs, was as important as fashion trends in shaping product R&D and research on natural and synthetic textiles. As a result of its strategy, Uniqlo clothes could be considered a fashion-basic style available in a great variety of colors and high quality materials.

UNIQLO's unique position is [as] the world's only LifeWear brand. LifeWear means everyday clothes for a better life—high-quality, fashionable, affordable and comfortable.3

Uniqlo was the pioneer of “Speciality Store Retailer of Private Label Apparel” (SPA) in Japan, a model that had been successfully used by the GAP in the US, and was common to all major “fast fashion” companies, including Inditex and H&M). Uniqlo’s implementation of the SPA model was based on an agile supply chain, where tight partnerships with a select number of

1For details, see Fast Retailing website: http://www.fastretailing.com/eng/about/business/shoplist.html (accessed 9th April 2014). 2For details, see Fast Retailing website: http://www.fastretailing.com/eng/ir/library/pdf/ar2013_en_13.pdf (accessed 9th April

2014). 3For details, see Fast Retailing website: http://www.fastretailing.com/eng/about/message/ (accessed 9th April 2014).

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15/562C UNIQLO: A Supply Chain Going Global

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suppliers were arranged in a network-like structure inspired by top Japanese car manufacturers [see Appendix 1 for an overview of the Fast Retailing business model]. Most Uniqlo suppliers were long-term Chinese partners. Asian markets were central to driving Uniqlo’s growth, but in its quest to become the top fashion retailer in the world, the company needed to expand into the US and Europe to overtake competitors in sales. Uniqlo was a dominant force in Japan and was expanding rapidly in China, so the company remained a regional rather than a global player. Uniqlo’s supply chain proved effective in the Asia Pacific region, but could the same model be scaled worldwide? Despite Uniqlo’s excellent results and expansion rate, the company was prepared to change its supply chain to become global. Was the low growth rate Uniqlo experienced in the US and particularly Europe partly due to the limitations of its current supply chain?

At first, Uniqlo was a casual chain on the back streets of Hiroshima. T