Tadashi Yanai has always thought big. After all, one doesn’t found and build the world’s third-largest apparel retailer without having large ambitions.
But his new goal is perhaps his biggest yet: “We want to change clothes,” the founder, chairman, president and chief executive officer of Fast Retailing, parent of Uniqlo, said in New York on Wednesday, repeating the company’s motto. “We want to change conventional wisdom and in doing that we change the world.”
That doesn’t mean Yanai is giving up on his goal of Fast being the world’s largest apparel retailer. While he has scaled back on his target of 5 trillion yen in sales by 2020 — trimming it to 3 trillion yen after the slowdown in the Japanese market seriously impacted Uniqlo’s results — he insists that the company will eventually hit the 5 trillion yen figure; it just might take longer than three years. It estimates sales for the year to August 2017 will be 1.85 trillion yen.
“I firmly believe that 3 trillion yen is doable with the help of digital technology,” he said in an exclusive interview following the presentation of Uniqlo’s new Lifewear collections at Spring Studios in downtown Manhattan.
Those two words — “digital technology” — are key to Uniqlo’s future as Yanai wants to transform it from simply a retailer into a “digital consumer retail company,” as he revealed at the unveiling of the brand’s new headquarters in Tokyo earlier this month. What that means is Uniqlo becomes digitally focused, not in the sense that it gives up on brick-and-mortar retailing but instead that the firm’s next phase of growth is driven by all things digital — well, almost all.
Asked how he came up with the concept, Yanai, smiling a broad smile, said, “To tell you the truth, I have been sitting on the board of the Softbank Group and starting from 10 years ago I sensed that things would roll around this way.”
Five years ago he started to reposition Uniqlo to adapt to the changing landscape, and the new headquarters are a manifestation of that. “I believe digital will change everything in the world,” said Yanai, sipping a cup of black coffee. He pointed to the hyper-availability of information and how it is enabling fashion to be increasing nimble.
“In that process, all the creators and talent working in our company need to work together to decode their creation to benefit consumers. We provide information to the consumers and the consumers give us feedback and we direct digitally information-wise and product-wise and that is the world we are living in today.”
In Yanai’s view, it is a virtuous circle — all leading to Uniqlo fulfilling the consumer’s needs, wants and tastes faster and faster. His aim, which he restated Wednesday, is to enable consumers to have total insight into Uniqlo’s supply chain and inventory, so they know what is available and, more importantly, the company’s stores would be able to completely customize their selection based on their local neighborhoods. The eventual goal is to literally enable the consumer to have clothes made just for them — making the “U” in Uniqlo even more relevant.
“This is our answer to the changing world,” said Yanai, who fielded the most complex question without pause and with an easy smile and laugh. “The stores need to change. We are centering around information and orienting around information more and more.”
He admitted that before all this occurs Uniqlo needs to have all the right systems in place, from the supply chain to the computer systems to the stores. Asked how long that will take, he said without hesitation, “All the essential building blocks will be in place in one year.”
But as countless retailers scale back their fleets to focus more of their efforts toward online sales, Yanai believes that the key is to maintain a focus on bricks-and-mortar but use information to improve the store operations. That is the key to localization of assortment, as well as to customer service. It is “high-tech, high-touch,” he said.
“So, in other words, we will have to service and interact with customers as we used to in the old days of retail. Personal contact is the key. But we will be supported by digital information,” said Yanai, pointing again to how each store must be different in terms of assortment. He described it as a “locally anchored store,” which is the opposite of the chain store.
It’s unclear whether the look of the stores will be different in each neighborhood, however. “That has to be decided with the help of artificial intelligence and big data,” he said.
But here, in a way, is where Yanai’s push for digitization meets its limit. Asked if Uniqlo was doing a lot with virtual reality, as many retailers are beginning to, he laughed heartily and said, “I’m not a big fan. I prefer physical to virtual reality.
“It has become a buzzword for everyone. Everyone can imagine that, probably, virtual reality will come, but I still remain dubious about it.”
The one thing he is not dubious about is the importance of the U.S. market to Fast’s global ambitions. Uniqlo has struggled in America with stores in both major cities and suburban malls and the U.S. operations continue to operate at a loss, although that loss was smaller last year. Yanai has been honest about Uniqlo’s difficulties in the U.S., and says the key now is for the company to focus on the larger stores in the bigger cities and forget about “suburban malls.”
It is the same strategy Uniqlo adopted in the U.K. after opening there in the Nineties. With ambitious plans to expand nationwide, it landed first in London and then moved into other cities throughout the U.K. However, it found that no one in those areas knew the brand and so eventually it closed those stores and focused first on building a strong presence in London, then eventually expanded elsewhere in Britain.
“Our most important market is the U.S. and we are using our U.K. experience here” to adapt the strategy, he said.
Asked whether Uniqlo would collaborate with a U.S. designer on a capsule collection in the way it is with Inès de la Fressange or, for fall, J.W. Anderson, Yanai said it would gladly do so with one caveat: “We have no interest in having just his or her label on a collection. The idea is to create Uniqlo clothing. How can we encourage his or her creation onto our creation and then this synthesis would be most beneficial to the consumer.”
Even as it fixes its operations in the U.S., though, Uniqlo remains focused on growth in other regions. “Our footprint is mainly focused on Asia and it’s the growth engine of the world,” he said, indicating that is why he believes the retailer can hit his 3 trillion yen sales target.
“All Asian countries are important — from China to India. Shanghai has become like New York, Jakarta, Manila, Bangkok, Kuala Lumpur — these cities could be compared to New York or Paris. They are becoming middle class in increasing numbers.” He pointed out that 1.3 billion people in India will join the middle class in coming years, creating a huge opportunity.
As it pushes toward its growth target, however, the one thing Yanai now rules out is any chance of an acquisition to achieve it. Fast Retailing in the past acquired Theory in the U.S. and years ago was mentioned as a potential bidder for companies ranging from Barneys New York to J. Crew. But he said he now has no acquisitions as part of his strategy.
“The cultural context will make it difficult to make a successful acquisition. In the U.S., as you know, some of the goals of the business leader is to divest the company and then to relax. That is an uninteresting proposition for me.”
He doesn’t like to relax, then?
“Having this kind of business discussion is enjoyable,” he smiles. “This is an exciting moment. My philosophy is that still, within the tense moment, you can find the joy.”
Then he starts to laugh again. “Relaxation seems to be associated with fun but being relaxed is not necessarily fun.”