UNIQLO’S BRITISH BOW: JAPANESE FIRM STARTS AMBITIOUS EXPANSION
Byline: James Fallon
LONDON — Uniqlo is going global, and it’s taking aim at a slew of popular international chains.
Japan’s fastest-growing retailer has taken its first step into overseas markets with the opening of four stores on the same day in and around London last week. The stores are part of Uniqlo’s plan to open at least 50 stores in the U.K. by 2003 and then to look at other markets.
“We see the U.K. as a stepping stone within a much bigger market,” Steve Pomfret, managing director of Uniqlo U.K., said in an interview. “Our goal is Europe overall and then other parts of the world. The U.S. is definitely on our radar screen and, on the basis that we do well in Britain, we can then begin looking at other Western markets.”
Pomfret declined to put a time frame on Uniqlo’s expansion into the U.S., but he made it clear Uniqlo is moving aggressively on its overseas expansion plan.
“I would be very disappointed if we don’t open 30 stores in the U.K. next year,” he said.
The firm’s entry into America would spell another major competitor for Gap, which already is suffering from the arrival of overseas retailers like H&M and Zara. Gap also is one of Uniqlo’s targets in Britain, where the American chain struggled for about a decade before finally figuring out a successful formula in the middle Nineties. Britain is now among Gap’s largest markets in Europe.
“In looking for new stores, we would look for adjacencies to Gap, Next and in some areas [of] Marks & Spencer,” Pomfret said.
Uniqlo’s British stores will average 5,000 to 10,000 square feet in size. The stores, which were designed by Sir Terence Conran, mirror those in Japan, with pebbled concrete floors and metal wire display cases. Men’s wear and accessories are displayed in the front of the store, while women’s and children’s wear are in the back.
The company was founded as a men’s wear retailer and that remains the majority of its business, Pomfret said.
“Initially, men’s wear will drive us forward in the U.K. but women’s wear is an increasing portion of the business and we expect it to grow rapidly here as well.”
Pomfret declined to reveal sales targets for Uniqlo in the U.K., but said he expects its stores to break even within the second year of opening and to move into profit by the third year. Tadashi Yanai, the chain’s founder and the president of Uniqlo’s parent, Fast Retailing Co., has said he wants the company to become the largest casualwear retailer in Britain. That would indicate Uniqlo is aiming for sales of more than $1 billion a year in the long term. A competitor like Next has overall sales of about $2.32 billion a year, but that includes tailored apparel and home furnishings in addition to casualwear.
Uniqlo is spending $5.8 million on its launch advertising campaign in Britain over the next three months, including TV, newspapers and outdoor locations like billboards and buses, said Dominic Chambers, the company’s marketing director.
“In Japan, Uniqlo makes up to 15 television commercials a season,” Chambers said. “It is committed to feeding and sustaining the brand and we will do the same in the U.K.”
The ad campaigns will divide between those aimed at building awareness of the Uniqlo brand — which generally will focus on its red and white logo — and those aimed at specific products, Chambers said. For example, one ad campaign is likely to trumpet Uniqlo’s low-cost children’s wear collection.
Uniqlo doesn’t pretend it is selling the latest fashions. The chain built its reputation in Japan on well-made basics in a variety of colors and at cheap prices. The most expensive item in its fall-winter collection is a triple-layer jacket at $87, while jeans retail for $29, polar fleeces for $21.75, wool knitwear from $21.75 and cotton tops from $7.50. All the prices include Britain’s value-added tax of 17.5 percent, making them 50 percent cheaper than Gap and some items at Next.
The firm is arriving in Britain at a time when consumers are increasingly value conscious. M&S’s well-publicized travails over the last two years stem partially from its failure to deliver fashionable women’s and men’s apparel at prices that could compete with H&M or Zara, while consumers began to believe retailers such as Next and Matalan PLC delivered basics at better prices.
But Uniqlo won’t face only M&S, Gap and similar chains. British food retailers such as Tesco PLC, J. Sainsbury PLC and Asda, the British subsidiary of Wal-Mart Stores Inc., are moving rapidly into apparel as an adjunct to their core food offerings. Tesco this summer appointed John Hoerner, an American who formerly was chief executive officer of British specialty retailer Arcadia PLC, as ceo of its Tesco Clothing subsidiary. Tesco is aiming to become a major force in the British clothing market and currently sells clothing in more than 140 of its stores. Asda, meanwhile, already has clothing sales of $870 million a year through its George line of women’s, men’s and children’s wear.
All the food retailers are aiming at a similar market to Uniqlo — well-made basics at prices lower than those found at traditional apparel retailers.
Uniqlo already has the scale to handle such competition, however. The retailer was founded in Japan in 1984 and currently operates more than 500 stores throughout its home nation. Uniqlo sells more than 300 million items a year, which is an average of three items for every man, woman and child in Japan. The retailer had a fivefold increase in net profits, to $288.5 million, and a doubling in sales, to $1.91 billion, in the year ending Aug. 30, 2000.
“I would like to see us maintain a 30 percent annual growth rate over the next decade,” Yanai said in January. “That would mean that our yearly sales would grow from the present $1.84 billion to around $16.7 billion.”