Since opening their first store in the US in 2005, the Japanese casual wear designer, manufacturer and retailer Uniqlo has swept the American retail scene by storm. Just like their competitors at Zara and H&M, Uniqlo has quickly become a visionary leader in retail.
We were pleased when we recently found Uniqlo’s business model posted on their parent company Fast Retailing’s website. We thought we’d share the secret sauce behind one of the world’s leading brands.
*Image belongs to Fast Retailing Co, LTD
Their approach is simple – “UNIQLO clothes are MADE FOR ALL.” Since 1984, they have been committed to developing long-lasting clothing items that transcend across all categories and social groups, offering a seemingly unlimited supply of everyone-has-them – or should-have-them – apparel basics.
Uniqlo has established a SPA (Specialty store retailer of Private label Apparel) business model, which encompasses the entire clothes making process –from design and production to final sale. This model allows the retailer to successfully differentiate itself from other companies, by developing unique products based on selling highly finished elements of style rather than the pursuit of fashion trends.
Research & Development (Designers/Pattern Makers)
Uniqlo’s designers work as project teams to develop new fabrics before studying fashion trends. Once the laboratory develops a new fabric, designers in Tokyo, New York, Paris, and Milano begin to make designs that fit the new fabric. Concept meetings happen around one year before a product launch. R&D then engages with merchandising, marketing, materials development and product departments to discuss and finalize concepts based on seasonal increments.
Development and Procurement of Materials
Uniqlo strives to provide such high-quality clothing at reasonable prices. Producing over 700 million items annually, Uniqlo can negotiate with global material manufacturers to secure materials at the lowest cost possible. Through setting up a Global Quality Declaration, an increased attention to material quality has led Uniqlo to develop innovative materials with some of the best martial manufactures such as Toray Industries and Kaihara Corporation.
Each Uniqlo store presents a sleek and modern look in a very Apple- meets-Gap way. Visual merchandising displays run from floor-to-ceiling and are no less than eye-catching, to give the illusion there is a lot to be found. The juxtaposed walls of men’s sweaters, women’s tanks, and kid’s T-shirts are tucked into cubbyholes and lining display cases coordinated to the shades in the rainbow. Customers are responding well, with 24,000 visits on a typical Saturday. NewYork Mag stated Uniqlo had become New York’s hottest retailer, an impressive title to be given from the retail and fashion capital of the world.
With Uniqlo’s urban megastore model, an average store is around 37,000 square feet; merchandisers play a vital role from product planning through production to make sure these stores are filled with the right product, at the right place, at the right time.
Merchandisers first meet with the R&D designers, they then apply the concepts for each season in product plans, materials and designs. Seasonal collections such as “Airism” in summer and “Heattech” in winter seasons represent Uniqlo’s philosophy of integrity and freshness.
Next, merchandisers decide the product lineup and volume for each season, paying close attention to a detailed marketing strategy. An important task for merchandisers is to decide when and where to increase or limit production. Decisions around adjusting production in line with demand are made with the product-planning department.
Quality and Production Control
Uniqlo deploys about 400 staff and textile takumi* (skilled artisans) to offices in Shanghai, Ho Chi Minh City, Dhaka and Jakarta. The takumi team gives instructions on dyeing technology and techniques to partner factories to insure the best quality of products. Customer concerns regarding quality are communicated immediately to production departments, and then improvements are made weekly to resolve outstanding issues.
Expanding Production Network
Broadening its global reach, Uniqlo has formed business relationships with partner factories in China, Vietnam, Bangladesh and Indonesia. Production offices in Shanghai, Ho Chi Minh City, Dhaka and Jakarta to ensure clothes are made to the highest global standard of quality.
The Inventory Control Department maintains the optimal level of store inventory by observing sales and stock on a weekly basis, and dispatching necessary inventory and new products to fulfill product orders. At the end of each season, merchandisers and the marketing teams help coordinate the timing of markdowns and sales (typically 20 to 30% off*) to ensure that inventory is sold.
Marketing promotions are done by season. During campaigns, Uniqlo advertises core products, such as fleece, jackets, polo shirts and HEATTECH. Uniqlo uses TV, flyers (Japan) and other media sources to promote offerings and discounts that week.
Sales from the Uniqlo Japan Online Store totaled 24.2 billion yen in fiscal 2013, or 3.5% of total sales. Uniqlo online portals are also in China, Hong Kong, Taiwan and the U.S. (Revenue from this has not been disclosed)
90,000 comments and requests are handles yearly.
For store locations, Uniqlo actively searches for areas with high potentials, usually in high-end shipping malls and urban centers. Uniqlo invests heavily into training stuff and awards high-achieving store managers. Some compare Uniqlo’s in-store experience obsession to a turbocharged version of kaizen, the Japanese concept that translates roughly as the continuous search for perfection. Uniqlo prescribes, records and analyzes every activity done at the store level, from folding techniques to how cashiers return credit cards.
Uniqlo business model has been successful in growing the empire; their aggressive expansion plan by year’s end is to have 39 US stores – with stores in Los Angeles and Boston – up from 20 at the start of the year. Uniqlo is the fourth-largest specialty-apparel store in the world behind Zara, H&M, and Gap; with sales around $10 Billion.
*”UNIQLO Business Model.” FAST RETAILING CO., LTD. N.p., n.d. Web. 27 May 2014.
Written by: Rebecca Shirazi
Rebecca Shirazi is the marketing manager at RBM Technologies. She is a frequent contributor to MerchandisingMatters.com, where she writes in the areas of marketing, merchandising and supply chain.