Uniqlo: Third Time Charm or Three Strikes Out?

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Uniqlo (a division of Fast Retailing) opened its first store in New York City in 2006. By 2015 they had 39 stores around the country, which has crept up to about 47 stores today, mostly in major cities on the East and West Coasts.

So what?

The “so what” has to do with CEO Tadashi Yanai’s ambition beginning in 1984 when he took over the reins from his father to grow the Japanese brand to become the number-one apparel and accessory brand in the world.

So what, again?

After almost a quarter of a century since their first store in NYC, they are not even close to being numero-uno in the number of stores and annual revenues globally. Yanai and his CEO of Uniqlo’s U.S. business, Daisuke Tsukagoshi, painfully know it. Tsukagoshi said, “Significant expansion in the U.S. is key to achieving that goal.” He then points out the sheer size of the U.S. market that necessitates a certain degree of patience. “In the U.S. we are still like newcomers,” he says.

Raising brand awareness has to be defined by what it is Uniqlo wants to raise awareness of, and to whom.  Who is the core consumer? Where are they? Who are the high-potential new targets and where do they live?  What is the location strategy for opening new stores?  What’s the plan?

Dreams Deferred

Well Daisuke, patience is relative. For one, a patient U.S. consumer is an oxymoron. And second, Yanai’s reference to patience regarding growth in the U.S. in 2015 was off strategy as he watched Forever 21 getting big fast and then even faster and bigger. That said, we know how that worked out for the now-bankrupt Forever 21.

Anyway, it seems that Yanai liked the Forever 21 strategy well enough, along with its then head of Forever 21’s U.S. business Larry Meyer, that he snagged him to run Uniqlo’s U.S. business around 2012. And guess what? Same playbook, same marching orders. But for a decade, Uniqlo had still only grown to 39 stores. Between then and now there are roughly 47 stores in the U.S. In the meantime, Larry Meyer is out and Daisuke Tsukagoshi is in as CEO U.S.

Back to the Future

I would also remind our readers that almost a decade ago, in January 2015, I wrote an article: “Uniqlo and Forever 21. What Are They Smoking?”/LINK. I said at the time that I didn’t know if “weed” was legal yet where Tokyo-based parent of Uniqlo, Fast Retailing Company, and its CEO Yanai resided or LA-based Forever 21 CEO Don Changra. Maybe they were getting delusional on some other substance.

One thing their delusions had in common was Larry Meyer. He was CFO at Forever 21 from 2001 to 2012 and then left to become CEO of Uniqlo U.S. Both of his bosses gave him orders to “get big fast” and focus mainly on the American market. Doesn’t everybody? And getting big fast apparently means bigger stores and lots more of them. I guess in their minds, this growth logic is supposed to result in bigger revenues as well.

Patience? I don’t think so.

Third Time Charm or Third Strike Out

I would like to think that Yanai and his new U.S. chief have learned over the last couple of decades that just opening stores quicker and bigger, and stuffing them with…well…stuff, leads to a death spiral in this country.

To put Uniqlo in context of its arguably biggest two competitors, both considered to be “fast fashion” models:

  • Inditex’s Zara: 2220 stores worldwide, $35 billion annual revenues, and about 99 stores in the U.S.
  • H&M: 4801 stores worldwide, $24 billion in annual revenues, and about 501 stores in the U.S.
  • Fast Fashion’s Uniqlo: 2394 stores worldwide, $19 billion annual revenues, and 47 stores in the U.S. GlobalData estimates revenues to be about $324 million. Note: At one point, Yanai set a lofty annual U.S. sales goal of $10 billion by 2020. Another note: that’s more than Old Navy makes worldwide. And 2020 has come and gone.

Nevertheless, one could say $19 billion in global sales and 47 stores in the U.S. and a robust U.S. online business is not so shabby. But no hard-charging business leader wants to admit defeat by accepting mediocracy in the world’s most competitive and vibrant consumer market. Impatient Yanai plows ahead for the third time with a U.S. CEO who continues to call for patience. After two decades of mediocracy in the U.S., it will be interesting to see how this plays out.

A New Plan?

Eschewing a fast fashion positioning in the U.S., Uniqlo intends to continue with what they believe to be an established formula of functional, everyday apparel sold in localized stores and community engagement.

The pandemic setbacks aside, Yanai’s strategy of spewing out more and bigger stores faster was put in place before the pandemic. So, one can understand the reality of that strategic failure, 47 weakly performing stores later. GlobalData’s Neal Saunders said in a Vogue article, “They’re by no means a national retailer and are not on the radar in the American market the way Gap or H&M are. It currently only serves pockets of the market.”

So, while localized stores and community engagement are two new approaches, Tsukagoshi added, “A priority, for now, is to raise brand awareness. We need to tell the story of ourselves and who we are.”

Yes, yes, and yes! It’s a huge investment in marketing. Most international brands entering the U.S. simply do not understand marketing’s critical importance. And to that point, an expert on the U.S. market, both physical and online, must be enlisted to implement the strategy.

What’s a Brand Worth?

Raising brand awareness has to be defined by what it is Uniqlo wants to raise awareness of, and to whom. Who is the core consumer? Where are they? Who are the high-potential new targets and where do they live? What is the location strategy for opening new stores? What’s the plan? Data and analytics are clearly the keys here to getting that bigger faster strategy right.

H&M got the marketing thing right. That is likely why they have 501 stores in the U.S. and 4801 globally. In my opinion, Zara didn’t get the marketing imperative or how to strategize it, and that’s why they only have 99 stores in the U.S. with 2220 worldwide.

Maybe there’s hope for Uniqlo. Tsukagoshi hired a former P&G marketer, Masahiko Nakasuji, to be their Chief Marketing Officer in the U.S. And P&G is arguably one of the best, if not the best quant marketer in the world. This choice for CMO gives some credibility to Tsukagoshi’s commitment to accelerate the growth of the brand in its third attempt to gain greater market share in the U.S.

One Last Thing from ChatGPT

My friend Renee T. Bavineau, who is an expert on fit and sizing issues that continue to plague even the biggest and supposedly smartest retailers and brands, reminded me about an article that was written in 2017 on why Uniqlo failed to gain meaningful growth in the U.S.: “Uniqlo is not willing to change its clothing sizes for the North American market. Americans normally have a bigger body structure than Asians, so it’s usually hard for overweight or taller people to find a good apparel fit in the Uniqlo brand.” Any American who shopped at Uniqlo six years ago knows that the sizing was way off.

So, being a conscientious, forward-thinking journalist, I decided to chat with ChatGPT to find out what changed. I asked: Did Uniqlo change its sizing and fit standards? ChatGPT’s answer within four seconds: “Yes, in recent years, Uniqlo has made changes to their sizing and fit standards. They have introduced new sizing charts and adjusted their measurements to better fit a global audience. Additionally, they have introduced new styles and cuts to their clothing to cater to different body types and preferences. It’s always a good idea to check their sizing charts and reviews before purchasing to ensure the best fit.”

So, in the past six years, Uniqlo has caught up with the American consumer with sizes that fit. That’s a good start to growing the American market. If the jacket doesn’t fit, it doesn’t matter how many Uniqlo stores there are. In closing, I bow to AI for being informative, polite, and considerate. Maybe the generative program has a better expansion strategy to offer Uniqlo’s management. I’ll get back to you on that.

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