Daily Management Review

Uniqlo sets to compete with Zara


03/16/2017


Fast Retailing Co., owner of the clothing brand Uniqlo, hopes that fast delivery of both the newest collections to stores and custom-made clothes to customers will help overtake Zara brand, owner of the company Tadashi Yanai said in an interview with Bloomberg.



TeaLaiumens
TeaLaiumens
Fast Retailing plans to shorten time from designing to delivery of the collection to 13 days. The world's largest seller of clothing Inditex SA takes about the same time.

Fast Retailing began to work as a small seller of men's clothing in Yamaguchi Prefecture in the west of Japan. Having headed the business in 1984, Yanai turned it into the largest clothing manufacturer in the country. The Japanese company has launched a new manufacturing facility in Tokyo, which will help increase sales and fasten delivery.

By 2021, the largest clothing retailer in Japan wants to increase total revenue by almost 70% to 3 trillion yen ($ 26 billion). This may not be enough to overtake Inditex, which earned $ 25 billion in 2016. According to Yanai, growing sales of Fast Retailing will help the retailer concentrate on production of casual wear.

Foreign markets, especially in Asia, will grow, and Fast Retailing revenue for them in the next 3-4 years will rise to about 66% from the current 50%. Uniqlo will be annually opening 100 new stores in China and the same number in South-East Asia.

The company’s new production complex in the Ariake area off the Tokyo embankment employs more than 1,000 people, including designers, marketers, a warehouse and logistics department. Resources concentrated in one place will help speed the work up, Yanai said. "The ability to deliver everyday high-quality clothing to anyone, anywhere, from day to day will allow us to stand out. We are called Fast Retailing, because we want to deliver right products to customers quickly. " 

After growing by more than 20% for three consecutive years in the past year, revenue increased by only 6%. This happened after Uniqlo raised its prices for products after prices for raw material jumped. After that, the company changed its pricing strategy and declared its readiness to reduce prices as much as possible. Still, the retailer had to lower the target revenue level from 5 to 3 billion yen in 2021. This year, Fast Retailing shares fell by 14%, and only Toshiba Corp. looks worse among participants in the Nikkei 225 index.

The company wants to automate operations as much as possible, including tracing products from packaging to delivery and using artificial intelligence to predict sales. In the next three years, production facilities, similar to those launched in Tokyo, will appear in other countries.

Chelsey Tam, an analyst at Morningstar Investment Services in Hong Kong, says: "Speed is definitely more important. Yanai got used to thinking that having a slow production cycle is normal, because he sells casual clothes. Indeed, its cycle may be slower than that of Zara, but it is important to increase efficiency, because it sells clothes for life. " According to Yanai, within three years Fast Retailing wants to expand the range of goods to order. In the US, where Fast Retailing has not yet made a profit, it will close stores in second and third-tier shopping malls and move some of them to more prestigious locations to improve the brand image. The number of shops will decrease as a result, Yanai said. 

source: bloomberg.com






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