CASE STUDY 4

UNIQLO

1. Would Uniqlo’s model work for other retailers?

Yes. This month's Fast Company magazine includes a six-page profile on Japanese fast-
fashion retailer Uniqlo, which basically tells more of what we already know: essentially,
the brand plans to expand dramatically in the US, and in order to succeed, it must walk
the fine line between good cheap and bad cheap. Not much new there, but here's
something fun: when the fiscal results from 2012 are tallied, Uniqlo is expected to log
about $10 billion in revenue and $1.5 billion in profit, making it the world's fourth largest
clothing retailer after Zara, H&M, and Gap. The magazine put together a handy—and, at
times, revealing—chart, breaking down the four brands by the numbers.

Japanese retailer Uniqlo wants to be the number one apparel brand in the world by 2020.
In 2013, parent company Fast Retailing’s global revenue was 1143 billion Japanese Yen
($11.2 billion). Swedish apparel retailer H&M had revenues of 150 billion Swedish
Kroner ($22.9 billion) in the same year, during which the estimated revenues of Spanish
retailer Inditex Group (the parent and owner of Zara) was 16.6 billion Euros ($22.4
billion). In comparison, American fashion group Gap Inc. had revenues of about $16.5
billion. Differentiates Uniqlo from fast fashion chains like H&M and Zara. While other
apparel companies try to find or follow the latest fashion trend, believes that customers
care more about quality and value than about a quick response to changing styles. So,
 Uniqlo uses long development cycles in which they test new materials and designs. They
create long-term partnerships with vendors. This strategy is similar to that of car
manufacturers, who spend months or years in product development to create a new
product.

Uniqlo identifies styles within product categories that don’t go quickly out of fashion,
finding a way to create levels of differentiation within these styles. The results have been
impressive, and Uniqlo is gaining fast on competitors such as Gap. At the other end of the
spectrum is Zara, which has built its strategy around consumer trends, embracing the fast-
changing tastes of its customers? Zara has developed a highly responsive supply chain
that enables delivery of new fashions as soon as a trend emerges.

H&Ms approach is somewhat of a hybrid of the Uniqlo and Zara models. It manages to
merge a commitment to longevity while staying responsive to fashion trends. The
clothing collections are created in Sweden by 200-odd designers. H&M outsources
production to a network of more than 500 suppliers. About a third of their products are
made in Europe, whereas almost two-thirds are made in Asia. Generally, the items with
very short lead times are manufactured in Europe, with longer-lead items manufactured
in Asia. Like Zara, this allows H&M to be more responsive to trends.

2. Do you think Uniqlo’s all-encompassing target group cutting across age, economic,
and culture to generation. Why not?

Yes. In 1984, Fast Retailing, headed by Tadashi Yanai, opened the first UNIQLO store in
Hiroshima, Japan. Since then, the brand has evolved from a chain of roadside stores to an
international leader in style, quality, and fun. It doesn’t matter who you are or where you
live, UNIQLO makes clothes that transcend all categories and social groups. Our clothes
are made for all, going beyond age, gender, occupation, ethnicity, and all other ways that
 define people. Our clothes are simple and essential yet universal, so people can freely
combine them in their own unique style. As our founder says, “UNIQLO clothes are
MADE FOR ALL–highly finished elements of style in clothes that suit your values
wherever you live. This unique concept of clothes sets us apart from apparel companies
whose sole purpose is the pursuit of fashion trends.

3. Is Uniqlo a direct competitor to Zara? How are they similar or different?

Globally, most fashion retailers have followed a similar business model for several
decades. Designers and buyers keep searching for new fashion trends round the year and
around the world. They make decisions 6-9 months in advance based on what they
believe (or guess) consumers will buy. More often than not, bad bets result in heavy
discounted sales (markdowns) to clear out unsold inventory. Uniqlo, and Zara, follow
two uniquely different models that are each proving to be hugely successful. All two
understand that success in the fashion business does not come from guessing on the next
hot style. Any retailer may have a few great buyers who are able to identify some
winners, but being dependent on the keen eye or gut feeling of a handful of people is a
highly risky strategy.

a) Touch points comparison

ZARA has a differentiated strategy with permanent collections targeting the different
segments (Women, Basic, TRF, Men and Kids) that cover the overall market. On the
other hand, UNIQLO’s main strategy is an undifferentiated one thanks to its high-quality
basics. Rather than chasing after the latest fashion trends, UNIQLO offers high-quality
basics that can be worn every day. To compensate the narrower choice of items compared
to its competitors, including ZARA, UNIQLO makes it up by offering a same item, in
many colors: socks came in 50 different designs at its Tokyo flagship store. UNIQLO
design director Naoki Takizawa explains “More than trends, consumers need
functionality. The product should be tough. It should be convenient to wear for daily life.
Everything does need an element of fashion, but that’s more like a spice.”

As a fashion retailer, the main competitors of UNIQLO are by nature these other fashion
retailers such as ZARA, H&M, GAP and so on, but this is not the vision of UNIQLO
CEO Tadashi Yanai. “We are not a fashion company” he says. “We are a technology
company.” But as much as he wants to differentiate his brand, he still knows that clothes
still need an element of fashion, and echoes the words of his design director. “One’s
strength can be one’s weakness: basics can be boring,” Mr Yanai admits. And that’s why
UNIQLO has had seasonal collections created in association with renowned fashion
designers to appeal to consumers more sensitive to fashion trends: +J with German
designer Jil Sander in 2009, uu/uniqlo undercover with Japanese designer Jun Takahashi.

c) Brand Positioning 
Brand Mantra
Post-purchase dissonance

While Zara plays more with the consumer’s emotions, it is interesting to highlight that
the core values of Uniqlo are actually playing with the customer’s rational thinking: high-
quality, good-value. These are two qualities that we all want for any products!
For Zara, even though the brand has a competitive advantage (compared to Uniqlo) with
a distribution online, Zara haven’t developed any online shopping platform in Asia which
is quite a big market. At the same time, UNIQLO only distributes online in Japan. The
core competitive advantage of UNIQLO is its high-tech technology, so if ZARA wants to
challenge UNIQLO, it should work on the technological field and put forward
innovation.

Concerning UNIQLO, the main points to improve in order to grasp ZARA’s market
shares are:

 To enforce the distribution channels such as stores presence and online shopping
 To offer trendier collections with higher positioned products (on the overall
fashion design)