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What will it take for America to love Uniqlo? After 15 years in the US, Fast Retailing-owned Uniqlo still has plenty to do to win market share from the likes of H&M and Zara, not to mention American retailers.
A long-held ambition for Tadashi Yanai, president and CEO of Fast Retailing, is to build Japanese-born Uniqlo into the number one apparel brand in the world. For that to happen, the retailer needs to make a much greater impact in America. “Significant expansion in the US is key to achieving that goal,” acknowledges Daisuke Tsukagoshi, CEO of Uniqlo’s US business.
To win over American customers, Uniqlo US is leaning in on its well-established formula of functional, everyday clothing combined with localised stores and community engagement.
The question is whether that is enough. Of Uniqlo’s 2,200 stores globally, only 47 are in the US, the world’s biggest clothing and accessories market, which is expected to be worth $462 billion by 2025, according to GlobalData. Uniqlo makes an estimated $324 million in sales in the US, the research firm estimates, a fraction of the sales in Japan, China and South Korea, says Neil Saunders, managing director of GlobalData's retail division. Fast Retailing does not explicitly break down the brand’s US performance.
On paper, Uniqlo presents sizable competition, Saunders points out. Fast Retailing is currently the third largest global clothing retailer by size and was labelled the world’s most valuable fashion firm in February this year when a surge in share price saw its value hit ¥10.87 trillion ($98.9 billion), a record valuation for any company in the global clothing sector (its current market cap is ¥8 trillion or $72.7 billion).
For the six months ended 28 February 2021, Fast Retailing’s net profit rose 5.4 per cent year-on-year to ¥105.8 billion ($963 million). Operating profit was up by 22.9 per cent to ¥167.9 billion ($1.53 billion).
The US and Europe were hard hit during Covid-19 lockdowns. With many of Uniqlo’s US stores located in shopping complexes, the retailer wasn’t able to maximise on the benefit of new shopping options such as curbside pickup, says Euromonitor’s Japan-based consultant Yuri Gorai. Many of Uniqlo’s stores are also in city centres and urban areas and lost sales as a result of the consumer retreat to the suburbs during lockdowns.
Uniqlo is under pressure to gain market share in the US, analysts say, requiring significant investment in more stores in strategic locations and increasing marketing to improve brand awareness. For a country the size of the US, Uniqlo’s store numbers are small, says GlobalData's Saunders. “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,” he says. “It currently only serves pockets of the market.”
Tsukagoshi points out the sheer size of the US market, necessitating a certain degree of patience. “In the US we are still like newcomers,” he says.
Quality over quantity
A priority for now is to raise brand awareness, Tsukagoshi says. “We need to tell the story of ourselves and who we are.”
The pandemic has presented new opportunities for Uniqlo in the US, he argues. Uniqlo’s LifeWear, its range of simple, durable and functional clothing, is more likely to resonate with consumers, who are less impressed, in a post-Covid world, by trend-driven items, Tsukagoshi believes.
However, Uniqlo’s emphasis on minimalism and simplicity, perceived as a strong selling point and favourable aesthetic across much of Asia-Pacific, by definition makes it tricky to keep up excitement and sales momentum, says GlobalData’s Saunders. Competition is strong from the likes of Target, Walmart and Amazon, which are all offering value-for-money clothing, while further retail competitors include everyone from Gap and Everlane to Nordstrom, A.P.C. and Ralph Lauren, notes Euromonitor’s Schneider.
Uniqlo’s relatively small inventory mix is a distinctive feature of the business, reducing the need for discounting. The retailer had 6,209 pieces for sale online in February 2021, while Zara had 9,198 and H&M 20,860, according to data from Edited. There are also fewer arrivals and stock stays on the shelf for longer, Edited has found.
Uniqlo has pushed the button effectively on collaboration over the years, says Kayla Marci, market analyst for Edited. She points to the +J collection in partnership with Jil Sander; and collaborations with Christophe Lemaire (artistic director of Uniqlo U since 2016), JW Anderson, Undercover and Kaws. “Instead of flooding the market with weekly drops of trends that have a short shelf life, Uniqlo’s strategy has long-term benefits to both the planet and its profits by minimising the number of products destined for landfill and avoiding overstock issues, protecting margins from steep discounts when products don't sell,” says Marci.
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Uniqlo isn’t completely trend avoidant, argues Masahiko Nakasuji, who joined Uniqlo as chief marketing officer for the US, from Procter & Gamble. “We are just not responding to smaller, shorter-term trends. We do pay attention to bigger shifts, such as a preference for oversized clothing.”
The oversized trend was boosted by the consumer preference for comfort during lockdown, prompting the brand to introduce more oversized styles. “That’s how we are responding to the market,” says Nakasuji. “We might not have a fashionable product but we are meeting the demands of our customers, whether it’s improvements on colour, functionality or fit.”
Community engagement
Uniqlo’s current US portfolio of 50 stores are located across key East and West Coast cities such as New York, New Jersey, Boston, San Francisco, Los Angeles and Seattle. Rather than open more stores in untapped parts of the US, the priority is to focus on existing stores and use the space more effectively to raise awareness about the brand’s core values. “It’s easy just to open more stores and expand more and more,” says Tsukagoshi. “The most important thing for us is how we contribute to society. That’s our reason for existing.”
Innovative marketing in New York shows the direction in which Uniqlo would like to develop. To celebrate 15 years since the opening of its Soho store, the retailer partnered with the Soho Memory Project to install a photo exhibition as well as with local businesses including florists and restaurants for exclusive in-store activations. Uniqlo also unveiled a campaign featuring individuals who have a rich connection with New York, such as art dealer Nicola Vassell and gallerist Jeffrey Deitch. Moving away from standardisation in retail formats and marketing approaches, Uniqlo’s goal is to connect more intimately with local consumers, notes Nakasuji.
“We don’t want to invest in lots of mass marketing,” Nakasuji says. “We want to build a relationship with the community and we do that by establishing a rapport first.” Uniqlo’s marketing is controlled and focused, he insists. The priority is to enrich people’s everyday lives by activating local communities with cultural programming. Partnerships have included major cultural institutions, such as The Museum of Modern Art (MoMa) in New York and Tate Modern in London.
Uniqlo’s physical stores are also taking on new roles in response to the consumer shift to digital. This summer Uniqlo has been testing live-stream shopping, which is filmed in stores. The streams are hosted once or twice a month by influencers, such as Dylana and Natalie Lim Suarez, and shop staff who provide more detailed information on products. The streams, using technology provided by Bambuser, are broadcast on Instagram Live and Uniqlo’s website.
“Unlike fast fashion, we aren’t selling only looks, but there’s a story around the quality, texture and function of a garment,” says Nakasuji. The streams provide an additional opportunity for more intimate brand storytelling, he explains. And live streaming represents one more way in which Uniqlo can stand out in a crowded marketplace.
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