Photo by Howen on Unsplash
July 12, 2024
Will UNIQLO’s Expansion Strategy Work Against the Competition?
In the era of fast fashion, SHEIN and Temu are dominating the playing field, for better or for worse. While other retailers are adapting specific strategies, such as Amazon and its proposed new discount section, UNIQLO has decided to go a completely different route.
Instead of low prices, the Japanese-owned retailer, UNIQLO, is adopting a global strategy that focuses on larger flagship stores, following its European model. Fast Retailing, UNIQLO’s owner, is planning on expanding in the area of Europe, with new flagship stores already built in Rome, Edinburgh, London, Milan, and Nice, bringing the total to 76 stores in Europe.
The flagship stores of UNIQLO that are established in European cities contribute as much as half of all store sales when compared to Japan and China. UNIQLO’s Europe business also shows signs of steady growth in both sales and operating income when shared in February 2024.
Interestingly, UNIQLO’s secret to success might be due to the fact that the brand’s public perception is not that of a typical cheap, fast-fashion brand.
“The concept of ‘life wear,’ which stands for high quality, basic design, and clothes’ ability to match with any item, has been accepted in Europe. People in Europe don’t consider Uniqlo to be fast-fashion.”
Jun Kawahara, a senior analyst at Daiwa Securities, via Nikkei
UNIQLO’s “life wear” concept of high-quality, versatile basics has gained acceptance in Europe, differentiating it from other fast-fashion brand competitors based in Europe, like Zara and H&M. Consumers who were interviewed echoed these sentiments by explaining how a simple, basic piece like a bra has become a must-have staple for daily wear. Another consumer explained how the clothes from Japan have a perception of being high quality in terms of craftsmanship. One other consumer was a bit more reserved and believed that the UNIQLO brand is still not well-known throughout Europe.
Moreover, UNIQLO’s expansion plans are not just confined to Europe. At the end of 2023, UNIQLO also revealed plans to increase the speed of its expansion in North America by opening over 20 new stores across the U.S. and Canada throughout 2024.
This growth focuses on the eastern and western regions and aims to reach 200 stores in North America by 2027. UNIQLO’s North American CEO, Daisuke Tsukagoshi, emphasized the importance of stores for engaging with local communities and improving products based on customer feedback. The brand has seen significant growth and expects continued double-digit sales growth in existing stores. While the brand does struggle in some areas, such as China, recent successes, including popular items and designer collaborations, have bolstered UNIQLO’s overall global popularity and customer connections.
Furthermore, rather than emphasize the e-commerce side of fashion, UNIQLO’s CEO mentioned the importance of physical retail stores and why he chose to focus on the in-person experience.
“Stores are the heartbeat of our business, where we can engage with our local communities, hear directly from our customers, and best understand their needs to continue to improve and perfect our products. We’re looking forward to a big year ahead.”
Daisuke Tsukagoshi, CEO of UNIQLO North America, via PR Newswire
UNIQLO’s new European expansion strategy begins this fall with its first new store being launched in Poland. Currently, UNIQLO operates a total of 2,469 stores worldwide.
Discussion Questions
In an increasingly digital retail landscape, how does UNIQLO’s focus on physical flagship stores and community engagement challenge the trend toward e-commerce dominance, and what might this mean for the future of in-person retail experiences?
Given UNIQLO’s success as a high-quality “life wear” brand distinct from fast fashion, how might other retailers adapt to compete with this mix of affordable luxury and staple versatility in fast-fashion-dominated markets?
Considering the varied perceptions of UNIQLO in different regions, how does cultural context influence the brand’s success, and how can retailers use cultural insights to tailor their strategies while maintaining a cohesive global brand identity?
Poll
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Anil Patel
Founder & CEO, HotWax Commerce
Carol Spieckerman
President, Spieckerman Retail
David Biernbaum
Founder & President, David Biernbaum & Associates LLC
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Uniqlo’s business model of selling apparel essentials with a modest twist of fashion at competitive prices is ideal for the current economic environment. When consumers cut back, they tend to do so on impulse buys and things they don’t really need. Unlike many traditional fast fashion players, Uniqlo doesn’t fall into this category as most of its products are everyday basics. On top of this, because Uniqlo’s products are good quality and not overly fashion oriented, they’re worn regularly, which means they end up being good value for money. Uniqlo has also helped itself by opening some great new stores in key locations which showcase the brand. All that said, Uniqlo isn’t immune to difficulty: the current results from China are weak and the business needs a reboot, including relocating stores that no longer perform well. But overall, this is a retailer that’s going places.
Uniqlo understands what its customers want.
It doesn’t chase fads or attempt to define short term trends.
It manufactures quality, long-lasting apparel.
It has differentiated itself by being a go-to brand for highly valued “life wear”.
Its customers seek out the Uniqlo in-store experience.
And flagship stores have been smartly placed in destination cities.
So far, it’s a recipe for success and difficult for others to replicate.
UNIQLO offers reasonable quality and fashion at good prices without attempting to out-trend their everyday customer market.
While Uniqlo’s strategy is different, there will be overlaps in customers. The Sheins and Temus of the world have introduced a very different selling model-catering to fast fashion. Conversely, high quality, longer lasting clothing- and perhaps luxury branded clothes fit into a different customer set. There will be a select group of customers that fit nicely in the evergreen, high quality, long term clothing view. The real question is whether this view will coincide with a larger or smaller market share- both now and over time.
I would say that E- Commerce “dominates” apparel sales. It’s less than 30 percent . When you look at what clothing is purchased on-line it’s often replenishment of basics.
Uniqlo has been known for quality high-tech textiles. This combined with a unique fashion sensibility earns them the right to build their brand as quality for the price.
They also build stores that incorporate technology into the experience. Most notably, the RFID check out bins at their Fifth Avenue flagship.
As Primemark expands into the US with even less brand awareness- it’s an opportune time for Uniqlo.
Uniqlo took a while to put pedal to the metal on its long-promised post-COVID store expansion, yet the timing seems auspicious. Inflation is showing signs of easing and discretionary purchases were a bright spot in May for the first time in a while. Uniqlo’s better-basics premise is right for the times as is its flagship-forward strategy. (I wrote about this in a recent blog article https://spieckermanretail.com/deep-insights/large-and-in-charge-why-flagships-arent-flagging-in-the-digital-age). The big question is whether Uniqlo’s basics are better enough to justify its launch of an even more value-oriented, flagship-based brand (GU). Either way, Uniqlo picked as good a time as any to amp up expansion.
UNIQLO’s focus on physical flagship stores and community engagement effectively challenges the e-commerce trend by creating unique in-person experiences that foster strong customer connections. This strategy suggests a promising future for in-person retail, emphasizing the importance of tangible interactions over purely digital transactions.
To compete, other retailers might need to blend affordable luxury and versatile staples, mimicking UNIQLO’s “life wear” approach. For example, offering high-quality, essential pieces that appeal to various styles can differentiate them from fast fashion brands. Plus, retailers should leverage cultural insights to curate their strategies while maintaining a cohesive global identity, just like how Uniqlo’s high-quality perception is a key in Europe.
The shopping experience at a Uniqlo store is terrific-kind of a combination of clothing treasure hunt and well laid out, “the underwear is over here” merchandising.
Plus, the brand is worn by the Australian Golfer Adam Scott, giving them some exposure to the golf audience. I just wish they sold those shirts more visibly…along with his swing!
Uniqlo’s value proposition lies in offering high-quality, versatile “LifeWear” blending innovation, functionality, and affordability. By focusing on innovative fabrics, timeless basics, and sustainability, and maintaining an efficient supply chain and immersive flagship stores, Uniqlo defies the e-commerce trend, emphasizing the enduring value of direct customer interaction.
Other retailers can compete by focusing on durable, timeless designs, creating unique in-person experiences, and leveraging sustainable practices and transparent supply chains to differentiate from traditional fast fashion. Cultural context shapes UNIQLO’s success; tailoring offerings to local preferences while maintaining a consistent global brand ensures widespread appeal.
I’m definitely a UNIQLO fan, as they understand the importance of getting assortment right, and I appreciate their ability to stay on trend without falling into the pitfalls of fast fashion. That said, I visited their new London store in May, and I didn’t think the ambiance was so above and beyond that it differentiated from other UNIQLO stores. If you’re going to lean into flagship so wholeheartedly, I’d expect even more. Further, while I have always been a brick and mortar advocate, it can’t come at the cost of attention towards digital. So, I just hope they stay balanced.
In addition to it’s better basics, I really like the designer collaborations that they do offering fresh, affordable style and quality each season. I love the physical store first approach to drive experience and engagement but also there is a clear link in store to the ecommerce platform to find size extensions and on-line indicates in which stores collections can be found. On social media, they lean into local with different stores going live to talk about new items, favorite items and special features like their AIRism fabrication. It also helps that it is a brand that appeals to both me and my teenagers alike. They have become one of my regular shopping destinations and I will definitely be there as we head into the back to school shopping season.