(Bloomberg Opinion) -- Wake up, shoppers around the world: A Japanese brand is coming for your wallets. And this time, the going-global fad probably won’t be a flop.
Fast Retailing Co., whose brands include Uniqlo and GU, is renewing its push beyond Japan, and could soon be bigger overseas than at home. On Thursday, Asia’s largest clothing retailer forecast that its full-year operating profit would increase 14 percent to 270 billion yen ($2.4 billion) in the year through August 2019 after hitting 236.2 billion yen this year. In its fiscal year ending August 2018, sales overseas at Fast’s flagship brand Uniqlo outpaced domestic ones: Uniqlo Japan sales rose 6.7 percent to 864.7 billion yen while Uniqlo International sales gained 26.6 percent to 896.3 billion yen.
Because of Japan’s demographic decline and sluggish retail market, the company — founded by Tadashi Yanai, Japan’s richest man — has laid ambitious plans to move abroad. Uniqlo’s parent will continue to expand in its top two international markets, China and Southeast Asia: It’s fresh off opening a 4,100-square-meter (13,400-square-foot) store in the Philippines. Fast Retailing also intends to build up its newly profitable presence in the U.S.; in Europe, Uniqlo is midway through a three-year goal of doubling to 100 stores.
Unlike Inditex SA’s Zara and Hennes & Mauritz AB, Uniqlo tends not to sell those animal prints that are all the rage, choosing instead to focus on high-quality basics. As its two main rivals grapple with competition from Primark’s cheaper takes on fast fashion, Fast Retailing is also reaping the benefits of a recent strategic shift.
In an earlier push into the U.S., Fast Retailing struggled from a lack of brand recognition and poorly located stores. After its operating profit slumped15 percent in the year ended August 2016, Fast Retailing decided to revamp.
First, Uniqlo switched to an “everyday low pricing strategy,” which strives to give shoppers consistent value for their money. That helped build loyalty from a customer base that had grown used to waiting for deep discounts when the brand tried to go premium, says Bloomberg Intelligence analyst Thomas Jastrzab.
In the U.S., changing locations also helped. Fast Retailing closed its shops in giant malls with weak anchor tenants and opted instead for strip malls and giant flagship stores.
Getting Roger Federer as a brand ambassador for the next 10 years — just as Tokyo prepares for the 2020 Olympics — doesn’t hurt either. That’ll be especially useful as the company aims to compete with H&M, Zara and Gap Inc. in their home markets. With the 37-year-old tennis champion possibly nearing the end of his career, the company would do well to parlay his success into a legacy, as Michael Jordan did with Nike Inc.
Even challenges like store closures on the British high street could turn into an opportunity to negotiate cheaper rents.
That isn’t to say it’s all easy riding. The company will have to avoid the pitfalls that tripped up Gap, another purveyor of wardrobe basics. In a rush to expand, the U.S. retailer’s Gap brand and low-cost sister label Old Navy blurred the line between their cheap and higher-end offerings. Fast Retailing will have to make sure it doesn’t cannibalize Uniqlo’s customers for the sake of GU.
But these are all small points: Fast Retailing has all the ingredients to accelerate its expansion outside Japan — without any of the faux pas from seasons past.
To contact the editor responsible for this story: Rachel Rosenthal at rrosenthal21@bloomberg.net
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Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.
Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.
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