Articles

UNIQLO: From Tokyo to New York to Global Brand

April 26, 2007

Speaker

Nobuo Domae, Chief Executive Officer, Uniqlo USA, Inc.; Executive Vice President, Member of the Board, FAST RETAILING CO., LTD.

Presider
Jotaro Hamada
, Managing Director, International Franchise Management, Citigroup Inc.

Nobuo Domae, CEO of Uniqlo USA and EVP and board member at parent company Fast Retailing, spoke about the transformations that made Uniqlo a national brand in Japan and now, with the opening of Uniqlo's flagship U.S. store in Manhattan's SoHo district, a global brand that brings casual clothing with a modern Japanese sensibility to a global audience.

Mr. Domae joined Fast Retailing as Chief Information Officer in 1998 and soon was named a board member, "still in his late 20s and without any previous experience in retail or fashion," observed presider Jotaro Hamada of Citigroup, who first knew Mr. Domae in the early 1990s when they both worked at McKinsey in Tokyo.

As CIO, Mr. Domae developed Fast Retailing's supply chain management infrastructure, "which is widely recognized as one of the company's competitive advantages even today," Mr. Hamada said. During the late '90s, "Fast Retailing achieved a really phenomenal explosive growth," becoming the number one retailer in Japan and "a national social phenomenon."

Uniqlo's mantra is "it's your style," Mr. Domae began. The company aims to offer high-quality clothing that is reasonably priced and provides "the tools for fashion, so that everybody can express their own style." Thus a current ad shows a stack of neatly folded polo shirts in a range of colors, with the tag line "No Ponies, No Logos, Just Polos."

In creating its clothing lines, Uniqlo embraces both shun and kino-bi, he explained. Shun means "timing, best timing, but also at the same time it's a trend," something that's updated and just in time, neither early nor late. The company offers clothing basics, but basics that are current, that respond to what's going on today in art and design. Kino-bi means function and beauty, joined together: the clothing is presented in an organized, rational manner, and that very organization and rationality creates an artistic pattern and rhythm. All these qualities reflect the defining characteristics of modern Japanese culture, modern "Japaneseness," he said.

When Fast Retailing decided to take Uniqlo global, it separated Uniqlo from the parent company, and the FR corporate structure now includes several additional brands, Mr. Domae noted. Among them are One Zone and View Company, shoe brands sold in Japan; Comptoir des Cotonniers and Princesse tam.tam, women's apparel brands sold in French department stores; and G.U., launched in 2006 to offer fashion-forward clothing that sells at prices lower than Uniqlo's.

With 2006 sales of $4 billion, Fast Retailing now ranks just within the top 10 specialty apparel retailers worldwide, and aims for sales of $10 billion and a spot in the top five globally by 2010, Mr. Domae stated. Achieving this target would put Fast Retailing in the company of Gap, which despite recent struggles remains the largest in the category globally; Sweden's H&M; Spain's Inditex, which markets Zara; and Limited Brands, he said.

The company's first store opened in Hiroshima in 1984 and sold Levis, Adidas and other national brands at discount prices, he recounted. In 1991, Fast Retailing launched a chain of suburban shops, opening 50 new stores a year for several years. By 1998, the company had over 300 stores and sales of just under $1 billion. It had begun developing the Uniqlo brand, but Uniqlo wasn't yet known in Tokyo.

"I was told that I have to wear Uniqlo clothes, and I asked the HR people where I can find a Uniqlo store in Tokyo," he said. "And they said, 'Not many.' So it was very difficult to find a store at that time."

In 1998, Fast Retailing began to develop internal resources for quality controls, sourcing and other manufacturing functions, and relocated its headquarters office from suburban Yamaguchi to Tokyo. This move, in Mr. Domae's view, "means we became truly a Japanese national company," with access to talented staff from all over Japan.

The company's first ventures outside Japan did not go well, he said. Twenty stores opened in the U.K. in 2001, but 15 were closed the following year at a loss of over $50 million.

To succeed in global markets, "the company itself had to be changed from a Japanese company to a global company," he remarked. Building a global flagship store in Manhattan's SoHo neighborhood became the nexus for this transformation. "Fashion comes from Europe or some other areas, but in terms of fashion business, New York is the center."

A site was selected, the lease signed in February, the design completed in March, and the Uniqlo store, a lofty, contemporary, 35,000-square-foot space at 546 Broadway, opened in November 2006--the largest store in SoHo except for Bloomingdale's, said Mr. Domae.

To bring Uniqlo to Manhattan, the company assembled a team of creative people from outside the company, including Kashiwa Sato of Samurai, for creative direction, Masamichi Katayama of Wonderwall, for interior design and architecture, and Marcus Kiersztan of MP Creative, for art direction and marketing campaign. Uniqlo set up its own New York design studio, which collaborates with Tokyo and with new Uniqlo studios in Paris and Milan to direct the design of all Uniqlo products, including those in Japanese stores, he noted.

"Here in New York, everything is art--even the buildings are art; and if we were not good at the art element, nobody would care" about the Uniqlo products, said Mr. Domae. Japanese artists and photographers contributed designs for t-shirts and shopping bags, a press event created a Uniqlo gallery at an event space in the 15th Street meatpacking district, and billboards at the construction site conveyed the message "From Tokyo to New York." To emphasize that message, Uniqlo also brought in shipping containers to serve as temporary stores in various locations around the city.

Focusing attention on Uniqlo's Japanese qualities, the team redesigned the brand's logo to use the red and white of the Japanese flag; as for the katakana in the logo, "the katakana is fun--it doesn't mean anything," Mr. Domae said.

The first global collection shows men's and women's clothing styles in three groupings: career, "clean casual," which is a preppy or Ivy look, and street casual, which the firm calls "urban country." And "since we're selling the very basic items, we need to update all the time, based on the trend or fashion stream."

The message of the "no ponies" ad, he concluded: "We don't want to fight with the company that is selling the polos with ponies. But No Ponies, No Logos, Just Polos. Simple, clean, and also, very organized. This is our way."

Mr. Hamada asked Mr. Domae:

The pronunciation of the brand name in English--it's a play on "unique clothing," but should it be you-NEEK-lo, or YOU-nee-klo?

"Actually we haven't decided how to pronounce it, but a lot of Americans call it YOU-nee-klo, so that's what I used," Mr. Domae replied.

Q&A with the audience followed:

Who is your true core customer in the U.S., and how well do you understand that customer's needs?

The career and clean casual categories are bigger than the street type of customer right now, "and that's why we're doing the promotion of the t-shirt campaign, which is more focused on that third customer," Mr. Domae replied.

How do you keep the quality high at such low prices?
 
The answer is economies of scale, Mr. Domae said. "Our style numbers are very limited compared with other fashion brands. A thousand--sounds very big, but it's very, very small compared with other brands like H&M or even with the Gap."

Uniqlo relies on some 60 or 80 mills and factories, he observed. With a single vendor for a given style number, Uniqlo can lower its costs by giving the vendor as much as three months' lead time on a design.

Will Uniqlo USA partner with celebrities and athletes, or is the concept that your customers create their own style almost the antithesis of celebrity marketing?

"We may do something similar," but hiring someone to speak for the company won't necessarily be a fashion model, Mr. Domae responded. "And luckily a lot of artists and a lot of celebrities with strong personalities already showed interest in our philosophy."

Before you launched in the U.S., did you train your American staff to the standards of customer service in Japan?

"We're still in the process of developing the trainings, so in our store, I'm actually not very satisfied about the customer service level, right now," replied Mr. Domae. "We are now considering how to do that."

--Katherine Hyde

 

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