Uniqlo

 

Uniqlo to apply European 'select few' strategy worldwide

Fast Retailing differentiates itself from fast-fashion sellers like H&M, Zara

TOKYO -- Uniqlo is shifting its focus to larger stores around the world, as the affordable fashion retailer hopes to build on its success by opening flagship stores in Europe.

The Japanese brand's owner, Fast Retailing, is expanding its European business. In April, it opened new flagship stores in Rome and Edinburgh in the U.K. It also added locations in London, Milan in Italy, and Nice in France this spring, bringing the total number of stores in Europe to 76 out of 2,469 worldwide.

Uniqlo's business in Europe differs from that of its more established operations in Japan and China. In Europe, flagship stores in big cities account for half of store sales. With many well-known labels competing on the continent, Fast Retailing decided that having more flagship stores was the best way to communicate the brand concept by showcasing the Uniqlo lineup.

Revenue per store was 2.9 billion yen ($18.1 million) in Europe for the fiscal year ended August 2023, compared with 1.1 billion yen in Japan, where it was operating 800 stores as of the end of fiscal year. In greater China, including the mainland, Hong Kong and Taiwan, where Uniqlo had 1,031 stores, the figure was 601 million yen.

The company's European business has enjoyed "outstanding growth rates" within the Fast Retailing group, the company said in April. In the first half of this fiscal year, from September 2023 to February 2024, sales at its European unit rose 38.4% on the year to 14.21 billion yen. Its operating income jumped 50% to 2.5 billion yen.

Europe is a battleground for the fashion industry, dominated by fast-fashion giants such as Inditex of Spain, which operates Zara, and Sweden's Hennes & Mauritz (H&M). Fast Retailing has annual global sales of $18 billion, while Inditex racked up sales of $39 billion and H&M $23 billion, according to their most recent financial disclosures.

"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," said Jun Kawahara, a senior analyst at Daiwa Securities. Fast Retailing sources its products similarly to fast-fashion brands through a massive supply chain that includes hundreds of garment factories. But, said Kawahara, "People in Europe don't consider Uniqlo to be fast-fashion."

A typical example is Uniqlo's ultralight down jacket. "I saw many people wearing it under their fashionable jackets in winter," recalls Sawa Suzuki, a 25-year-old woman who studied in France until 2020 and now works in the fashion industry in Japan.

Customer's posts showing Uniqlo's built-in bra top on social media have gone viral. The top can be worn without underwear. Another hit is the Round Mini Shoulder Bag, which has helped raise Uniqlo's brand profile in Europe.

"Uniqlo's bra top has been a game-changer for my daily comfort and confidence," said Dana Dyusheyeva, a 24-year-old woman living in London. "Unlike fast fashion options from brands like Zara and H&M, Uniqlo offers staples that are versatile and enduring enough to be worn throughout the year," she said.

"Overall Uniqlo has a good reputation coming from Japan which, in the eyes of European consumers, have a focus on craftsmanship and quality," said Tom Snoijink, a 32-year-old music label manager based in Amsterdam.

However, the company still has work to do raising Uniqlo's brand recognition in Europe. A 25-year-old German man who has been wearing Uniqlo's shirts for a few years said, "I have no experience [with] Uniqlo's shirt torn ... But I feel Uniqlo is still quite unknown."

Uniqlo plans to open 10 new stores in Europe during the fiscal year ending in August. "We are in progress in achieving the goal," a spokesperson told Nikkei Asia.

Uniqlo is expanding into Eastern Europe and will open its first store in Poland this fall. The new store, in a Warsaw shopping mall, will have a sales floor of approximately 1,300 square meters. The decision to open the Warsaw outlet followed the success of a pop-up store in a commercial facility in 2022.

"As Uniqlo has sent more and more staff members trained through experience as store managers in Japan overseas, the company has become more confident in demonstrating leadership at overseas stores," said Kawahara.

In contrast to Europe, Uniqlo has been conducting "scrap and build" operations in China, closing unsuccessful stores to utilize resources more efficiently. "Some stores in mainland China have seen low monthly sales due to changes in the market and customers' lifestyles," said Takeshi Okazaki, chief financial officer of Fast Retailing, when he announced Fast Retailing's half-year results in April.

"We are currently focusing more closely on the quality of new store openings," the Uniqlo spokesperson said. In mainland China, store closings exceeded openings in the first half of the fiscal year ending in August.

With a sales goal of 10 trillion yen, Fast Retailing is pursuing "all-round diplomacy," regardless of the region, said Kawahara. "It is trying to shift to a more efficient business model while consumption is weak in China."