Fashion Trend Changes Due to COVID-19
Uniqlo Plans to Expand 200 Stores in North America
If Successful, One-Third of Sales Will Come from Japanese Market
[Asia Economy Reporter Lee Ji-eun] Uniqlo is strengthening its push into the North American market. Capitalizing on the attention gained for comfortable clothing during the COVID-19 pandemic, the company plans to accelerate its expansion in North America.
Uniqlo Expands in North American Market
On the 19th (local time), Bloomberg reported that Fast Retailing, the Japanese fashion giant and parent company of Uniqlo, is pursuing a plan to increase the number of Uniqlo stores in North America from 61 to 200 within five years. Uniqlo will open 10 more stores by August this year. Starting next year, it plans to open 20 to 30 stores annually.
However, Fast Retailing has decided to avoid a sales strategy that lowers product prices while increasing marketing expenses to enhance brand value. Bloomberg noted, "In the U.S., public brand awareness of Uniqlo is very low, so continuous investment in marketing is necessary," but also advised, "However, the temptation to lower product prices to attract customers should be avoided."
Fast Retailing's move to expand in the North American market is largely influenced by changes in fashion trends due to COVID-19. Uniqlo has been evaluated as having low recognition in North America except for New York. However, Bloomberg explained, "During the spread of COVID-19, consumers sought comfortable clothing as they moved away from cities to avoid infection," and "Uniqlo focused on comfort when producing underwear and women's wear, which led to significant success in the Japanese market during the pandemic."
Fast Retailing expects that if Uniqlo succeeds in the North American market, it could achieve annual sales of 300 billion yen and an operating profit margin of 20% by 2027. This scale is equivalent to one-third of the annual sales of 810 billion yen in the Japanese market.
Developing the North American market is also a long-cherished goal of Fast Retailing’s founder, Chairman Yanai Tadashi. Chairman Tadashi opened Uniqlo’s first store in New Jersey, USA, in 2005, but the performance was poor compared to the achievements made by Tsukagoshi Daisuke, the current CEO of Uniqlo USA, in China. Nevertheless, despite the underwhelming results, Chairman Tadashi continues to pursue business in North America. He has not given up because the fast fashion industry, which refers to inexpensive and mass-produced clothing, generates annual sales of 538.5 billion yen (about 5.2 trillion won) in North America.
Will It Succeed?
On the other hand, some express concerns about Fast Retailing’s rapid store expansion. Takahiro, an analyst at Swiss investment bank Credit Suisse Securities, pointed out, "In 2001, Uniqlo rapidly increased stores in the UK but cut a quarter of its European stores due to poor performance," and advised, "Uniqlo should expand its business at a moderate pace."
The fact that North American consumers’ spending power is decreasing due to inflation is also considered a risk factor. Bloomberg stated, "North American consumers are expected to reduce spending due to rising energy and food prices," and added, "Swedish clothing company H&M also saw its fourth-quarter operating profit drop by 87% due to rising energy prices and shipping costs."
Currently, the country with the most Uniqlo stores worldwide is China, with a total of 917 stores. Japan and other Asian countries have 814 and 547 stores respectively, while Europe has 112 stores in operation.
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