Starting with one store in Hiroshima, Japan in 1984, Uniqlo has grown to over 1300 stores in 15 countries . Their customer promise has remained the same– to provide high-quality, innovative, and functional clothing at affordable prices. Compared to other “fast fashion” retailers such as Zara or Forever 21 that launch new styles weekly, Uniqlo’s product development cycle is more similar to technology companies. Uniqlo’s year-long process is needed to research, source and test new fabrics, and then negotiate with vendors to place cost-efficient high-volume orders . Uniqlo then deploys takumi, or textile “masters,” to production floors to ensure quality dyeing and sewing, a testament to its emphasis on fabric innovation and quality over trendiness . Therefore, while innovative on textiles, they offer a limited variety of styles but in a high variety of colors .
Fearing Fast Fashion
Once upon a time, fashion collections were introduced twice a year. Now, technological advances at various points in the supply chains have condensed production cycles, decreasing design, lead, and production times and transforming the expectations of fashion retail consumers. Customers demand four to six collections a year that need to keep up with unpredictable trends, forcing retailers to adjust their merchandising and design processes accordingly . In order to compete with other fashion retailers, Uniqlo is starting to think about the impacts of shortened production cycles on its value proposition. Competitors like Zara are able to respond to customer demands quickly, turning a design from the runway into a product in 13 days . As such, the consumer expectation is to find stores with high volume and variety of products that reflect the current trends. Given that pressure, Uniqlo’s slow development cycles run the risk of missing out on responding to customer demands and expectations, even if it’s about changes in fabric quality and fit rather than design.
Spending on Speed
In March 2017, in the midst of slowing sales growth, CEO Tadashi Yanai announced that it plans to match Zara’s design to delivery time . It opened a new 200,000 sq. ft office in an industrial area in Tokyo that will bring together design, production, and marketing resources in one facility, hoping that this increase in collaboration will increase speed to market . In addition, the new facility will also help Uniqlo expand its e-commerce business and same-day delivery service in the Tokyo area . In conjunction, Uniqlo is ramping up its hiring of tech talent who can help develop more sophisticated AI algorithms that could help factories, distributors and stores predict what the customer wants, and reduce excessive inventory .
Keeping Up With Competition
Without a doubt, given competition, speed needs to be a core element of Uniqlo’s operational strategy. Nevertheless, it must still maintain its competitive advantage as a destination for high-quality, low-cost basics. Though other retailers have had first mover advantage in retail’s “speed-to-market” evolution, there are several ways in which Uniqlo can catch up.
- Customized Basics: Although the “fast fashion” retailers have different value propositions to their customers – Zara and Forever 21 focus on disposable trends while Uniqlo focuses basics – there is an opportunity to focus on developing more “customized” basics. In particular, integrating AI and customer feedback, Uniqlo should offer a wider variety of sizing options for different body types. This gives the customer that same sense of responsiveness and variety of a fast fashion retailer, without losing its core value proposition.
- Build a Stronger E-Commerce Presence: The condensed supply chain has changed a customer’s store experience. In particular, given the rapidly changing selection of styles, there is a sense of exciting exclusivity, prompting purchases on a whim . Although Uniqlo’s core competency and strategic advantage is fashion basics, its lack of variety and product exclusivity decreases customer store visits. However, Uniqlo is strategically positioned to build a strong e-commerce channel given its emphasis on commoditized basics. Currently, Uniqlo’s brick and mortar locations are large and highly stocked, leading to an often overwhelming experience. The e-commerce channel currently represents only 5% of sales . In line with other retailers, it should offer more convenient delivery services, leveraging its urban store network to create a “ship-from-store” model that decreases the shipping times. Given the commoditized nature of basic apparel, it can further emphasize convenience by offering a subscription service for items that customers regularly replenish, such as socks or undergarments.
Nevertheless, these suggestions are contingent on the continued viability of Uniqlo’s business model. Is their “basics-only” strategy still competitive in the current landscape, or does Uniqlo need to keep up with trends?
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