Out of Style

Fast Retailing Needs to Look Sharp

The Uniqlo owner has lagged on e-commerce and changing consumer tastes.
Photographer: Tomohiro Ohsumi/Bloomberg
FAST RETAILING CO LTD
-250.00
At Closing, January 19th
50300.00 JPY

Fast Retailing Co. should consider applying the brakes.

The owner of the Japanese chain Uniqlo is planning to open stores in India as part of a greater push internationally amid a shrinking population and sluggish wages at home.

Time to Break Free

After a lackluster year, Fast Retailing's stock has started to recover

Source: Bloomberg

Building stores in Asia's third-largest economy makes sense, so long as it's done right.

Fast Retailing expects Uniqlo's international takings to surpass those in Japan for the first time this year. (The number of stores outside Japan already exceeds domestic locations.) Rivals such as Inditex SA's Zara and Hennes & Mauritz AB have already made a start in India.

Color Blocking

Fast Retailing expects the percentage of revenue coming from Uniqlo International to surpass that of Uniqlo Japan in the coming year

Source: Fast Retailing

The problem is that Fast Retailing still hasn't figured out how to grow sustainably in other offshore markets, including the U.S., where it missed the mark with consumers on sizing and expanded so quickly it later had to wear losses from store closures.

Ditto in China, where Fast Retailing opened to huge success but couldn't keep up with rapidly changing consumer tastes. It also lagged in e-commerce.

Fast Retailing has said its Southeast Asia stores are doing well, but they still constitute a tiny part of the overall business. For Uniqlo to be successful in India, the company will have to learn from its mistakes in other markets.

Not counting on large bricks-and-mortar stores to attract foot traffic is one idea.

Greener Pastures

International sales growth is outpacing Uniqlo's domestic operations, partly because the company is building more stores outside of Japan

Source: Bloomberg

Uniqlo has an opportunity to enter India with a mobile-first strategy in which stores support the e-commerce business and serve as showrooms for customers to try on clothes and pick up and return goods ordered online. Uniqlo could create buzz by having stylists on hand and hosting special events, making stores a destination rather than an errand. And since Uniqlo is wildly behind on e-commerce, India could serve as a test bed for the rest of its empire.

Uniqlo will also have to zero in on the right pricing and style strategies. That means adopting region-specific sizing, rather than bringing garments that sell well in slim-figured Japan to places like the U.S. and India, where curvier silhouettes prevail. Same goes for colors: Although muted blacks and grays are the norm in Japan, brights and patterns play well elsewhere.

Since competitors like Zara are currently seen as premium brands in India, and because Uniqlo is known globally for providing quality goods at decent prices, it seems reasonable for Fast Retailing to think that entering India at a higher price point might be the right strategy.

Wrong. As my colleague Andy Mukherjee notes, the fact that Uniqlo's name contains an approximation of the word "low" means it automatically sounds like a discount chain to Indians. Fast Retailing might be better off starting out there with its newer brand, GU, which offers lower prices and more colors and variety.

Done right, Fast Retailing could establish a valuable foothold in India. Sticking to the same old script, however, risks resulting in another fashion miss.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Shelly Banjo in Hong Kong at sbanjo@bloomberg.net

    To contact the editor responsible for this story:
    Katrina Nicholas at knicholas2@bloomberg.net

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