„We all need people who will give us feedback. That’s how we improve”
– Bill Gates, Founder of Microsoft
arvy’s teaser: Uniqlo, the Japanese king of casual wear, is reshaping global fashion with its unique community-driven approach and strategic expansion. With ambitions to outpace global competitors and a solid foundation in Asia, Uniqlo is poised to become the world’s top clothing brand.
Casual Wear.
It is a dress code that is relaxed, occasional, spontaneous and suited for everyday use.
It has its origins in the counterculture of the 1960s. This period is known for the hippie movement and the huge boom in music festivals such as the Woodstock Music & Art Fair. Eventually, practical and comfortable casual wear became the permanent uniform of this generation as the daily wearing of suits and the traditional western dress code became less important. Like what we recently experienced with Covid, when the clothing guidelines were significantly relaxed. Instead of suit and tie, now polo shirt and sneakers. Interestingly, the market leader for casual wear is now based in Japan.
The brand, which has even made Roger Federer its ambassador, has become the fourth largest clothing company in the world in terms of turnover.
The king of casual wear?
Uniqlo.
Chart 1: Uniqlo Flagship Store in Tokyo, Japan
Source: The Japan Times
Family Owned
Uniqlo is owned by the company Fast Retailing (Ticker: 9983 JP).
It is still in the hands of the founder’s family, the Yanai family, which owns 41% of the company. While Uniqlo is the flagship of the company and accounts for more than half of sales, the company also owns other brands that are less well-known in Switzerland, such as GU, Theory, J Brand, Comptoir des Cotonniers and Princesse Tam Tam.
Fast Retailing is the epitome of a family-run business in Japan and a prime example of why these companies outperform over the long term (chart 2). Ownership structures, attractive incentives and long-term thinking are a key feature of these companies. Details that we focus on when analyzing a “Good Story”.
The result?
The family is the richest in Japan with a net worth of over $40 billion. And the family, particularly the 75-year-old founder Tadashi Yanai, has no intention of resting on their laurels. They now have a big goal with Uniqlo.
They want to become the No. 1 brand among customers.
Worldwide.
Chart 2: Family-Owned businesses outperform
Source: Credit Suisse Research Institute
International Expansion
Uniqlo is going full steam ahead.
As of 2023, they operate 2,434 stores worldwide and now want to open a further 40 in Japan alone and 180 outside Japan (chart 3). Unfortunately, as far as we know, there are no plans to open any stores in Switzerland, nor can they deliver to Switzerland.
A key characteristic of Uniqlo stores is that they do not follow the traditional concept of store development (“copy and paste”), they believe that opening more community-rooted stores worldwide is an indispensable driver of growth. This is reflected in two aspects:
- They value local culture and history in and around their stores
- They enter communities proactively and build the brand together with local customers (feedback)
Considering the second point, Uniqlo receives a staggering 30 million pieces of feedback from customers each year, and they immediately incorporate their requests into available products.
We at arvy are Uniqlo lovers and cannot get enough of their high quality, yet relatively affordable clothing in all sorts of colors – no affiliation, just a happy customer😉. No big logos or fancy or loud designs on them. If you ever pass by one while traveling, I highly recommend a visit.
With only 67 stores in North America and 68 stores in Europe, there is enormous potential for growth, and Uniqlo is not yet very well known in these regions.
This is an advantage over the competition.
Chart 3: Uniqlo expands globally, store count
Source: Annual report 2023, Fast Retailing
Opposite Way
The fashion industry inevitably faces two challenges: 1) product innovation and 2) you must conquer Asia, especially China, to become a global player.
Whether sportswear brands like On Holding, Nike, Lululemon or luxury companies like LVMH, L’Oréal or Hermès. If you want to make it big, you must grow in Asia.
Naturally, most US and European brands first try to build their brand in these two regions and then move to the East, where many face difficulties sooner rather than later. These eastern regions are much more of a self-contained ecosystem – less open to foreign products (think Guachao with Nike). But they have a very strong and large purchasing power.
Fast Retailing faces the opposite.
They are already heavily involved in Asia and now want to conquer Europe and the US to grow, which is much easier than the other way around. We maintain an open-minded ecosystem – we are more receptive to foreign products.
To achieve their goal, it was already a smart strategic move to win King Roger Federer as an ambassador.
Fast Retailing is taking the right steps.
Chart 4: Fast Retailing over ten years, in USD
Source: TradingView
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