Uniqlo Aims to Expand During the Pandemic
The Japanese Retailer Plans for Growth in Asia
With international stay-at-home orders, reduced travel, and widespread restaurant closures, the COVID-19 pandemic has hit the fashion industry hard. That is, it has clobbered retailers of going-out clothes. For reasonably-priced, casual, comfortable clothiers, however, the pandemic could be a turning point. Uniqlo, the Japanese clothing brand owned by Fast Retailing Co (FRCOY), will focus on building new stores in Asia and growing online sales to gain an advantage over competitors.
While retail rivals like Zara, owned by Inditex SA (ITX), and H&M (HMB) have announced store closures this year, Uniqlo plans to triple its number of physical stores in China. Currently, Fast Retailing runs around 800 stores in China. Eventually, it hopes to open 3,000. Ultimately, Fast Retailing’s CEO, Tadashi Yanai said the company hopes “to become the world’s No. 1 apparel brand.” The ticket to that title might be the Asian market. Already, Fast Retailing took in $21 billion in 2019, putting Uniqlo in third place behind H&M and Zara.
Uniqlo generates around 90% of its sales from around Asia, where shoppers are more quickly returning to stores after the pandemic shutdown. Zara and H&M, however, are both based in Europe and get more than 75% of their sales from Europe and the United States, where many shoppers are still staying home.
‘The Ultimate Mask’ in the Works
While Uniqlo is known for comfortable, high-quality, and reasonably priced basics that play well in the WFH era, customers often turn to Zara and H&M for reasonably priced clothes to wear out and about. Now, Uniqlo may be able to count masks among its pandemic hits.
Early on in the pandemic, Uniqlo launched a washable “AIRism” face mask in Japanese stores. The mask was advertised as having three layers, UV protection, and increased comfort compared to other masks. When the mask was released in June, Uniqlo’s website crashed and Japanese shoppers faced long lines—a rare sight during the pandemic. In September, the AIRism mask became available in the United States.
CEO Tadashi Yanai said designers are now working on something even more breathable and attractive. It could be “the ultimate mask.”
Uniqlo Staying Out of US-China Rift
Despite plans to open more stores in Asia, Uniqlo faces a potential challenge in the international market. The Japanese retailer could find itself stuck between the United States and China as tensions between the two countries intensify.
If conflict arises between the United States and China, Fast Retailing plans to remain neutral. Should either country ask for Japanese support, Yanai said the company will refuse to take sides. He hopes the leaders of his country will do the same. Investors will watch for the release of Fast Retailing’s quarterly earnings on October 15, when it may be possible to see if Uniqlo’s strategy is paying off.
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