Uniqlo case UNIQLO: A SUPPLY CHAIN GOING GLOBAL

BENJAMIN YEN

UNIQLO: A SUPPLY CHAIN GOING GLOBAL
The growth and expansion of Uniqlo seemed unstoppable. With its founder and CEO Tadashi
Yanai at the helm, the company grew in the span of 20 years to become the fourth largest
fashion retailer in the world, with over 1,550 stores worldwide as of February 2015.1
Yanai took over the family business, Ogori Shoji Co., in 1984 and radically changed it right
away. The company went from selling ready-made men’s suits to affordable basic casual wear
under the “Unique Clothing Warehouse” brand. The first store was opened in urban
Hiroshima, and a year later, the second followed at a roadside location. The latter format
proved successful and became the template driving store expansion across Japan up until
1998. That year, the company opened a flagship urban store in the fashionable Harajuku
district of Tokyo and “Unique Clothing Warehouse” was incorporated into the Uniqlo brand.
The opening of the flagship store and simultaneous introduction of a new polar fleece jacket
marked the beginning of a very rapid expansion for Uniqlo, which became one of the hottest
clothing brands in Japan and the number-one fashion retailer in the country.2
Since day one, Uniqlo focused mainly on price and quality, adopting a counter-current
approach and not relying entirely on fashion trends in developing and marketing its clothes.
Direct customer feedback, based on practical every-day needs, was as important as fashion
trends in shaping product R&D and research on natural and synthetic textiles. As a result of
its strategy, Uniqlo clothes could be considered a fashion-basic style available in a great
variety of colors and high quality materials.
UNIQLO's unique position is [as] the world's only LifeWear brand. LifeWear
means everyday clothes for a better life—high-quality, fashionable,
affordable and comfortable.3
Uniqlo was the pioneer of “Speciality Store Retailer of Private Label Apparel” (SPA) in Japan,
a model that had been successfully used by the GAP in the US, and was common to all major
“fast fashion” companies, including Inditex and H&M). Uniqlo’s implementation of the SPA
model was based on an agile supply chain, where tight partnerships with a select number of
1

For details, see Fast Retailing website: (accessed 9th April 2014).
For details, see Fast Retailing website: (accessed 9th April
2014).
3
For details, see Fast Retailing website: (accessed 9th April 2014).
2

Davide Lentini prepared this case under the supervision of Professor Benjamin Yen for class discussion. This case is not
intended to show effective or ineffective handling of decision or business processes.
© 2016 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be reproduced or
transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise (including the
internet)—without the permission of The University of Hong Kong.
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UNIQLO: A Supply Chain Going Global

suppliers were arranged in a network-like structure inspired by top Japanese car
manufacturers [see Appendix 1 for an overview of the Fast Retailing business model]. Most
Uniqlo suppliers were long-term Chinese partners. Asian markets were central to driving
Uniqlo’s growth, but in its quest to become the top fashion retailer in the world, the company
needed to expand into the US and Europe to overtake competitors in sales. Uniqlo was a
dominant force in Japan and was expanding rapidly in China, so the company remained a
regional rather than a global player.

Uniqlo’s supply chain proved effective in the Asia Pacific region, but could the same model
be scaled worldwide? Despite Uniqlo’s excellent results and expansion rate, the company was
prepared to change its supply chain to become global. Was the low growth rate Uniqlo
experienced in the US and particularly Europe partly due to the limitations of its current
supply chain?
At first, Uniqlo was a casual chain on the back streets of Hiroshima.
Then...we became a national brand in Japan. So, the next step is to become a
global brand.4
We really have to transform this company to be successful and compete.
Before, we manufactured in China and sold in Japan. Now we need to
manufacture in the world and sell to the world.5
Apparel retail markets worldwide, Asian focus, intense competition
With an average projected annual growth rate of 9.5% in 2014-2018, Asia remained the most
attractive market for apparel producers. China would account for almost one third of the
entire regional market demand, which was expected to be around US$340 billion by 2018.In
China, thanks to over 30 years of economic development, the middle class was growing to
become the largest in the world. Along with India, the overall market size for clothing was
staggering.
Asian consumers appeared to be hungry for trendy fashion apparel, and thanks to rising
disposable incomes, willing to spend. China was to play a central role in the region and “fast
fashion” houses had aggressive expansion plans for the Mainland. Inditex, the world’s leading
apparel retailer had, as of 2014, over 500 stores operating in China, The GAP was reducing its
presence in the US and expanding its network of stores across China to 80, with 34 opened in
2013 alone. GAP’s retail expansion strategy focused on 50 Chinese cities with populations
over five million. Its objective was to grow in a less competitive environment and double its
turnover, reaching US$1 billion in revenue by 2016.
H&M, the second largest retailer in the world, after Inditex, was planning to expand even
faster in the Mainland, opening 80-90 new stores in 2014 and adding similar numbers in the
following years. Uniqlo’s expansion plan was the most aggressive of all, with 100 new stores
to be added every year in China to the 340 open as of February 2015, with a target of 1,000

stores by 2020. The top offline fast retailers were not the only ones competing for Chinese
market share. Asos, the British e-commerce player, launched a Chinese website on which it
was planning to sell over 2,000 of its own brand’s styles, all designed for the local market.
Fast-fashion retailers were focusing their expansion not only in hub cities along the Chinese
coast, but also in tier two, three and four cities, where the potential for growth in expenditures
4

Michiko Nakamoto “Japan’s King of casual smartens up” (2012) interview with Tadashi Yanai
Accesses on Sept 24th 2015
5
The Economist online (2010), interview with Tadashi Yanai, Published on June 26th 2010
Accessed on June 1st 2015

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was higher. Consumers in smaller cities were considered more aspirational and less
influenced by the luxury brands that were dominant forces in first and second-tier cities.
In the wider Asian region, South Korea, Taiwan and Japan remained hot sports. With its top
designers and brands, Japan continued to be a strong influencer of consumer taste across Asia,
as well as an important market. By February 2015, Uniqlo had a good presence in Korea, with
over 130 stores, and Taiwan, with over 50 stores.
Asian fashion retailers were also on the move. Hong Kong companies were actively engaging
the Mainland market, with Hong Kong-based Giordano, Baleno, Bossini and Esprit

expanding, albeit with mixed results. Despite its high rents, Hong Kong attracted top retail
brands seeking to tap into mainland tourism: Topshop, J. Crew, Tommy Bahama and A&F
had all established retail presences in Hong Kong.6
The local retail scene in China also had its own home-grown heavyweights, like Metersbowne,
which, with over 3,000 shops covering large and small Chinese cities, was the third largest
apparel brand in the country, after Nike and Anta. Anta had over 7,800 shops in China, and
continued to expand, opening 100 new stores annually 7
Asia, and China in particular, were “hot” for fashion retailers focusing on expanding
operations in the region to tap growth and access the world’s largest market. Competition
would become intense, but with rapidly raising salaries and a resilient economy, China was to
remain an attractive market for a long time.
Inditex still had a dominant global-leader position and a significant presence in China. It was
the first company to use a responsive supply chain with reduced time-to-market, producing
“in-season designs” in tune with the latest fashion trends to argument sales. Responsive
supply chains and the SPA model proved n operationally superior to offshoring at low-cost
locations. All the largest fashion retailers—Inditex, H&M, GAP and Uniqlo—shared this
approach. While the top three could be considered global companies, Uniqlo was still
building its international presence. While a major force in Asia, its presence in the US, and
Europe in particular, was marginal.
Fast Fashion companies and their supply chains: the Inditex and H&M
approach
Inditex and its brand Zara initiated the so-called “fast fashion” business model, a completely
different paradigm that parted with seasonal collections created by “star” designers well in
advance of sale dates, manufactured by sub-contractors months before reaching stores and
marketed to the public with heavy advertising support. By outsourcing all production
processes to low-cost locations, traditional fashion houses maximized marginal-unit cost
reductions, but at the same time increased “time-to-market.” Retailers like A&F, Ann Taylor,
and The Limited followed this model, were subject to high inventory levels and were forced
to mark down unsold inventory at the end of each season.
In contrast with traditional retailers, Inditex considered fashion apparel to be a non-durable

consumer good with four-week sales periods. That meant that a continuous stream of new
products, inspired by the latest luxury, fashion and media trends, had to hit stores
continuously, on an almost weekly basis, to meet customer demand.
6

Price Waterhouse Cooper (2015) “2015-2016 Outlook for the Retail and Consumer Product sector in Asia”
(accessed June 4th
2015).
7
Price Waterhouse Cooper (2013) “2013 Outlook for the Retail and Consumer Product sector in Asia”
(accessed June 4th 2015),

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Instead of having a single designer, Inditex worked with a large in-house design team that
constantly monitored trends to anticipate what the public wanted. In addition, POS sales data
from Zara shops around the world, indicating which styles and products were selling the most,
reached headquarters twice a week. Detailed sales data was essential in catching trends, and
Inditex was the first to structure its operations in a “pull” supply chain that could match
market demand by means of a shortened design-to-retail cycle, set in motion by a constant
feed of POS data from stores.
Inditex was vertically integrated and owned 14 automated factories, all located in Spain.
Production processes related to fabric procurement, dyeing, printing and marking, fabric

cutting, quality control, packaging, logistics and retailing were all under direct control. Inditex
outsourced lower value-added activities, like sewing, to a network of small cooperatives
located around La Coruna and in the north of Portugal.8
In Inditex factories, robots worked around the clock dyeing and cutting fabric, creating socalled “grey goods” that could be finished in a variety of ways at later stages of production.
Before being distributed to shops, all garments were returned to Zara’s five-million square
meter main distribution center for quality control. Its fast supply chain allowed for 10-15 days
from design to retail. Stores could be restocked twice a week.9
Inditex’s business model innovated radically. In particular, it traded a cost advantage for
responsiveness in a vertically integrated, tightly controlled and localized supply chain.
Inditex’s operational model greatly influenced the retail clothing industry: the fast fashion
model allowed production of new “in season” designs that could be rolled out to stores
quickly. Sales figures showed that only 39% of Zara revenues came from seasonal collections,
while 61% came from “in season” designs. The short time-to-market allowed Inditex to keep
its inventory at 7% of sales, compared to its competitors’ 13%.10
H&M, the world’s second largest apparel retailer, operated without directly owning
production facilities and with longer planning times than Inditex. The design and planning
process was centralized at Stockholm headquarters, where over 100 designers worked under
the supervision of Mr Van Den Bosh, H & M’s head designer for 20 years. While Zara was
constantly exploiting fashion trends and rolling out a large number of new “in season”
designs, H&M sales were dominated by seasonal collections, which accounted for 80% of
total sales. The design process at H&M was integrated with sourcing and merchandising, as
the retailer outsourced its production to over 700 garment manufacturers and 60 pattern
suppliers, 60% of which were based in China, and the rest in Europe.
H&M had over 30 directly owned production centrers that controlled supplier quality, and a
sophisticated IT infrastructure connecting its design center with the entire supply chain. In
contrast to Zara, H&M sold basic items of clothing that had a longer shelf- life than Zara’s
more fashion-oriented items.11
Inditex and H&M’s supply chain were markedly different. Inditex’s was vertically integrated,
while H&M used a supplier network monitored by production offices overseeing a dispersed
global supply chain.

8

Stephanie 0. Crofton, Luis G. Dopico, (2007)” ZARA-INDITEX AND THE GROWTH OF FAST FASHION”, Essays in
Economic & Business History — Vol XXV, 2007
9
Greg Petro (2012) “The Future Of Fashion Retailing: The Zara Approach (Part 2of 3),”Forbes online
(accessed
April 15th 2015).
10
Stephanie 0. Crofton, Luis G. Dopico, (2007) “ZARA-INDITEX AND THE GROWTH OF FAST FASHION”, Essays in
Economic & Business History — Vol XXV, 2007
11
Lau, C. (2014) “Behind H&M’s fashion forward retail inventory control,” (accessed April 16th 2015.

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Uniqlo’s supply chain emerged as a mix of elements from both Zara and H&M. Uniqlo was a
younger company, and while it took inspiration from its competitors, new elements were
introduced, creating a mix of Inditex and H&M operational strategies.
Uniqlo’s SPA model and China-centred supply chain: the early years
The “Specialty Store Retailer of Private Label Apparel” approach adopted by Uniqlo was
pioneered by the GAP in 1986. GAP started giving its own private label merchandise more
prominence at the end of the ‘70s, pushing other top name brands into the background. The

move proved successful, and thanks to lower pricing. GAP brand merchandise started to drive
the majority of sales. The new business model allowed the retailer to have direct visibility on
sales data, and use it to plan and design apparel collections that better matched customer
demand.12
Uniqlo’s business model and supply chain developed gradually, having followed the SPA
model since beginning operations in 1984. For the first ten years, the company relied on
major Japanese trading houses, such as Marubeni, Mitsubishi Shoji and Sojitsu, to produce its
garments at low cost, sourcing materials from Chinese manufacturers. Uniqlo was unable to
meet the minimum order quantity (MOQ) of major garment manufacturers, and did not have
the expertise and structure to source directly from China or monitor quality. Only in 1994,
when sales started to reach approximately US$500 million, did the company begin to revise
its sourcing strategy, taking direct control of supply-chain management. Up to that point,
Uniqlo had relationships, via its trading partners, with over 100 garment manufacturers in
China.13
It was critical to Uniqlo’s business model to retain and develop the capability to source
garments in China at low cost, as price advantage was fundamental to the brand. While
Uniqlo sold a jean jacket for the equivalent of US$24, the corresponding Japanese GAP store
sold it for US$58 to $66, while Matsuya department store charged US$175. Uniqlo’s
outsourcing production to China resulted in far more competitive prices for end consumers.14
Uniqlo reformulated its overall strategy in 1994, focusing on three core objectives:
accelerating retail sales growth by opening over 50 stores per year in Japan; restructuring the
supply chain by bypassing trading companies and lowering purchase costs; and maintaining a
high-quality product level.
Bypassing trading companies and maintaining efficiency and quality was not an easy task.
Only four years later, in 1998, did Uniqlo establish its first two overseas production offices,
one in Shenzhen and one in Shanghai. The new offices’ first task was to reduce the supplier
base, bringing it from a total of 120 to 40 suppliers. The rationale was that only by working
with fewer suppliers and increasing order sizes could unit prices be lowered. With growing
sales and fewer suppliers, the average order size became 8.75 million pieces. While available
styles sold at Uniqlo stores went from 200 in the late 1990s to 400 in 2012, the number was

still only 10 to 30% of that offered by Inditex or H&M, so each item was produced in larger
quantities. 15

12

Huijuan Du, Yanjun Huang, Yan Liu, (2014)” The Analysis of the SPA Apparel Company Strategy”, College of Quartermaster
Technology, Jilin University, Changchun, China
Usui, T. (2014) “Dynamic Development of Competitive Hybrid Governance Structure in Supply Chain: A Longitudinal
Qualitative Data Analysis” (accessed April 20th 2015).
14
Benjamin (2001)“One-man restructuring act”, Forbes magazine online post />accessed 21 April 2015
15
Usui, T. (2014) “Dynamic Development of Competitive Hybrid Governance Structure in Supply Chain: A Longitudinal
Qualitative Data Analysis” (accessed April 20th 2015).
13

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In 1998, Uniqlo deployed an advanced IT system to connect supplier factories, stores and its
head office online in order to improve inventory management and forecasting processes with
POS data. After the opening of the Tokyo flagship store and simultaneous introduction of a
cheaply priced polar fleece jacket, sales at Uniqlo almost doubled from its 1998 level to 2.7
billion units in 2000.

Uniqlo polar fleece was a great success, as it was of good quality and cost a fraction of
competing products sold by established sportswear brands and Japanese department stores.
Uniqlo’s visibility and appeal increased considerably beginning in 1998. In 2001, sales
reached a level of US$5 billion, with 433 stores having opened in Japan by the end of the year.
All production continued to be managed in China, by the 40 suppliers originally selected in
1998, plus another 20 added in 2001 to cope with sales volume expansion. Uniqlo considered
product quality and overall efficiency key elements of success, and, in 2000, the company
created the Takumi team to assist suppliers in developing production processes to reduce
defects, increase efficiency and better coordinate the entire supply chain.
The so called Takumi team was composed of veteran technicians from the Japanese garment
industry, who each had over 30 years of experience in various specific phases of garment
production, such as fabric cutting, dyeing and sewing, and who were all versed in operation
management. The technicians were hired with performance-based salaries and went to
Chinese suppliers’ factories with the specific purpose of improving production processes to
meet the quality and efficiency standards Uniqlo required.
Based at production offices in Shanghai and Shenzhen, the Takumi team visited suppliers’
factories two or three times per week, far more often than the H&M and GAP teams did. GAP
in particular had only quality-control (QC) managers visiting factories, while H&M was
sending personnel in to monitor production progress only once a month.
Uniqlo’s Takumi team had a far broader scope than quality control. It was in charge of
developing direct manufacturing skills and quality-control systems. It worked side-by-side
with supplier personnel, teaching best practices and the Kaizen philosophy of continuous
improvement. Fabric dyeing was one of the most challenging processes. Obtaining the same
color using different cauldrons at different production sites was extremely difficult and
required specific, un-codified knowledge supplied by the Takumi team experts on-site. At the
production process level, the Takumi team aimed to perfect every phase, from yarn sourcing
to final quality control, optimizing the production process as a whole to achieve just-in-time
performance and quick operational response.16
Uniqlo was a large customer of the Chefeng Group, a medium-size garment manufacturer
located in Guangdong province. As a result of the Kaizen philosophy, signs bearing the word

“Kaizen” were displayed in every production department, embedding quality control at each
stage of the production process. Chefeng molded its operations with the help of the Uniqlo
Takumi team and implemented a three-step process. These included: a detailed analysis of
every production process to identify systemic quality issues; strict product quality control to
identify defective stock-keeping units (SKUs) at every production stage; and a comprehensive
staff training program.
The Takumi team and Uniqlo’s own production experts worked daily with Chefeng staff to
tackle production issues as they arose. To promote change, Uniqlo’s experts at times did
practical demonstrations to factory managers of alternative ways of carrying out particular

16

Usui, T. (2014) “Dynamic Development of Competitive Hybrid Governance Structure in Supply Chain: A Longitudinal
Qualitative Data Analysis” (accessed April 20th 2015),

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operations. Uniqlo quality control requirements were demanding, and included inspection of
every single SKU produced, a procedure that most other fashion brands did not implement.17
In an effort to coordinate all actors in the supply chain, in 2014, Uniqlo instituted a “One
Table Meeting,” where, under the supervision of Takumi experts, fabric suppliers and
garment manufacturers would meet to coordinate their respective production scheduling and
processes to meet Uniqlo targets. These “One Table Meetings” allowed fair negotiation and

coordination among materials suppliers, garment manufacturers and Uniqlo, leading to a more
satisfactory overall relationship among all participants in the supply chain.18
In 2000, Uniqlo sold a total of 300 million pieces divided into 200 SKUs, maintaining the
average order size of every SKU at around 1.5 million pieces. After years of collaboration
with Uniqlo’s Takumi team, supplier partners had acquired the capability to sustain Uniqlo’s
level of quality at competitive cost.19
Uniqlo’s evolution: fashion as utility and supply-chain upgrades
From 1998 to 2000, Uniqlo sold over 35 million fleece jackets at the very affordable price of
¥1,90020 per piece. The item’s success was unprecedented and crystallized Uniqlo’s product
strategy of functionalism. Rather than serving the purely hedonistic aspects of fashion, its
products were to supply practical performance and function, keeping customers warm and
fresh, regulating moisture and dryness.
Innovation was key to consolidation of the new LifeWear philosophy. In 2003, Uniqlo
partnered with Toray to develop new fabrics. Toray was one of the leading composite
material and advanced fiber manufacturers in Japan. The partnership’s objective was to create
a superior-performance synthetic textile, in an effort to repeat the success of “Uniqlo fleece”
and consolidate the LifeWear philosophy.
The Heattech fabric was introduced in 2002 and used to manufacture a line of highperformance thermal underwear. Its considerable success sustained the sales-growth
momentum Uniqlo experienced in 1998-2000, reversing falling sales trends [see Appendix 2
for Uniqlo Sales Growth]. Heattech was a special synthetic fabric designed for warmth. Toray
improved its performance season after season on the basis of Uniqlo customer feedback. The
fabric became softer, incorporated new anti-microbial properties, and became anti-wrinkle
and anti-static. Uniqlo management believed that working with synthetic fibrer opened a path
of progressive improvement that could further differentiate its products. Other innovative
products followed from the collaboration of the two companies, such as Air-Sim and the
Ultra-light down jacket.21
The integration of the Uniqlo and Toray supply chains was based on a stable flow of orders
that could saturate production capacity throughout the year, as the fiber manufacturer’s
production plans could not accommodate seasonal peaks and zero-production periods. Uniqlo
had to manage the inventory and production schedule of Heattech and other fabrics Toray

supplied in order to guarantee the constant utilization of the production capacity it had booked.
To do this, Uniqlo relied on early POS data to shortlist best-sellers and develop similar
17

Fast Retailing (2013) “Partners in Quality,” (accessed May 3rd 2015)
18
Fast Retailing (2014) “Partners in Quality,” (accessed May
3rd 2015).
19
Usui, T. (2014) “Dynamic Development of Competitive Hybrid Governance Structure in Supply Chain: A Longitudinal
Qualitative Data Analysis” (accessed April 20th 2015).
20
Equivalent to 16.001 USD average exchange rate July-December 2001 Japan Yen to US Dollar 118.74
21
Hong Kong Exchange website, Uniqlo Hong Stock Exchange listing prospect 2013,
Accessed 29th April 2015

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designs. It utilized a responsive supply chain with a design-to-store lead time of six weeks,
mimicking the “just-in-time” supply methods used by Japanese automakers. 22
Inventory management became central to execution, and only the inventory of year-round
items like jeans, long-sleeved shirts, t-shirts and sweatshirts was carried over. Inventory

carry-over for seasonal items was minimized by utilizing inventory pooling techniques,
moving slow sellers at one store to locations where demand for the same items was strong.23
Store, warehouse and factory-level inventory positions were updated daily. Inbound store
logistics were outsourced to Third Party Logistics (3PL) providers and supervised at store
level by inventory controllers that monitored deliveries and inventory levels in real time. First
batches of new products in particular were closely monitored. Inventory controllers analyzed
new-item sales levels, and issued specific delivery instructions to logistics companies to
assure that stores were never out of best-selling items. Forecasting of future production
volumes based on early sales data was central both to Uniqlo’s production planning and
pricing strategy.24
Slow-moving SKUs were tracked and their prices changed to stimulate sales. Prices varied
almost daily based on sales forecasts versus actual sales. If an item failed to reach target sales
volume, its price was lowered as often as every two days. If price reduction lifted sales, the
price was again adjusted upwards, and, if sales were on target, all the way back up to the
original price.25
To better serve customers, Uniqlo, in collaboration with Casio and Microsoft, created a device
that allowed each member of the 40,000-strong in-store sales staff to check inventory on hand,
prices and the availability of every item being sold, all in real time. Introduced in 2010, the
handheld device was connected to a central database containing all information about SKUs
in current production, including stock available at stores. Readily available information made
it possible for employees to redirect customers to nearby stores in case stock ran out. Further,
quick access to information improved customer service, helping staff in stores find rapidly
updated prices.26
With regard to retail networks, Uniqlo had still more stores in Japan than in the rest of the
world combined as of February 2015. Store numbers were flat in Japan, where the company
was focusing instead on e-commerce. In China, Uniqlo had 340 stores as of February 2015,
an increase of 80 stores in one year. This was 20% below the expansion target of 100 stores
per year, but still staggering. China was Uniqlo’s second-largest international market, but
Japan still had more than double the number of stores. The second-largest international
market was Korea, where the number of store was stable at around 130 as of February 2015.

In Europe, Uniqlo’s presence was small. The UK had ten stores, France eight and Germany
one. In the US, the number of stores rose from 17 to 39 between 2014 and 2015. Uniqlo still
had a long way to go to establish a strong presence in the US and Europe. In an effort to
sustain expansion and low prices, the company was relocating production away from China
and experimenting with new supply chain models in preparing the ground for globalization.
22

Alexander, J. (2010) “Japan’s just in time clothes” (2010), CBS news website, (accessed 29 Apr 2015).
23
Uniqlo Hong Stock Exchange listing prospect (2013), published on Hong Kong Exchange website
Accessed 29th April 2015
24
Uniqlo Hong Stock Exchange listing prospect (2013), published on Hong Kong Exchange website
Accessed 29th April 2015
25
Kang Han Zi (2014) “The research of industry supply chain management-The comparison of the supply chain management
between Lining and Uniqlo”, Master Thesis, Hebei University of Economics and Business
26
Microsoft (2010) “Intelligent System Integrates Handheld Retail Devices and Improves Customer Service”, from Microsoft
website download.microsoft.com/.../Fast_Retailing_Windows_Embedded%20.pdf accessed on June 1st 2015

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Uniqlo production outside of China and distribution networks for online
retailing
In 2008, Fast Retailing opened offices in Bangladesh in order to redistribute part of its
Chinese production. The goal was to reallocate a third of production volume outside Mainland
China by 2020.
In Bangladesh, instead of partnering with external manufacturers, Uniqlo recruited partners to
create a joint venture capable of production according to its required quality and efficiency
standards. Uniqlo took only a 10% stake in the first joint venture, with Pacific Textile
Holdings Limited and Crystal International Limited together holding, 83% of the venture, and
the remaining 7% held by Trendit, part of the Anananta Group. Uniqlo and its partners
directly controlled and managed a garment manufacturing and a fabric manufacturing plant.
They were also minority holders of a yarn-spinning plant that was majority-owned by the
Bros Group.
Uniqlo’s main partners in the venture where well established companies. Pacific Textile
Holdings had a turnover of HK$4.3 billion and specialized in knitwear, with bases in SriLanka and China, Crystal group, which had a US$868 million turnover, was a garment
manufacturer with an annual capacity of 200 million pieces. It supplied M&S and the GAP, as
well as Uniqlo. The other two investors in the partnership were a Bangladeshi company,
Anananta Group, a fast-expanding garment manufacturer with a workforce 6,000 strong and
an over 12 million-piece production capacity, and Bros Group, which operated spinning
plants across China.27 [See Appendix 4 for the Uniqlo Bangladeshi JV structure.]
Rising wages in China pushed some of Uniqlo’s suppliers, like Lever Style, to move
production to Vietnam, where wages were half those in China. After a decade of nearly 20%
annual wage increases, the PRC was starting to become too expensive. Uniqlo followed its
suppliers to Vietnam and Cambodia, establishing a production office in Ho Chi Minh City, to
which it offered the support of a Takumi team.28
At a logistical level, in partnership with the Daiwa Group, a large Japanese conglomerate,
Uniqlo was setting up distribution centers to better serve its network of shops. Daiwa was to
build ten distribution centres in major Japanese cities, the first of which was located in the
Ariake district of Tokyo. This distribution-center set-up aimed to improve the efficiency of
Uniqlo’s distribution network in Japan, and in particular to better serve online customers.

Uniqlo’s existing warehouse network was divided into first-tier warehouses receiving goods
from factories, and second-tier or regional warehouses distributing products directly to shops.
The typical transit time was three to six days. While this was fine for offline channel
deliveries, the lead times were too long for Japanese online shoppers. Once the new
distribution centers were in operation, online shoppers could be served in one day. With the
Japanese market saturated with over 840 stores, the growth rate was slowing at physical shops.
While online retail constituted only 4% of total sales, e-commerce offered a brisk growth rate.
29

Tadashi Yanani had a radical vision of Uniqlo’s digital future:

27

Fast Retailing(2008) “FR to establish Bangladesh production joint venture,”
(accessed June 1st 2015).
28
Chu, C. (2013) “Asian manufacturers survive by moving to Asian neighbors,” Wall Street Journal,
online , (accessed June 1st 2015).
29
Nikkei (2014) “Uniqlo operator teams with Daiwa House on global logistics” Nikkei website, news section
Accessed June 1st 2015

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Once it is completed in spring 2016, we plan to develop our new state-of-theart distribution centre in Ariake, Tokyo into the world's largest digital
flagship store. We intend to carve new business by combining our virtual
storefronts (online retailing) with our physical store network in such a way
that enhances their mutual functionality, and makes buying our clothes an
even more pleasant experience for customers, wherever they are, and
however they choose to shop.30
The choice of JD.com in China was an example of the level of performance Uniqlo expected
from its online operations. With 123 warehouses and 3,210 delivery and pick-up stations
covering 1,862 districts in China, JD.com promised same-day delivery, in major Chinese
cities, of merchandise bought online.31 Uniqlo also opened an online flagship store on JD.com,
using the platform not only for logistics, but as an e-commerce solution.
A supply chain for the US and the world
Fast Retailing opened its first store in the US in 2006, choosing the chic Soho district in New
York, and by mid-2014 operated another 26 stores across the US, mostly on the east and west
coasts, with the objective of opening 200 stores by 2020. After 2014, Uniqlo planned to open
around 15 new stores per year in the US, a number that has been bettered with 22 new stores
[see Appendix 3 for store count by country]. High shop-opening costs prevented the retailer
from posting a profit in the US, but the stores were forecast to be profitable by 2016-2017.
Another factor that impacted sales at US stores was sizing: a medium-size jacket in Japan
would only be a small in the US, and that left a size gap in Uniqlo’s offerings.32
Again in the words of Tadashi Yanai, development of the US market was a pillar of Uniqlo’s
strategy:

30

Yanai , T. (2015) “Pioneering a new industry”, Fast Retailing, (accessed July
4th 2015),
31
Bloomberg (2015) “JD.com sees Uniqlo deal as boost for warehouse business,”

(accessed
June 1st 2015).
32
Fast Retailing press release (2015) “Uniqlo continues USA expansion plans”, Market Watch website
accessed June 1st 2015

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We intend to work hard to develop UNIQLO as a leading brand in other regions as
well, including the United States, Europe, Southeast Asia and Oceania. In fact,
creating a firm operational platform and expanding the UNIQLO brand in the United
States is our top priority at this stage, and we intend to channel the expertise and
experience of the entire Fast Retailing Group into achieving that aim. Over the
coming three years, our target is to develop UNIQLO USA into a ¥100 billion
operation.33
Uniqlo’s supply chain and distribution strategy was working well in the Asia region, where
brand expansion maintained momentum. Its operations in Japan were geared up to better
serve online shoppers and, in China, the partnership with JD.com and a network of over 340
stores yielded strong growth.
It seemed Uniqlo was preparing to evolve its operations and supply chain to become the
leading global apparel retailer:
Fast Retailing is keen to pioneer a new industry, which is completely different
from the apparel, fashion and retail industries we know today. This will

require a fundamental review of our entire supply chain. We have already
established R&D centres in Tokyo, New York and Shanghai. Now we are
looking to promote full-fledged product development in Paris, London and
Los Angeles as well by opening additional R&D centres in these three
cities.34
Fast Retailing’s supply chain had evolved organically, sustaining strong expansion in Asia for
two decades. It looked likely to take over the world. Uniqlo was preparing a radical “change
of style,” reinventing its Kaizen philosophy and dedication to quality.

33

Tadashi Yanai, T. (2015),“Pioneering a new industry”, Fast Retailing, />(accessed July 4th 2015).
34
Ibid.

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APPENDIX 1: FAST RETAILING BUSINESS MODEL35

35

From Fast Retailing website Accessed June 3rd 2015

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APPENDIX 2: UNIQLO SALES GROWTH36

36

From Fast Retailing website Accessed July 4th 2015

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APPENDIX 3 UNIQLO STORE COUNT BY COUNTRY37

Units: Stores

As of

As of

As of

As of

As of

As of

November
30,

February 28,

May 31,

August 31,

November
30,

February
28,

2013

2014

2014

2014

2014

2015

1,369

1,384

1,460

1,485

1,547

1,558

UNIQLO Japan:

857

850

862

852

852

842

Own
Stores

838

832

841

831

824

814

Largescale

190

191

201

199

203

203

Standard

648

641

640

632

621

611

Franchise

19

18

21

21

28

28

512

534

598

633

695

716

China

251

260

290

306

330

340

Hong
Kong

19

22

22

22

23

24

Taiwan

42

43

43

46

48

51

Korea

115

116

132

133

137

139

Singapore

13

16

16

18

21

22

Malaysia

12

14

18

21

23

24

Thailand

13

14

18

20

21

21

Philippines

10

11

12

16

19

22

Indonesia

2

3

4

4

6

6

UNIQLO Operations

UNIQLO
International:

1

1

4

4

USA

17

17

21

25

39

39

UK

10

10

10

10

10

10

France

4

4

6

6

8

8

Russia

4

4

4

4

5

5

1

1

1

1

1,200

1,212

1,258

1,268

1,319

1,314

GU
Theory*

250
425

250
435

277
449

276
460

300
482

295
489

COMPTOIR DES
COTONNIERS*

372

374

374

374

379

375

PRINCESSE
TAM.TAM*

152

151

152

152

152

151

1

2

6

6

6

4

2,569

2,596

2,718

2,753

2,866

2,872

Australia

Germany
Global Brands

J Brand
Total

-

-

-

-

APPENDIX 4 FAST RETAILING JOINT VENTURE STRUCTURE IN BANGLADESH38
37

From Fast Retailing website accessed July 4th 2015

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UNIQLO: A Supply Chain Going Global

From Fast Retailing website accessed June 1st 2015

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