Iris Publishers_Journal of Textile Science & Fashion Technology (JTSFT)

Luxury Strategy by Daily Fashion Brand of UNIQLO: Flagship Shop Strategy for Large Store Location

Abstract

Most of the luxury brands have flagship shops. In recent years, daily fashion brands and fast fashion brands also have flagship shops. Both flagship shops are large store, located in special place such as Ginza for brand-building. However, flagship shop importance is not only place and size but also Product, Price, Promotion. In this article, we investigate flagship shop strategy and the relationship between flagship shop strategy and brand building by case UNIQLO.

Keywords: UNIQLO; Daily fashion brand; Large store location; Flagship shop strategy

Introduction

As Japanese retailers struggle to expand overseas, UNIQLO has been achieving success in overseas expansion with the opening of flagship shops. This is surprisingly the same as how European and American luxury brands, which are on the opposite end of the spectrum from daily fashion retailer UNIQLO, expanded in Japan by opening flagship shops. This means that the flagship shop strategy is similarly being adopted by Western luxury brands [1-3] that are polar opposites from UNIQLO, which is a daily fashion retailer [4]. Yet, does the fact that such companies are not only focusing on advertisements and promotions, but also spending a large amount of capital to open flagship shops, mean that flagship shops are taking on an aspect of brand building that cannot be achieved through advertisement and promotions alone?

To answer that, this paper seeks to systematize the flagship shop strategy by comparatively analyzing cases in the overseas expansion of Fast Retailing Co., Ltd. in which their subsidiary UNIQLO failed with normal stores but succeeded with flagship shops. This paper also elucidates the casual relationship between the flagship shop strategy and brand building by investigating why success can only be achieved with flagship shops, but not with normal stores.

In the next Section, previous studies on flagship shops are reviewed and the analytical framework for this paper is presented. Section 3 introduces an overview of UNIQLO, Section 4 analyzes UNIQLO’s successes and failures in overseas expansion, Section 5 analyzes UNIQLO’s flagship shop strategy, in Section 6 flagship shops are systematized, and Section 7 discusses flagship shop strategies and brand building. Finally, verification is performed using the results from fieldwork conducted at the New York Fifth Avenue store.

Previous Studies on Flagship Shops

This section outlines previous studies on flagship shops and explains this paper’s position. In previous studies, flagship shops are defined as follows. Although fashion related books tend to describe flagship stores (flagship shops) as “stores that carry all of a brand’s products,” [5,6] we have defined flagship shops as “stores that carry all of a brand’s products while exhibiting the brand’s essence [7]”.

Despite there being definitions for flagship shops, there are currently no in-depth discussions in Japan on flagship shops since they are seen as a part of an overall business strategy.

Even in Flagship Marketing [8-10], no research covering Japanese companies had been conducted on flagship shop strategies and brand building.

This paper therefore takes up the case of a Japanese company, systematizes their flagship shop strategy, and analyzes the use of the flagship shop strategy for brand building [11].

Overview of Fast Retailing Co., Ltd

Fast Retailing Co., Ltd. was founded in Yamaguchi Prefecture in 1963. The first UNIQLO casual-wear retail store opened in Hiroshima in 1984, and Tadashi Yanai was appointed president in the same year. The company became listed on the Hiroshima Stock Exchange in 1994, and then in the second section of the Tokyo Stock Exchange in 1997. The scale of their business expanded with fleece becoming a hot trend in 1998, and they became listed in the first section of the Tokyo Stock Exchange in 1999. After a subsequent period of decreased revenue and profits, business recovered, being spurred by an increase in women’s products, and with consolidated sales of 2,290.5 billion yen and operating profits of 257.6 billion yen in 2019, they came to represent one of Japan’s top companies.

Fast Retailing’s business is divided into the four segments of UNIQLO Japan operations, Japan-related business operations, UNIQLO international operations, and global brand operations.

This paper only covers the UNIQLO international operations segment. The UNIQLO international operations segment was founded with the company’s expansion to UK in 2001, and by 2019 they had developed their overseas presence to 1379 stores throughout China (717 stores), Hong Kong (29 stores), Korea (188 stores), the United States (51 stores), France (24 stores), Singapore (28 stores), Russia (37 stores) and so on, while 817 stores in Japan. Initially international operations struggled, but they have been producing profits since 2008, and sales for the year ending in August 2019 were 1,026.0 billion yen (in Japan 872.9 billion yen), while operating profits were 138.9 billion yen (in Japan 102.4 billion yen) [12].

Although the sales ratio is currently 54.0%, this is a segment for which growth can be thoroughly anticipated for in the future.

UNIQLO’s Overseas Expansion

UNIQLO’s overseas expansion failure – UK case

UNIQLO’s overseas expansion started with their expansion to UK in 2001. Under a strategy to open 50 stores within three years and to also produce profits within three years, they opened four stores in London, with the Knightsbridge store (198 tsubo, equivalent to approximately 655 m2), the Wimbledon store (177.5 tsubo, equivalent to approximately 587 m2), the Romford store (191 tsubo, equivalent to approximately 631 m2), and the Uxbridge store (174.5 tsubo, equivalent to approximately 577 m2). By 2002, they had expanded to 21 stores, but due to having 360 million yen in losses, it was announced that 16 stores would be closed down in 2003. UNIQLO’s expansion in UK had failed.

As President Yanai subsequently remarked regarding the failure in UK that “There is absolutely no familiarity with UNIQLO (overseas). You can’t expect a brand to sell if people don’t know it. This was not a matter of good or bad products, the problem was one step before,” [13,14] their overseas expansion failure can be attributed to the low degree of familiarity with the brand. However, it is thought that there must have been a degree of familiarity with UNIQLO in London, considering that at the time of the expansion in 2001, UNIQLO was promoted extensively using advertisements on buses that ran through London and so forth, and considering that the Knightsbridge store was in a prime location where the luxury department store Harrods is also located. UNIQLO’s failure in UK was not simply a problem of consumers being unfamiliar with the brand. Since the failure occurred even at the Knightsbridge store, where extensive promotions were carried out, it is thought that the cause was a complex intertwining of operational problems in which UNIQLO’s characteristic features were diminished due to British personnel being appointed to manage the subsidiary, and the problem of being unable to achieve brand awareness based on promotions and location alone.

UNIQLO’s overseas expansion success – US Case

In the United States, three stores were opened in September of 2005 in shopping centers in the New Jersey suburbs, with the Menlo Park Mall store (217 tsubo, equivalent to approximately 717 m2), the Rockaway Townsquare store (151 tsubo, equivalent to approximately 499 m2), and the Freehold Raceway Mall store (223 tsubo, equivalent to approximately 737 m2). The failures in UK were taken into account and the company employed a strategy in which they moved forward while using the stores as test stores to study the market, but sluggish sales persisted. However, when inventory that was not selling started to be stockpiled and a provisional 80-tsubo (equivalent to approximately 265 m2) sized store in Soho was opened to help get rid of that inventory, sales ended up being higher than the three New Jersey stores. As a result, the opening of a large-scale store in Soho was considered, and after conducting extensive promotions, the Soho New York store was opened as a flagship shop in November of 2006. Being located on Broadway, it became a hot topic amongst many local media outlets, and sales have steadily achieved targets since the opening (Figure 1).

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