March 21, 2017 12:00 pm JST

Uniqlo goes uni-person

In about-face, Fast Retailing aims to individualize casual clothing

HISASHI IWATO, Nikkei staff writer

Uniqlo's new office in Tokyo's Koto Ward handles everything from product planning to distribution.

TOKYO -- Fast Retailing, the operator of Uniqlo, is saying goodbye to its traditional one-size-fits-all formula of selling inexpensive mass-produced items. In plans for drastic reform, the Japanese casual wear retailer will soon make clothes tailored to customers' preferences and deliver them to stores or the customer's home within 10 days of receiving an order. 

The idea is to reduce the amount of unsold stock stemming from the misinterpretation of consumers' needs and woo new customers.

During a briefing on the project at the company's new office in Tokyo's Koto Ward, Tadashi Yanai, chairman and president of Fast Retailing, said, "What we are working on right now is a companywide reform campaign."

The aim is to overhaul the company's entire business model, from its way of working and developing to producing and distributing. 

The new office, which opened in February, has no partitions or walls -- it is a free-flowing floor space of 16,500 sq. meters.

Some 1,000 Fast Retailing employees were relocated to the headquarters, incorporating functions including product planning, marketing, production and logistics. By making what had been a vertically divided organizational structure seamless, employees can now communicate better with each other. The hope is that the time required for decision-making will be slashed. 

The organizational change also comes with the unification of all data for each process using information technology.

From SPA to simultaneous

Before, Fast Retailing adopted a relay-style system of passing the baton to each process step by step. Based on the SPA model -- short for Specialty store retailer of Private label Apparel -- the company handled every aspect of work internally, from deciding on product designs six months to one year before launch, to procuring materials, stitching at overseas contracted factories and finally selling them at Uniqlo stores. 

According to Yanai, this system leaves products planned a year ago sitting on store shelves. In fact, Uniqlo's lineup for the 2015 winter season failed to adapt to unexpectedly warm temperatures, causing same-store sales to drop 10% year-on-year. 

The company scrapped that method. Instead, Fast Retailing will construct a new system that gets factory workers to start preparing for production at the same time as product planning begins. 

Yanai said the system requires as little as 10 days after an order is placed: seven days for production and three days for shipping.

If realized, the system will be flexible enough to quickly ramp up output of hot-selling items. 

"We are switching from selling products that we have already made to only making products that customers want," said Dai Tanaka, a Fast Retailing group senior vice president. 

The company teamed with the U.S. consultancy Accenture to build an IT system that includes the analysis of the customer data. Daiwa House Industry will lend a hand in managing distribution warehouses.

Fast Retailing also wants to be more personal. The new service will allow customers to customize clothes by making requests on sizes, colors and designs at stores and online. Home delivery will take 10 days from order placement. 

Prices are expected to be similar to regular offerings at Uniqlo stores. 

Getting out of the rut

Last autumn, Fast Retailing revised down its sales target for the year ending August 2020 by 2 trillion yen ($17.6 billion) to 3 trillion yen. But the current sales growth of less than 10% threatens to fall short of achieving that goal as the company faces growing competition with new foreign rivals. Amazon.com of the U.S. has grown on a par with large apparel businesses through online sales.

But going to such lengths to satisfy individual customer's needs could strain Fast Retailing's entire operation. 

Yanai's bold plan will take the company into unchartered waters. 

FAST RETAILING CO., LTD.

Japan

Market(Ticker): TKS(9983)
Sector:
Industry:
Retail Trade
Apparel/Footwear Retail
Market cap(USD): 31,592.95M
Shares: 106.07M

Daiwa House Industry Co., Ltd.

Japan

Market(Ticker): TKS(1925)
Sector:
Industry:
Finance
Real Estate Development
Market cap(USD): 22,943.53M
Shares: 666.23M

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