TOKYO -- Japan-born casualwear retailer Uniqlo is opening its first African manufacturing plant in Ethiopia to take advantage of low labor costs, hoping to create an export hub for the U.S. and European markets.
The chain aims to begin test production of T-shirts and other tops in the country as early as 2018. More products will join the mix if the plant shows that it can handle the volume and meet quality standards.
The plans were announced by Tadashi Yanai, chairman and CEO of parent Fast Retailing. Wages are on the rise in China and Vietnam, where Uniqlo now manufactures much of its products. But labor costs in Ethiopia remain low even for Africa.
The country also sits closer to Europe, which Uniqlo considers a key market for growth. Clothing intended for export to the U.S. would not be taxed, either. Fast-fashion titan H&M Hennes & Mauritz has also begun production in Ethiopia, as have such players as Chinese companies.
Fast Retailing set up a joint venture in Bangladesh in 2008 to tap cheap labor there, eventually turning the country into a production hub.
Uniqlo has been performing strongly abroad, particularly in greater Asia. But in the West, it faces tough competition from the likes Zara and H&M. It aims to cut costs with the Ethiopian plant to gain an edge.