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Uniqlo's quest to become the world's top e-tailer/retailer

Having built the brand, Yanai's focus now switches to digital strategy

Uniqlo opened its biggest store in Southeast Asia in Manila last October. (Photo by Jun Endo)

TOKYO -- When it comes to growing a global brand, few Japanese companies can match what Uniqlo has achieved in the past 20 years.

Having launched the first in 2001, the casual clothing retailer now has 1,295 stores overseas, compared with 832 at home. But for Tadashi Yanai, president and chairman of holding company Fast Retailing, establishing a worldwide presence only marks the halfway point.

"The very concept of a 'retail sector' will disappear," he said in reference to his vision for the industry. "We are aiming to be a corporate entity that combines e-commerce and retail."

Uniqlo's overseas sales reached 896 billion yen ($8.15 billion) in the year through August 2018, for the first time surpassing the figure for Japan, 865 billion yen fpr the same period. Its outlets abroad are expected to overtake domestic stores in terms of operating profit in the current fiscal year.

"There are still many untapped regions and bricks-and-mortar stores will help us promote the Uniqlo brand," he said. But in an era of online shopping, metrics like store numbers fail to communicate the strength of a retail brand.

Fast Retailing President and Chairman Tadashi Yanai said the concept of a retail sector "will disappear" with technological developments in the industry. (Photo by Keiichiro Sato)

"We have already integrated elements of manufacturing and retail," he continued. "What remains is to bring in aspects of information technology and the service industry."

"Digitization will make it possible to directly link individual consumers' tastes to the manufacturing sector. We need to morph into an entity that is connected across the whole pipeline."

While the likes of Amazon will be "threat" in this new environment, Yanai believes Uniqlo has something that online-only retailers lack in its global supply capability and directly managed stores.

Ultimately, he aims to forge a business model in which Uniqlo products are available online or in stores worldwide, with each outlet also able to sell unique or localized lines -- all this while maintaining a reputation for low-priced, high-quality casualwear that suits individual tastes.

This, he concedes, will require rebuilding all of its stores. But the company has a solid track record when it comes to "morphing."

After making a name for itself selling fleeces in the late 1990s, Uniqlo managed to shed its image of being a "cheap" store by opening up in exclusive Tokyo locations like Ginza and Shinjuku.

It also went about revamping the brand, bringing in prominent designers, refurbishing stores, and crucially, tweaking the logo to reflect its Japanese heritage.

A first push to expand overseas, which involved opening stores in suburban areas, did not quite work out as planned. "In retrospect, it was like a foreign brand going into small towns in Japan. Consumers just didn't get it."

That lesson helped shape the company's current strategy, which led to the worldwide network of modern stores in prime locations. The brand now enjoys a more sophisticated image abroad than in its home market.

For more than 20 years, Yanai has stressed the importance of developing a uniquely Japanese label, in the same way that GAP is seen as typically American or Next is British. Getting tennis star Kei Nishikori to compete in Uniqlo gear has been a key part of that strategy.

Fast Retailing has made occasional acquisitions, but its fundamental strategy has always been to pursue organic growth.

"If we wanted to borrow money, we could borrow trillions of yen (tens of billions of dollars). But what would we use the money for? To buy [Zara operator] Inditex and Gap?

"That might make us No. 1 in the world, but that's it. It is not interesting, is it?"

"Things are fun when we do them on our own," he said.

Yanai turned 70 on Feb. 7, and succession is becoming a key issue. His two sons are now on the Fast Retailing board but "they will not run" the company.

"Their role is only to be in charge of governance," he said. "A company that is a family business and at the same time has its stock traded publicly grows the most."

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