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Japan-Update

Uniqlo struggles to boost online sales

Big distribution snafu, too many real outlets cloud website's appeal

Uniqlo's overwhelming strength in physical stores -- more than 800 outlets across Japan -- diminishes some of the convenience of online shopping.

TOKYO -- Uniqlo is struggling to grow its online sales in Japan, where it has more than 800 outlets. The difficulty comes despite Fast Retailing's stated goal of nurturing its online operations as a source of growth.

Fast Retailing, Uniqlo's operator, in March unveiled a new smartphone-optimized site, and online sales took a 20% joyride for a month. Yet online sales are about 6% of total domestic sales -- one-fifth the target.

Fast Retailing was hoping a new smartphone-optimized site would bring in more orders than it has.

At an earnings briefing on July 13, Chief Financial Officer Takeshi Okazaki seemed frustrated with the current state of the company's online shopping business. He said internet sales should have grown by 30% and that the company could even expect growth of 40% to 50%.

Online sales for the March-May quarter jumped 17% on the year to 12.3 billion yen ($109 million). As a share of total sales, they rose from 5.5% to a still-low 6.2%.

A major distribution snafu that lasted until spring was one reason for the sluggish online sales. It came about after Fast Retailing chose to streamline its logistics system to cope with rising distribution costs and other factors.

Uniqlo had always had other companies handle its logistics and therefore lacked expertise in the area. Chaos resulted. Distribution warehouses in Tokyo's Koto Ward that Fast Retailing set up as part of its reform drive have had problems. The company was hoping to make same-day deliveries but could not even make next-day drop-offs.

Above all, the more than 800 outlets that Uniqlo has across Japan diminishes some of the convenience of online shopping. Not many customers visit Uniqlo's online site on a regular basis -- an indication that the company needs to convey the advantage of online shopping to its fans.

The new smartphone-optimized site recommends outfits and allows customers to conduct image searches, then find similar products. Customers can pick up their online orders at any of 43,000 or so convenience stores across the nation.

"There is still much to be done," Okazaki said. The company needs to prompt customers to shift from actual outlets to the web, offer special online sizes and exclusive online products, and improve its digital marketing.

And there is no time to waste, not with online behemoths like Amazon.com of the U.S. increasing their fashion offerings and crowding out competitors.

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