Reference no: EM132214292

Recession or not, people still need to look good and feel good. However, a shift in buying behavior has changed the retail landscape. Consumers are stretching every dollar, buying less while making smarter decisions in every purchase. Apparel brands struggle to creatively engage consumers at every conceivable purchase point. So how does a clothing retailer woo shoppers into their stores to make a purchase when these shoppers are resigned to spend less or not spend at all?

Japanese consumers are known to be the most demanding in the world. They have a strong preference for quality and luxury products are a must have. But amid a sharp economic slowdown, price is finally beginning to take priority for many shoppers who are worried about their job. Luxury products have lost their luster as more Japanese now take the thrifty route in fashion. Gone are the days of the 1980s and 1990s, when they spent generously on imported branded items.

In early 2009, clothing retailer UNIQLO introduced its blockbuster jeans for 990 yen (USD10.70). Frugal and bargain hunting Japanese were enthusiastically acquiring this piece of UNIQLO’s eclectic style of affordable fashion. Such frugality is likely to be more than a fad as the Japanese are showing good appetites for value-for-money products. The phenomenal growth of UNIQLO is proof that the era of austerity is taking hold.

UNIQLO is a well-storied brand known for its low-cost fleeces and T-shirts. Founded by the Yamaguchi-based company Ogori Shoji in 1940, the store originally sold men’s clothing until 1984, when they opened a unisex casual wear store in Hiroshima under the name “Unique Clothing Warehouse.” It was at this time that the brand name UNIQLO was born, as a short form for “unique clothing.” By 1994, there were over 100 UNIQLO stores operating throughout Japan.

Its first urban store in Tokyo’s trendy Harjuku district in 1998 proved such a success that by 2001, more outlets sprouted in major cities in Japan. With over 500 retail outlets in Japan, UNIQLO expanded overseas and in 2001, opened its first outlet in London, England and then in Shanghai, China. In 2005 more overseas stores opened in the United States of America and in Hong Kong. In 2010, UNIQLO also opened stores in Kuala Lumpur, Malaysia and Taipei, Taiwan. In a global marketplace with increasingly pragmatic consumers, UNIQLO has indeed become the favored clothing retailer, serving its value-conscious fans with 860 stores worldwide.

As a cheap, chic brand popular with design-conscious Japanese youths, UNIQLO is now catering to trendsetters outside Japan. Its presence is felt as a flagship store opened in the world’s fashion capital, Paris. In April 2010, UNIQLO opened its first store in Russia and is planning on opening more stores around the world. UNIQLO has to compete with fast-moving contenders such as Esprit, Zara, Mango, and H&M. will all these brands be able to incite customers to buy fashion items more regularly?

The new era of frugality means that these brands must clearly spell out their value propositions so that customers are willing to part with their hard-earned money. H&M’s recession-friendly proposition of fast fashion at affordable prices has helped the brand to weather the economic crisis – so much so, that UNIQLO is planning an aggressive expansion into southeast Asia, including Malaysia.

On the other hand, Esprit professes to be an international youthful lifestyle brand offering smart, affordable luxury items. Each year, Esprit’s attributes are translated into 20,000 products in 12 collections to cater to confident and stylish high brand awareness worldwide.

Still, UNIQLO’s appeal remains strong. Besides offering discounts on top of already-affordable prices, it attracts a wide consumer base by providing basic, essential garments that are high on quality.

The billionaire owner of UNIQLO, Tadashi Yanai, is proud to claim that his brand offers exceptionally high quality at a relatively low price to his customers. His dream is for UNIQLO to become the biggest maker and retailer of fashion in the world.

He also believes that UNIQLO allows a customer to combine each unit of clothing to express his or her personality. Indeed, the immense popularity of UNIQLO, especially in Japan, is propelled not just by a frugality route in consumption, it is also fueled by a new generation of confident fashionistas who are happy to creatively mix and match and on non-luxury items as a form of self-expression. Most recently, UNIQLO collaborated with the fashion designer Jil Sander. Following a five-year absence from designing, she created a collection for UNIQLO, named “+J,” launched globally in 2009 and sold out in most countries in the first week. With this launch brought a whole new demographic of customer as they sought to buy Jil Sander-designed products at UNIQLO prices.

In a recessionary environment, many consumers are taking pride in being able to discern between buying to fulfill a need and a want to adopting a back-to-basics mentality. Others will constantly search for affordable ways to indulge in an attempt to lessen the stress of worrying about escalating living expenses. Companies and brands simulate purchases by making it clear to the consumers how their products are totally relevant to the purchasers’ needs and that their offerings are worthy of their every cent.

While the shopping mood is one of caution and lower-priced smart wear is the ongoing preference of enlightened trendy shoppers, the UNIQLO chain still enjoys brisk sales in Asia. It is putting top priority in the Asian market as it aims to boost global sales to 5 trillion yen ($54 billion) by 2020. In the latter half of 2010, UNIQLO announced plans to expand its UK-based ecommerce site. The e-commerce team would use their expertise to expand into Europe with the ultimate aim of a global e-commerce site. By 2020, UNIQLO plans to expand the number global stores to 4000.

Meanwhile, having entered China in 2002 and opened 64 stores by mid-2010, UNIQLO plans to open a further 1,000 stores across major cities in China it has also entered the Singapore market with great aplomb, needing crowd control measures to ease the flow of human traffic when the stores opened. As many as 7,000 die-hard fans thronged the newest outlet located at ION Orchard in downtown Singapore.

As customers fervently scour UNIQLO outlets for the latest fashion, they are rest assured that the brand offers quality merchandise that is good value for the money. In the new environment, when cheap and chic also means looking feeling good, UNIQLO has certainly found the best cut in the fabric.

Questions:

What are the micro and macro environmental factors that have contributed to the success of UNIQLO?

By focusing on low prices, has UNIQLO pursued the best strategy?   Explain.

Given the competitive market for fast fashion, what recommendations would you give to UNIQLO for its future development?