UNIQLO: What’s behind the low-cost high-quality casual wears?
UNIQLO is a global casual wear SPA. How does UNIQLO create innovative high quality products, HEATTECH, AIRism, etc., despite low price?
UNIQLO
UNIQLO, headquartered in Japan, operates 1,639 casual wear stores in 16 countries, including China, US, and UK. The Japan-based company has grown rapidly in global, creating JPY 1.7 trillion (» USD 13.8 bil) of annual revenue and JPY 110 bil (» USD 905 mil) of annual net income as of August 2015. One of the keys to this success is from its excellence of business model.
Business and Operating Models
UNIQLO’s business is low cost, highquality SPA (Specialty store retailer
of Private label Apparel) model, operating all clothes making process from planning, production, distribution and retail sales.
Like other SPAs, UNIQLO produces low-price daily use wears for it
s customers. However, the unique point of UNIQLO is its high quality and innovative products with good customer service. I have used UNIQLO wears for about 15 years. Some shirts and inner wears I bought 10 years ago are still working. HEATTECH, the technology for innerwear which moisture-wicking fabric retains heat, keeps people warm in a rigorous winter. AIRism, the technology of quick-dry and light as air for inner wear, keeps customers living in humid area comfortable. I always comfortable to buy products by sales staffs’ kindly and polite service.
These unique business strengths, low-cost, high-quality and innovative products with good service, are based on its operation.
Source: Fast Retailing CO, LTD. company website
Procurement of Materials
UNIQLO procures its fablic from its material manufactures partners. UNIQLO can secure stable, high-quality materials at low cost by ordering large volume. In addition, UNIQLO continuously seeks the highest-quality and lowest-cost material in global and realizes it by directly negotiating with manufactures.
Building strategic partnership with Japanese high-quality and innovative manufactures supports UNIQLO’ uniqueness. For example, with Toray, Japanese innovative synthetic fiber manufacture, UNIQLO developed HEATTECH. UNIQLO procures specific spinning and dying denims from Kaihara corporation, Japanese denim fabric manufacture.
Outsourcing Production
Unlike other SPAs such as ZARA, UNIQLO outsources its production to partner factories in emerging countries for its low-cost production. UNIQLO doesn’t own factories and holds flexibility to change production partners because the best production location has changed as times goes. Currently, UNIQLO has relationships with factories in China, Vietnam, Bangladesh and Indonesia and Turkey.
Quality Control
Since UNIQLO outsources its production to partner factories, quality control is not easy and a critical factor. However, UNIQLO has overcome this problem by its unique “Takumi” system. In Japan, there are many skilled artisans, called Takumi who has great skills to create high-quality products. In order to keep high quality products, UNIQLO builds a Takumi team, consisting 400 textile skilled artisans and sends them to its partner factories all over the world. Moreover, production managers visit factories once a week to resolve quality problems.
Customer service
UNIQLO also focus on its customer service at retail stores. It emphasized Japanese style dedicated service, achieving same level of service as exclusive department stores. In the US UNIQLO stores, newly hired employees are sent to stores in Japan for six months and learns UNIQLO’s core values and service style, politeness and efficiency. Moreover, in 2014, UNIQLO created a position of customer satisfaction (CS) store manager who is responsible for maintaining service quality standards at the stores in assigned areas.
Feedback system
Facing to customers, sales staffs at retail stores and operators at customer centers are important channel to receive customer feedbacks. Latest sales trends and customer feedbacks, such as quality concerns, are immediately delivered to production departments, and then discussed among cross-functions among R&D, procurement, production, marketing, etc.
Increasing a pace of opening new stores in the US, UNIQLO’s customer awareness is also rapidly raising. Based on its strengths of operation, UNIQLO could be famous casual wear brands like GAP and Zara in the near future.
Great post. Looking towards the end of the post, you mention brands like Zara and GAP while the initial parts of the post refer to its unique “HEATTECH” technology. Going by just this technological “advantage” alone, would it not be possible to even compete with brands like North Face, Patagonia and Canada Goose? Especially in particularly cold Boston winters, it might be creating value via its business model for people who might want to invest in winter-wear which is functional and yet not too costly (read: students or students who have taken student loans to pay fees :))
Great Post!
I was really surprised to hear about them training the employees back in Japan. It reminded me of Benihana and how they used original decorations! Do you think the international consumers value this differentiated customer service or there are opportunities to reduce cost?
I was also wondering if you had more information on their design process. From what I’ve noticed they seem to be moving away from only having basic “gap like” designs into more fashionable upscale pieces (but using the same technology of fibers). This might translate into more expensive inventory, how do you think this could affect their operating model?
@ MRI, interesting what you say about competing with North Face, Patagonia etc.. I visited a Uniqlo yesterday with the hope of picking up ski gloves and ski socks, and they had nothing to offer. It seems like an obvious adjacent category for them to move into but I can’t see much evidence of it in their stores so far.