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Retail Buying and Merchandising

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EMBA in Retailing

Module 2: Retail Buying and Merchandising

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Assignment 2
Uniqlo is a Japanese retail apparel chain owned and operated by Fast Retailing Co Ltd, a public listed company in Tokyo. A highly successful retailer in Japan, it has been expanding internationally. Although Uniqlo is now a retail player in Malaysia, not many people knows about its background and its merchandise strategy and practices. Through the use of research and observation, write a report of about 2000 words to your management, justifying and explaining why Uniqlo could be a formidable competitor in the Malaysian retail market.

There is an intense competition in the market place of clothing and apparel in Malaysia. Through globalisation most of the international brands have established their business and penetrated their brands and products into the Malaysian market. Amongst them are MANGO, PADINI, ESPRIT, TOPSHOP, TOPMAN, SUB, G2000, FOREVER 21, GAP, GIORDANO and ZARA. With this Era of infinite competition, Retailers face a fast expanding, multi pattern competitive set. A company may see it losing market share but is unaware of where it’s going.

Consumer spending is scattered thanks to new ways of making purchases. Manufactures are becoming retailers. New rivals, often in the form of companies too small to hit the radar, continue to enter & fragment the market. In such a climate, every customer interaction becomes crucial. (SRTEPC, 2009 & Interbrand, 2012)

Now that consumer decides how, when and where to interact, the only location for retail is where the customers are. Retail scale has traditionally been identified by number of stores. Greater scale allows more efficiency which yields greater profit. Today, however, commerce is available any way the consumer wants it, online or offline, reducing the levels of business predictability. (Interbrand, 2012)

For retailers, a fluid and uncertain market is the new normal.
Responsiveness now trumps efficiency. When a brand is responsive to its shopper’s behaviours and expectations, it adds value to its good and services. Added value allows a brand to earn more. In a responsive world, scale can be redefined as reach and responsiveness through store counts combined with online impressions, mobile transactions, and real-life social interactions. (Interbrand, 2012 & Potts, D. 2013)

A fine example of global scale today is Japan’s Uniqlo brand. Uniqlo is a leading apparel brand in Japan and is slowly dominating the apparel market as one of the top emerging brands globally. Uniqlo is owned by Fast Retailing they began their business as a men’s store called Ogori Shoji in Japan in 1949. It than extended its assortment to unisex apparel and called its stores Unique Clothing Warehouse, now known as Uniqlo. Uniqlo was well known for its low cost casual clothing line. In 1991 it changed its company’s name to Fast Retailing Co. Ltd., and by 2006, Uniqlo had expended its business globally with stores in the United States, the United Kingdom, Hong Kong and South Korea. (Interbrand, 2012 & Uniqlo, 2013)

Uniqlo has become the envy of apparel retailers worldwide, being one of the five biggest specialty fashion retailers in the world and also Asia’s biggest clothing retailer. According to The Wall Street Journal; the management team of Uniqlo’s has an ambitious goal to make Uniqlo the leader in apparel retail worldwide. According to Forbes; Uniqlo was the fourth-largest retailer behind Gap, H&M and Zara-owner Inditex, during the late 2012. (Durisin M., 2013, Negishi et. al. 2013, & Business Insider, 2013)

Uniqlo strives to develop clothes of exceptional quality that are fashionable as well as value for money. With its strong emphasis on attractive pricing without sacrificing its renowned high quality it has successfully expanded within Asia. With only 3 years into the Malaysian market, Uniqlo has already gained the consumers’ confidence on its quality and competitive pricing.

To date Uniqlo has a total of 10 stores in Malaysia and is expected to mature into all major cities in Malaysia. Uniqlo could easily be “a formidable competitor in the Malaysian apparel retail industry with its distinguishing Business Model, SPA (Speciality store retailer of private label apparel) system, that helps them understand their customers’ needs and want. Uniqlo strives to be fashionable as well as cost conscious and a leader in quality casual apparel. (Interbrand, 2012 & Uniqlo, 2013)

Although lower prices are resulted in competition, there are still concerns and risks of facing low quality production, bad shopping experience and poor customer services. Uniqlo has moved one step ahead to ensure that they focus on all the areas of concern by providing shoppers with the best quality product, best shopping experience, good customer service and value for money. In the United States Candace Corlett, president of consultancy WSL Strategic Retail said “Uniqlo is a formidable competitor; They are taking share away from GAP and everyone else who sells thin down coats and T-shirts. With such success in US, Southeast Asia is closer to home and easier to please”. (Cheng, A., 2012 & Uniqlo, 2013)

Uniqlo’s SPA business model is an abbreviated management term of “speciality store retailer of private label apparel.” Uniqlo was the first company in Japan to establish an SPA model encompassing all stages of the business; from design and production to its final sale. SPA may be defined to improve the management process which covers R&D, logistics, inventory and sales, based on Supply Chain Management. By continuously refining its SPA model, Uniqlo has successfully distinguishes itself from other companies by developing unique products. They can quickly make changes to the production to reproduce the latest sales trends and to minimize store-operation costs such as storage cost and in-store operation cost. This will in return provide high-quality clothing at reasonable prices. (Iida, T., 2005 & Fast Retailing, 2013)

Uniqlo Business Model: SPA (Specialty store retailer of Private label Apparel) (Uniqlo, 2013)

The diagram above explains the flow of the production cycle and how each area is looked into detail to ensure that the end result is as per the requirement or taste of the end users. Uniqlo controls every stage of production from the fabric used to the strict production control program at the factory and finally to the display at the store. Each step is looked into by a team of specialist and they also focus on making sure the product is produced with the best quality possible and at the lowest price. Uniqlo has an added advantage allowing them to negotiate directly with the manufacturers and securing bulk orders at low cost. (Uniqlo, 2013 & Fast Retailing, 2013)

Uniqlo strong links between sales and production via close collaboration and information exchanges with partner plants and has distinguished the formulation and implementation of sales and production plans, all of which helps to keep the price of materials down (Fast Retailing, 2010). The SPA business model has brought Uniqlo one step ahead of its competitors in Malaysia making it harder for them to be as responsive to its shopper’s behaviours and expectations which adds value to its good and services.

Uniqlo is able to collaborate with raw material companies, giving it the uniqueness and added advantage compared to the other retailers as they have mastered the process of developing and improving new materials, such as its thermal, heat generating material called Heat Tech through its collaboration with major materials companies such as Toray Industries. Through the collaboration with other major material makers, Uniqlo has come up with additional new materials, such as Bra Top and Neoleather. These strategic partnerships have led to significant improvements in offerings within new business areas, such as women’s clothing and inner-wear products. (Uniqlo, 2010 & Interbrand, 2012 & Uniqlo, 2013)

Working together with about 70 production partners they regularly check all their production factories to ensure products are manufactured under appropriate working conditions in factories that do not employ children or engage in forced labor, and constantly strive to improve working conditions and disclose information in a transparent manner. They provide technical guidance with these partner facilities with textile experts known as “takumi” who provide on-site technical guidance and assist with process management and human-resource development. (Uniqlo, 2010 & Interbrand, 2012 & Uniqlo, 2013)

Uniqlo’s ventured into Malaysian 18 months after its launch in Singapore, in line with their effort to globalize and accelerate its expansion into the South East Asian market. According to Onoguchi Satoshi, Managing Director of Uniqlo Singapore and Malaysia, “We entered Malaysia ahead of schedule, just one year after opening the store in Singapore, the initial plan was three”. Uniqlo’s success in Japan and worldwide will strongly reflect in Malaysia, by making sure it has showcase Uniqlo’s strengths, which is providing high-quality clothing at affordable prices with a focus on individual style. (Homefinder, 2010 & Uniqlo, 2013) Globally, each new store opened by Uniqlo has enjoyed strong sales from the outset and every operation quickly became profitable. Uniqlo intends to increase international sales from 10% of total sales to over 50% in five years, and increase of its store worldwide to 4,000 by 2020 (Walker, 2011; Euromonitor, 2011).

Uniqlo has not only manage to gain customers confidence on their products but are starting to gain apparel market share from all its competitors, including the departmental stores, general merchandise stores, apparel store in shopping centres, and other specialty stores (Interbrand, 2012 & Uniqlo, 2013). This has resulted from consumers making comparisons in terms of price and quality. Over the past two years in particular, there has been a major development on the product front and regardless of sex, age, or income level, almost all consumers have become increasingly value conscious.

Therefore, the demand of Uniqlo’s products in terms of value for money has become increasingly apparent. Once consumers have become used to the prices and quality offered by Uniqlo products, it will be difficult for them to return to other stores. In addition, Uniqlo would operate at a similar margin to its base stores in Japan; given the company’s competitiveness and strong positioning, they believe that growth potential remains. Uniqlo offers even more attractive prices without sacrificing its renowned high quality. Uniqlo designs, manufactures, markets and sells casual wear that can be worn by anyone, any day. Uniqlo’s tag line explains its uniqueness compared to its competitors “Rather than dictate a look, Uniqlo provides people everywhere with the piece they need to create their own style. And style comes from within, which is why the Uniqlo’s logo is nearly invisible, hidden inside the garment”. (Van, A. et. al., 2010; Uniqlo, 2013; Fast Retailing; 2013)

In Malaysia there are many apparel companies that sell items similar to Uniqlo however the uniqueness in Uniqlo is that its products are made with tough Japanese standards which reflect on its quality. From t-shirts and sweaters to denim, outerwear and trend items, all of Uniqlo’s clothes come in a variety of colours and styles. By providing customers with true excellence and innovations in casual wear, from the design and functionality to the fit and colour choices; Uniqlo is sure to be a formidable competitor in the Malaysian apparel market. Consumers in Malaysia have grown more sensitive about their choices. A growing, influential middle class population with access to better information sources and education is making more informed decisions. Foreign brands are still preferred as they offer consistent and convenient brand experience. Uniqlo can take advantage of this market climate (Interbrand, 2012 & Uniqlo, 2013).

Uniqlo is promoting a variety of strategies aimed at women, such as the rollout of fashionable products for young women at Girls Collection and other fashion shows, reinforcement of Heat Tech inner-wear, denim, knit, and other core products, and expansion of skirts, blouses, jackets, and other products with low market shares. Uniqlo is also active in Malaysia by participating in local fashion show events such as charity fashion show “Vogue for Fashion” held at Queensbay Mall, Penang in April, 2013 and promoting its apparels through varies in-house events such as “UNIQLOOKS Malaysia Competition” held in June, 2012. Uniqlo has the potential for expansion in Malaysian’s women’s apparel market, as it currently holds low market share and has the potential to launch stores and expand in Asia. In addition, Uniqlo has two R&D design studios, one in Tokyo and the other in New York, enabling it to stay abreast of the latest trends in fashion from around the world. (Interbrand, 2012; Uniqlo, 2013; Fast Retailing, 2013 & Facebook, 2013)

Mr Yanai founder of Uniqlo told Forbes, he has set his team to not chase after trends but instate focus on basics. Uniqlo has benefited from using
basics as core product. These products are such as Oxfords and Polos. Blouses, slim-fitting bottoms and lightweight outerwear are also Uniqlo’s basic core products too. During any hard financial times or during recession, it is Uniqlo who would have benefited the most since that’s when consumers look for affordable clothing. They capitalize on the recession when the world drop in spending power. (Uniqlo, 2013; Fast Retailing, 2013 & Cheng A., 2012) Uniqlo also stands out among other retailers when it comes to recruitment. Uniqlo has standardized their pay system globally, whereby their managers and its teams worldwide would receive the same wage as per the Japanese market rate.

Yanai believes the team deserves to be paid equally for the equal amount of work. In this context Uniqlo is sure to recruit the best quality employees who would be dedicated and would strive to do their best (Durisin, M., 2013; Uniqlo, 2012; Uniqlo, 2013) We can conclude that Uniqlo is a unique clothing company that was restructured from a successful Japanese retailing company into a leading retail clothing company in Malaysia.

Their focus on mass-production of basic garments has helped them gain a competitive advantage over other high fashion companies like H&M and Zara. Uniqlo also focuses heavily on research and development to ensure that they are maintaining current trends and fashion worldwide. The strong response to all the local stores has forced Uniqlo’s rapid expansion and quick growth in Malaysia. Uniqlo hopes to be able to cover a wider network of cities to enable all Malaysians to enjoy Uniqlo experience. Uniqlo has significantly improved its competitiveness in Malaysia and downside it’s risk of sustained sales and earnings weakness.

Uniqlo is “a formidable competitor” in the Malaysian market as they are taking away the market share from GAP and everyone else. Uniqlo will need to review the existing clothing & apparel industry and explore the opportunities in order to come out with best advertising and branding strategies. Brand awareness is needed to compete against the other direct competitors that have arrived before the entry of Uniqlo. With Uniqlo’s wide range of products, low cost of production, apparels with Asian cutting and measurements, consistent productivity and creativity for every season (fashionable and essentials); most locals fashion enthusiast welcome the brand and with its growing recognition globally, Uniqlo is sure to be a popular brand in Malaysia.

Reference:
1. Andria Cheng : MarketWatch (Sept, 2012), Japan’s Uniqlo looks to conquer N.J., then U.S. Suburban store is retailer’s fourth in U.S.; on tap: 196 more (http://www.marketwatch.com/story/japans-uniqlo-expands-in-us-suburbs-2012-09-25) 2. Ashley Van der Waag, Katheryn Lorio, Lauren Macintosh (Feb, 2010), Credit Suisee Reseach Institute, Great Brands of Tomorrow : Thought Leadership from Credit Suisse Reseach and the worlds foremost experts. (http://www.scribd.com/doc/28151658/25-February-2010-Global-Equity-Research-Multi) 3. Business Insider : Postmedia Network Inc (April, 2013), How Japanese retailer Uniqlo is taking over the world, (http://business.financialpost.com/2013/04/26/how-japanese-retailer-uniqlo-is-taking-over-the-world/) 4. David Potts (March, 2013), 6th Street Inc., eCommerce Operations , Achieving the flexibility demanded by the modern-day retail sector, (http://www.saleswarp.com/ecommerce-operations/achieving-the-flexibility-demanded-by-the-modern-day-retail-sector/) 5. Euromonitor International (Feb, 2011), Has the bubble burst for Japan’s Uniqlo? : Clothing and Footwear, Retailing. (http://blog.euromonitor.com/2011/02/has-the-bubble-burst-for-japans-uniqlo.html) 6. Facebook (June 2013), Uniqlo Malaysia : Facebook Account, Facebook Updates (Wall). (https://www.facebook.com/uniqlo.my)

7. Fast Retailing (Aug, 2010), Fast Retailing – Annual Report 2010. (http://www.fastretailing.com/eng/ir/library/pdf/ar2010_en.pdf) 8. Fast Retailing (2013), Fast Retailing – CSR Report 2013, Making the World a Better Place. (http://www.fastretailing.com/jp/csr/report/pdf/csr2013_e.pdf) 9. Homefinder (2010), Uniqlo Clothing, Fans and Fashionistas rejoice. (http://homefinder.com.my/living/unique-qlothing/)

10. Interbrand (2013), Creating and managing brand value, Best Retail Brands 2012, (http://www.interbrand.com/en/BestRetailBrands/2012-Best-Retail-Brands.aspx) 11. Mayumi Negishi, Diana Mattioli & Ryan Dezember (April, 2013) Uniqlo Sets Goal: No. 1, Fast Retailing Co.’s Growth Ambitions Indicate Need for Deals:

Cite this Retail Buying and Merchandising

Retail Buying and Merchandising. (2016, May 12). Retrieved from https://graduateway.com/retail-buying-and-merchandising/

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