Uniqlo, the flagship brand of Fast Retailing, is defying the struggles faced by other apparel retailers in the United States and is experiencing success in the North American market. While companies like Gap and Kohl’s are grappling with declining profit margins and hesitant customers, Uniqlo is poised to achieve its first annual profit in North America after 17 years of perseverance. This accomplishment can be attributed to the company’s revamped logistics and pricing strategy, which was implemented during the pandemic.

One of the key factors that contributed to Uniqlo’s success is its shift towards basic clothing items such as loungewear and the implementation of a lean inventory management system. Additionally, Uniqlo has established an automated warehousing system that synchronizes the inventory at its physical stores and e-commerce platforms. By refraining from offering significant discounts, Uniqlo has set itself apart from its competitors and aims to familiarize customers with the concept of flat pricing.

To overcome the logistical challenges posed by the pandemic, Uniqlo has increased its utilization of air freight, despite its higher costs, in order to reduce lead times for popular items. This strategy has proven successful for other brands like Adidas and Lululemon Athletica, who have also turned to air transportation to bypass delays at seaports.

While Uniqlo’s profits from its North American stores may still be modest compared to its overall operating profit, the company views this market as crucial for its future growth. With a declining customer base in Japan and concerns about over-reliance on China, Uniqlo sees progress in North America as an indication of its potential to become the world’s leading apparel retailer, surpassing Spain’s Inditex.

Daisuke Tsukagoshi, Uniqlo’s North America chief, has stated that the company used the pandemic as an opportunity to implement significant changes in the region. Uniqlo has redesigned its stores to better cater to American preferences; however, the decision to discontinue offering discounts may have misjudged the market. While low prices are appealing to U.S. consumers, occasional bargains may be necessary to attract bargain hunters.

Uniqlo’s expansion plans in North America involve opening 30 new stores annually until reaching a total of 200 stores within the next five years. To achieve this, the company aims to increase its operating profit margins from the current rate of over 5% to 20% by reducing logistics and marketing costs and exploring more affordable rental options outside major cities.

Nevertheless, some analysts express skepticism regarding Uniqlo’s ambitious goals, noting that the company has not achieved 20% profit margins even in its home market of Japan. The company’s dependence on manufacturing in China also poses a risk, as concerns persist about human rights violations in the Xinjiang region. While Uniqlo has not faced consumer boycotts thus far, it has not disavowed the use of Xinjiang cotton, unlike some of its competitors. The company faces scrutiny and investigation by French prosecutors regarding allegations of concealing “crimes against humanity” in Xinjiang.

Uniqlo vehemently denies these allegations and emphasizes its zero-tolerance policy towards human rights violations among its suppliers and vendors. China, for its part, denies all accusations of abuse in the Xinjiang region. Despite these challenges, Uniqlo remains resolute in its determination to establish itself as a leading force in the North American apparel retail market.

Useful links:
1. Fast Retailing’s Uniqlo Posts First Annual Profit in North America
2. Uniqlo Denies Concealing “Crimes Against Humanity” in Xinjiang