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UNIQLO Business Strategy

Last Updated: 2013.04.12
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Developing Products of Exceptionally High Quality

To ensure the development of products of exceptional quality, UNIQLO has refined its SPA* (Specialty store retailer of Private label Apparel) business model, allowing for control of the entire business process — from planning and design to material procurement and sales.

Production Factory in ChinaUNIQLO is continuously developing products of exceptional quality, in order to “create clothing with new and unique value and to satisfy customers worldwide.”

Product Development Based on Customer Feedback

Customer opinions and needs play a vital role in UNIQLO’s product development. The UNIQLO Customer Center receives approximately 70,000 comments from customers annually. Our HEATTECH products, for example, have been refined each year based on customer feedback — such as comments asking for softer fabric, a function to keep skin both warm and prevent dryness and an expanded range of colors. It is precisely this customer feedback that makes it possible for UNIQLO to produce the high-quality apparel that it does.

Material Procurement from Around the World

The UNIQLO Material Development Team is able to procure high-quality materials at low costs through direct negotiations with and bulk purchases from material manufacturers globally. For instance, take the denim fabric that is nearly synonymous with UNIQLO. This is woven, dyed and manufactured to meet UNIQLO’s specifications by the global denim manufacturer KAIHARA Co., Ltd.. In addition, it is efforts like this that have made it possible for UNIQLO to secure high-quality, long-staple cotton — which can only be harvested from three percent of the world’s cotton plants — for UNIQLO’s popular Extra-Fine Cotton plain T-Shirts.

Expert Technical Guidance at Factories Emphasizes Quality

In order to produce millions of products of standardized quality, it becomes important to implement quality control across factory production technology and management. UNIQLO has a team of technical specialists, known as the Takumi Team, boasting many years of experience in the Japanese textile industry. These specialists are sent directly to our partner factories in China to offer technical instruction and share their abundant experience. At the same time, the supervisors from the Production Department, based in the Shanghai office, make weekly visits to partner factories to check the quality and progress of production.

* SPA stands for “Specialty store retailer of Private label Apparel,” meaning that the company’s activities are fully integrated from manufacturing through sales, including material procurement, design, product development, production, distribution, inventory management and final sales.

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Becoming Japan's Top Brand by Expanding Urban Market Share

Emphasis on Urban Stores

UNIQLO Japan:Share of Sales by Prefecture

As UNIQLO's brand image and customer appeal have improved, we have become an increasingly attractive tenant for developers of department stores and commercial buildings. In 2009, we began opening more high-street and department store outlets. Our biggest store in Japan, with a sales floor of 3,300 square meters, opened in September 2011 within Ikebukuro's Tobu Department Store in Tokyo.

These prime urban stores generate strong sales and are popular with customers, so they should help broaden our customer base and further boost the value of the UNIQLO brand.

Traditionally, UNIQLO has been under-represented in Japan's urban centers, with relatively few stores in proportion to the population of major cities such as Tokyo, Osaka, Nagoya and Fukuoka. We are seeking to expand our urban market share by accelerating the opening of high-street stores, as well as outlets in department stores and shopping centers.

Market for Women's Wear Twice that of Men's

According to Japan's Ministry of Economy, Trade and Industry, sales at Japan's department stores, supermarkets and apparel retailers totaled 10.7 trillion yen in 2010. Extrapolating from that data, UNIQLO had a 5.5% share of the overall market, including a 8.9% share of men's wear and a 3.9% share of the women's wear market.
The Japanese UNIQLO Japan Sales / Apparel Market by Product Category

Large-scale Store Business Model

Changes under Larger Store LayoutUNIQLO became Japan's leading apparel retailer by developing a network of mainly regional roadside stores. From 2004, store openings expanded rapidly, hot on the heels of the growing commercial shopping center boom. From 2005, UNIQLO began developing large-scale stores in a drive to extend our total sales-floor space in Japan. The focus of current store development is shifting from standard stores with sales floors of around 800 square meters, to large-scale stores with sales floors of 1,600 square meters or more.


UNIQLO Japan: Sales Floor Space & Sales per Square MeterIn the apparel industry, sales and profitability per square meter in a given store typically decrease as sales floor area increases. However, UNIQLO has established a business model that achieves levels of sales and operating profit per square meter in a large-scale store that are comparable to those of a standard store.

UNIQLO ventured into the urban arena in 1998 with a store in Tokyo's trendy Harajuku district. In fiscal 2000 and 2001, a 1,900-yen fleece campaign set off a surge in UNIQLO popularity, producing the spike in sales per square meter that can be seen in the graph below. Since then, we have managed to maintain sales per square meter of approximately one million yen per year, an impressive achievement.

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UNIQLO International: Rapid Expansion

Becoming the Top Brand in Asia

UNIQLO's overseas business is forecast to achieve net sales of 216 billion yen and operating income of 16 billion yen at UNIQLO International for the fiscal year ending August 2013. Sales from overseas operations account for more than 20% of all UNIQLO sales, with both sales and profitability expanding steadily in Asia, which accounts for over 80% of overseas sales.

We have opened one store after another in China, Hong Kong and South Korea. In fact, we have expanded our store network at an impressive pace across the region, with our first stores opening in Singapore in April 2009, Taiwan in October 2010, Malaysia in November 2010, Thailand in September 2011, and Republic of the Philippines in June 2012. These new Asian markets have welcomed UNIQLO with open arms, and now is the perfect time to accelerate the pace of store openings. We plan to open 144 stores in Asia in fiscal 2013.

■UNIQLO International
Business Performance

UNIQLO International Business Performance

■UNIQLO Stores by Region
(Forecast as of 11 April, 2013)

FY to Aug. 2011 FY to Aug. 2012 FY to Aug. 2013
(Forecast)
End
Aug.
YoYEnd
Aug.
YoYEnd
Aug.
YoY
Japan 843 +35 845 +2 854 +9
China 80 +26 145 +65 225 +80
Hong Kong 15 +2 16 +1 18 +2
Taiwan 1 +1 17 +16 37 +20
South Korea 62 +14 80 +18 105 +25
Singapore 5 +2 7 +2 11 +4
Malaysia 2 +2 5 +3 8 +3
Thailand00 4 +4 9 +5
Philippines00 1 +1 6 +5
U.K. 11 -3 10 -1 10 +0
U.S. 1 0 3 +2 7 +4
France 1 -1 2 +1 3 +1
Russia 3 +2 2 -1 2 +0
UNIQLO
Total
1,024 +80 1,137 +113 1,295 +158

Building Our Brand through Flagships

Paris Opera Store(Oct. 2009)

Global flagship stores in major cities around the world will become an increasingly important part of our strategy to build an international store network. These stores are ideal showcases for promoting the UNIQLO brand concept of highquality basic clothing to the world.

Since opening our first in New York's Soho district in fall 2006, we have subsequently opened global flagship stores in London, Paris, Shanghai, Shinsaibashi in Osaka, Taipei, New York's Fifth Avenue and Seoul. Our ninth and latest is due to open in Ginza in March 2012.

global flagship stores

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HEATTECH

HEATTECH is the result of collaboration between UNIQLO and Toray Industries, Inc. HEATTECH is a unique highly functional line of innerwear that offers amazing comfort, which has won over a multitude of customers.

HEATTECH InnerwearWe developed HEATTECH in response to customers’ demands for functional innerwear to complement UNIQLO’s previous lineup of mostly cotton innerwear. Our debut HEATTECH product line was launched in the fall/winter 2004 as warm innerwear for men, combining the merits of heat-retention and anti-perspiration functions. The following year we began selling similar products for women. By combining our original HEATTECH fibers with a special milk protein, we were able to create a fabric that is smooth, soft and comfortable. The products proved so popular in the 2007 fall/winter season that production was nearly outpaced by demand.

UNIQLO relentlessly strives to create world-class products of the highest caliber and will not compromise on quality. One example of this commitment to quality is the strategic partnership formed with Toray in June 2006. Toray had the technology and manufacturing capability to meet UNIQLO’s high quality standards, and together we pushed the boundaries of technology to create the fiber LOC Ⅱ “CEOalpha®, the foundation for HEATTECH. This synthetic fiber is soft yet durable, and can be created in a wide range of vibrant colors. HEATTECH’s superior functionality lies in this highly advanced original fiber. To meet the high demand for HEATTECH, we have increased the production capacity of Toray’s Ishikawa Plant with an exclusive HEATTECH production line.

The hallmark qualities of HEATTECH are its thinness, lightness and softness, and the comfort achieved by the elasticity of the fabric is so outstanding that it has continued to both greatly impress and satisfy our customers. In the 2011 fall/winter season, 100 million HEATTECH items were sold worldwide, spanning the entire lineup from innerwear and socks to bodywarmers and jeans.

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