Fast Retailing, the world’s third largest apparel company behind the brand Uniqlo, threw down the gauntlet against world number two Hennes & Mauritz on Friday, opening its first store in H&M’s home market of Sweden, as it makes further inroads in Europe.
“This is a big step toward becoming a global brand,” Chairman and CEO Tadashi Yanai said. He usually spends his summer in Hawaii through the end of August but this year he has been in Stockholm to prepare for the store opening.
More than 1,000 people lined up at the store in Sweden’s capital. “I was impressed with the variety of items anyone can wear regardless of age,” said a 20-year old college student who bought a sweater.
The store highlights Fast Retailing’s clear focus on Europe of late. The company last fall opened its first store in Spain, the home of world number one clothier Inditex, known for its Zara brand.
Uniqlo generates only 4% of its global sales in Europe. And Fast Retailing has had a bitter experience in the region. It opened its first overseas store in the U.K. back in 2001 riding a boom for fleece clothing and quickly increased the U.K. store count to over 20, only to shutter 16 locations in 2003 due to continued losses.
“We were arrogant and took the challenge lightly,” Yanai said in retrospect.
Fast Retailing has since cultivated its European presence steadily, making its debut in Germany in 2014. But the store count in Europe was a mere 75 at the end of July.
Three quarters of the 2,057 Uniqlo stores are in Japan, China, Hong Kong and Taiwan. And 186 are in South Korea.
The company is expected to log sales of over 2 trillion yen ($17.9 billion) in the year ending August. Much of Uniqlo’s revenue is concentrated in Asia.
Given the similar body types and climates in the neighboring markets, it is more efficient for Fast Retailing to put in resources there than in Europe.
But establishing a solid presence in Europe, the fashion capital of the world, is a vital step for Fast Retailing to enter a new stage of growth.
Fast Retailing is confident of its offerings, including the quick dry and heat retention features. But the challenge is to have people in Europe exposed to Uniqlo clothes so they can pick up and feel the clothes in person.
Uniqlo found a powerful supporter in this endeavor: the tennis legend Roger Federer. The Swiss athlete has become a Uniqlo brand ambassador and sported the Uniqlo logo on his match wear in the Wimbledon tournament in July, switching from Nike.
Fast Retailing has also collaborated with Finnish design house Marimekko — known for its dot designs on women’s apparel — and former Hermes designer Christophe Lemaire to develop new products.
The business landscape presents an opportunity for Fast Retailing to make it big in Europe. Although Inditex has performed well, H&M’s sales have declined as consumers increasingly feel that the design and quality do not measure up to the price.
Uniqlo disrupted the apparel industry back in the 1990s by mass-producing clothes through contractors abroad and selling products in its own stores. The new approach pushed the company to surpass traditional apparel makers that sell their offerings at department stores.
But as it moves ahead in the digital age of today, there is no guarantee for success, amid competition not only from the big rivals but also from new players like direct-to-consumer brands — sold exclusively online and thus saving costs by skipping physical stores.
British brand boohoo is one example that has undergone rapid growth. In the year ended February, the operating company logged sales growth of 97% on the year to 579 million pounds ($673 million). And in Japan, a new business model is forming in the apparel industry as services that match amateurs with sewing professionals allow virtually anyone to open an apparel business. One-of-a-kind items made in small volumes may gain traction in this environment.
