CASE STUDY (4 questions – 20 marks total)
Read the article below. In no more than 3 single-spaced pages or 1200 words total, answer the following questions:
- A) Write a brief analysis of the fast fashion industry. (6 marks)
- B) Using the information from the case and also the risk discussion during the course, identify 3 risks facing Uniqlo as it looks to continue its global growth and expansion. How could Uniqlo mitigate each of these risks? (6 marks)
- C) Analyze the marketing mix, as pursued by Uniqlo. In your opinion, which element in the marketing mix is the most important for the company’s international success? (5 marks)
- D) Based on the information in the case, would you advise Uniqlo’s executives to continue operations in the United States? Why or why not? (3 marks)
Uniqlo, a Japanese “fast fashion” retail chain, is a success story in Japan (its home market), China, South Korea, Taiwan and even Europe (although it is closing some stores in Britain).
In the United States, however, it has been struggling. Currently, Uniqlo has more than 40 stores there and has been operating in the US for more than a decade. Yet, it is still relatively little known.
Its newest location recently opened in Chicago on the Magnificent Mile (the main shopping area in Chicago), with much fanfare. Uniqlo branded a subway train with Japanese lanterns and Japanese pop music, created a media spectacle and hired local ‘tastemakers’ (chefs, musicians, cheerleaders and others) to model their clothing on the website. Despite this marketing effort, sales have been less stellar than hoped for.
Uniqlo’s US presence is smaller than that of fast fashion rivals, such as Zara, Mango and H&M. It is also smaller than casual-clothing chains like the Gap, Forever 21 and American Eagle. Finally, it is also smaller than “off-price” sellers of designer labels, such as Ross and T.J. Maxx.
The US retail market is notoriously competitive, whether firms are domestic or foreign. American Eagle (domestic) declared bankruptcy in October 2015. The Gap (domestic) is closing a quarter of its 675 US stores. J.Crew (a domestic brand that Uniqlo’s parent company considered buying in 2014) is reporting slumping sales, as is Abercrombie & Fitch (also domestic). Mango (foreign) had entered into a partnership with J.C. Penney, but is closing all of these outlets. United Colours of Benetton (foreign) closed its last US store in September 2015, however Primark (an Irish retailer) opened its first US store in that same month.
Uniqlo’s US performance is starting to affect its bottom line. The company reported losses in the fourth-quarter of 2015 largely due to its US stores. As a result, the company is lowering its expansion plans for the US. Whereas Uniqlo once intended to open 200 stores by 2020, the company is now only looking at opening 5 stores in 2016 (compared to 17 in 2015). Uniqlo’s weakest US stores are in suburban shopping malls, as shoppers there are not familiar with the brand. So, the company is looking at closing these locations and instead focusing its resources on larger city-centre stores (like the one in Chicago) and on online sales. Only 15% of Uniqlo’s US sales are done through the internet.
Investors are questioning whether Uniqlo should stay in the US at all. But some say that it is doing so well in Asia that it can afford to bear some losses in the US until the investment pays off. Others suggest the company cannot become the world’s top fashion brand (as it claims is its goal) if it leaves the world’s largest retail clothing market. Others suggest Uniqlo’s stores in the US may not need to make much money to pay benefits for Uniqlo’s Asian customers. Uniqlo’s main US stores are in prominent locations in the main US cities visited by Asian tourists. These prime retail locations help to reinforce Uniqlo’s image as a global fashion success with these customers, where most of its growth opportunities likely still lie.