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On a recent spring morning, the streets of downtown New York City were chaotic as usual. Inside Uniqlo's Soho store, though, a team of retail associates worked with impressive order. With military precision, they folded, stacked and color coordinated in preparation for the doors to open to customers at 10am.
Overseeing the systematic preparations was Cassie Locsin, one of the store's three managers, who's been with Uniqlo for three and half years. Locsin's team starts early as 5am, when a giant shipment of Uniqlo clothing arrives each morning for shelf replenishment. Locsin spent six months training for her Uniqlo position in Japan—a rigorous program all Uniqlo employees go through (now in their own countries) —and she noted that employee management is a crucial element of Uniqlo's DNA.
"Uniqlo has a business ownership mindset; we want employees to be able to manage all aspects of a shop floor, so that they can essentially be their own shop owner," she explained. "So folding, cleaning, replenishment, even down to alterations, cash out, fitting rooms, they all learn [these tasks] at training. Employees get a full retail education, they even learn to read numbers."
Behind Locsin, several dozen employees lined up on the store's stairs for their morning routine: evaluating the store's goals of the day and reciting Uniqlo retail slogans, "the Six Standard phrases," in a uniformly boisterous tone.
"We cheer together so that we start our day off right, and all on the same page. We try to hype up the associates to all have the same energy and to treat every day like a new store opening. It gives you motivation," Locsin explained over enthusiastic cheering.
The interior of a Uniqlo store in New York. Photo by Driely S.
The way Uniqlo's operation is run—its rigorous employee training, the impeccable store management, the positive work culture—is just one of the reasons why the Japanese retailer has risen to such success over the last few years. In almost a decade since Uniqlo first arrived in the US, the company has expanded from one successful Manhattan store in 2007 to 17 locations across the country, with plans to open several more this coming year.
Uniqlo now has its heart set on dominating the US market, according to Uniqlo CEO Larry Meyer.
"From the salinity, the demographics of it, the US is an important market. The Japanese market is more homogenous, but the US is much more diverse—you basically have all the world inside the borders of the US. I'd like to be the retailer of choice for consumers," Meyer told Racked.
The company is now taking specific strides towards obtaining just that sort of market domination in the United States. Analysts believe that Uniqlo very well may become the country's top retailer.
Focusing on location
The retailer, owned by Japanese billionaire Tadashi Yanai, has come a long way since it first hit America. Uniqlo has a growing global network of 1,300 stores in 14 different countries, but it first arrived in America in 2005 inside three malls in New Jersey. The locations were undoubtedly a poor choice for the retailer's first appearance and Uniqlo closed these stores two years later.
The company decided to reevaluate its location choices during the New Jersey gaffe and retrenched to Soho to gain consumer recognition. Uniqlo opened its NYC flagship store in 2006, and sales have tripled ever since: in 2006, Uniqlo pulled in $2.9 billion in US sales. Seven years later, in 2013, that number jumped to $7.5 billion, according to data from FactSet.
A Uniqlo interior. Photo via Getty Images.
"We had work to do. We decided not to place the operation in shopping malls first, but to find the best location for the best store. That was a 180-degree change in our strategy. After that, with big flagship stores, our three key stores, they had a good location and from there we could expand," Hiroshi Nagai, Uniqlo's chief marketing officer, admitted to Racked.
Nagai said that the company is focused on obtaining a stronger customer following within cities before they move out to more rural areas. Whereas retailers like Gap and Old Navy can be found in any town around America, Uniqlo believes that if the city folk come first, the rest will follow. Running with this strategy, Uniqlo will open stores in Philadelphia, Boston, and Los Angeles later this year.
"Once we meet the goal in the new markets, to establish bigger flagships in bigger cities, that will help consumers find the brand and we can move in," Nagai added.
The power of brick and mortar
Stepping into a Uniqlo store is really unlike any other physical shopping experience and the company works hard to set its stores apart. Aside from armies of floor employees, all trained to utilize the exact same key phrases in customer interactions, and the stacks of floor-to-ceiling, color-coordinated merchandise, Uniqlo has embraced various forms of in-store technology as a tool for shoppers.
Earlier this winter, deep inside Uniqlo's Fifth Avenue outpost, a crowd of Polish tourists crowded around a television-paneled wall, watching a video tutorial on how a Uniqlo winter jacket could fold into a simple pouch. The crowd broke into applause afterwards, each grabbing a jacket pouch and heading straight for the cash register to watch more videos as they waited on line.
Photo by Driely S.
"It feels like the North Pole of colorful khakis," said David, a tourist."It's fun and organized. I like the screens."
"It's not just about clothing, [we're] about technology. We're heavy on electronic monitors around the store that convey the philosophy of the company. We spent a lot of time and money to explain to customers what the products attribute to," Meyer said. "We have some products that need explanation and we create media that explains how our heat-tech works and how the airism works to keep you cool and dry. We feel the customer deserves to understand it like this, and it's effective to explain products."
Building brand awareness
Nagai said another mistake Uniqlo had made when it came to America in 2005 was not building a strong enough brand.
"Brand awareness was a problem. We needed to create the brand first before opening a store, which is a strategy we are working on now," Nagai said.
Through marketing and advertising, Uniqlo eventually got its message across: high quality, fashionable pieces in lots of colors at reasonable prices.
Image via Getty.
The brand also has bet heavily on collaborations with big names. Rather than paying attention to runway trends like its retail competition, Uniqlo has partnered with eclectic talents like pop star Pharrell Williams, the Museum of Modern Art, French fashion designer Inès De La Fressange, Irish designer Orla Kiely, Britian's Lulu Guiness, and Undercover's Jun Takahashi.
"The brand is a world away from when it started," retail analyst Hitha Prabhakar noted. "Instead of plopping themselves down in malls again, doing collaborations helped them out in this country. It helps with sales and establishes the idea that we'd go to Uniqlo for cool things that are also staples."
Perfecting the product
While fast fashion chains are Uniqlo's major competitors, Meyer refused to place his company in that category, explaining that it doesn't only "do basics" or "chase trends" but instead offers a unique type of merchandise.
"Our brand is about classic fashion with great functionality. Do we do crop tops for 16-year-old girls? No. We do basics [that are] in fashion, and we're made for anyone who enjoys wearing comfortable clothing, wants great quality but doesn't want to spend a lot of money," Meyer said. "Zara is about European fashion, H&M is about getting the latest looks out there fast. We're unique: no one develops ultra-light down, and heat-tech apparel, and airism."
A common complaint Uniqlo has dealt with recently is the issue of fit. While the Japanese company says its methods of clothing creation are different for the Japanese market than the American and European market, many consumers find the clothing just doesn't fit the US population properly.
"It's always hanging off. When I look at it on a hanger, it looks like a box. It's like they don't test out a real person fit," Sarah Penney, a graduate student in Chelsea, told Racked outside Uniqlo's Soho store. "Their larges are definitely not for a larger person," her friend, Amy Tang, piped in. "I'm usually an array of sizes in different stores, but nothing fits me here."
"This country has a different type of customer, and they have to make adjustments to that consumer," said Matthew Berglass, president of retail executive recruiting firm Berglass+Associates. "The sizing in this country and the sizing in Asia don't necessarily correspond. You have to be careful when you allocate the product and Uniqlo needs a bigger product. The body styles in the US are certainly bigger than Asia and the Europe. Uniqlo's specs are [off]."
"Uniqlo still needs to understand the US market, how they shop, what they fit like, because these are [common] mistakes retailers make when going to the other side," Berglass added. "Gap had this problem with its European expansion, Abercrombie faced similar challenges, and J.Crew is now attacking it cautiously."
Nagai said the company is aware of the fit problem, and as Uniqlo continues its US expansion, the team is exploring new techniques to solve this problem.
"We're always listening to what the customer says and feels. When we are selling the same product in Asia, US, and Europe, we try to create a universal product but the fit has been an issue and we are aware of it," Nagai said. "The fit is the most difficult thing and it needs to improve. We know the bodies are different here than in Japan. It's something we need to consider more deeply and figure [out what] the specs are. Asia's specs are different than the United States, and that is different from Europe. We have to figure the specs out."
Uniqlo's parent company, Fast Retailing, also owns several luxury retailers including Helmut Lang, J Brand, and Theory. Being in the same family as these brands, according to Prabhakar, lends Uniqlo fashion cred.
Prabhakar predicts the company will move towards more acquisitions over the next two years. Her comments followed the collapse of talks between Fast Retailing and J.Crew, but Prabhakar said to expect something big soon.
"Uniqlo runs on a very different business model. They aren't interested in having high and lows, like Gap, they are looking for a wider reach," Prabhakar said. "For Uniqlo to achieve worldwide domination they won't build from the inside out, they will acquire in order to expand the company quickly. Instead of spending resources in-house, they'll most definitely be looking to acquire luxury brands to dominate."