Business model

by wgyuvs8a on 2012-02-29 08:35:03

Business Model

Guided by the concept of "providing high-quality brand clothing at reasonable prices for the masses," Fast Retailing has adopted a new "SPA" (Manufacturing Retail) model. The SPA model refers to "directly connecting production with sales," or linking "customers" with "producers."

In 1985, when Fast Retailing was still just a distribution company, Chairman and CEO Tadashi Yanai was troubled by the inability to lower purchase prices. To understand the price trends in the apparel industry, he traveled to Hong Kong, Quanzhou, and Xiamen. Yanai accidentally witnessed the production process of polo shirts at a factory, which impressed him with its speed. He immediately began transactions with this factory. At that time, Yanai realized that casual wear is an industry without boundaries between manufacturing and sales, and it transcends national borders.

After repeated trials, Fast Retailing finally established the SPA business operation model, which reorganizes the entire process from planning, production, logistics to sales by directly listening to customer needs. "We take on 100% of the risks and control the entire process ourselves," eliminating unnecessary middlemen such as agents and intermediaries, thoroughly implementing low-cost operations. Stores also adopt a warehouse-style supermarket self-service format, but relentlessly pursue improving product quality and service.

To better manage every production step, Fast Retailing hired many senior technical consultants from the industry to provide technical guidance on every aspect from raw materials to garment production, ensuring product quality by enhancing the technical skills of the production facilities, known as the "Master Engineer" program. During the development stage of almost all garments, senior management personally tries them on and requires all developers to focus on creating the most exquisite single items.

They do not relax their standards for service levels either. To provide customers with a relaxed and pleasant shopping environment, they avoid aggressive sales tactics and instead focus on maintaining clean and comfortable store environments with abundant and easy-to-select merchandise displays. When customers need help, staff members promptly appear. With stores often spanning over a thousand square meters, spacious like large warehouses, product displays resemble those of a supermarket visited daily—all goods are neatly arranged on metal shelves taller than two people, with shopping baskets identical to those found in supermarkets placed nearby. Goods cover almost all clothing types needed for daily life, including children's socks, umbrellas, wallets, hats, gloves, and other small accessories, all easily accessible in clearly divided sections of the store. From the perspective of customer demographics, UNIQLO caters to various consumer groups, truly embodying the business goal of "casual wear surpassing age, gender, nationality, occupation, education level, and other boundaries." The combination of China's garment production with Fast Retailing’s unique marketing philosophy and operational model has created today’s casual wear giant.

[Editing Section] Company Origin

The Fast Retailing company, which operates the UNIQLO brand, was established in 1953 as a small clothing store selling suits. Later, it decided to develop through the latest products in clothing—casual wear. Current Chairman and CEO Tadashi Yanai graduated from Waseda University's economics department early in his career. He joined Fast Retailing in August 1972 and became the company's Chairman and CEO in September 1984. In 1982, while studying in the United States, Yanai was inspired by the warehouse-style sales methods seen on American university campuses. Upon returning to Japan, he proposed trying out warehouse-type self-service clothing sales in clothing stores and introduced the large-scale retail store style of clothing sales for the first time in Japan, achieving low-cost store operations through a unique product planning, development, and sales system.

In June 1984, the first UNIQLO warehouse-style clothing specialty store officially opened in Hiroshima, Japan. At the time, Japan's economy was in a slump, and UNIQLO's strategy was to offer fashionable casual wear at low prices to all consumers. To attract customers, UNIQLO initially provided free breakfasts of bread and milk to shoppers, successfully drawing large crowds. Every morning, many people gathered in front of UNIQLO stores, queuing up to collect breakfast before entering the store to shop.

[Editing Section] Company Development

In 1991, Fast Retailing started its chain business and proposed a development plan to establish 1,000 branches, aiming to chain UNIQLO stores. American Limited and GAP stores with local characteristics became models for UNIQLO's expansion; In 1994, UNIQLO listed on the Hiroshima Stock Exchange and subsequently listed on the Tokyo Stock Exchange; In 1998, the Harajuku UNIQLO store opened, and the wool sweater promotion was successful, marking the beginning of the "direct-to-consumer casual wear" era. "Direct-to-consumer casual wear" means comprehensively revising the business processes of planning, production, circulation, and sales, striving to establish the most suitable business model for consumers, with the key being mass production according to consumer demand.

Thus, relying on its unique business philosophy and model, UNIQLO continued to grow. Today, Fast Retailing has become Japan's top-ranked retailer and one of the world's leading clothing retailers, with nearly 600 stores in Japan alone. It achieved the miracle of doubling its annual revenue for three consecutive years: 1,110 billion yen in 1999, 2,289 billion yen in 2000, and 4,185 billion yen in 2001. Therefore, it ranked first in Japan's "Top Prosperous Enterprises of the 21st Century," becoming Japan's highest market share casual wear brand. In September 2001, Fast Retailing opened its first overseas store in London, UK. Now, UNIQLO has 15 specialty stores in the UK and was rated as the "Most Influential Excellent Enterprise in the UK Market in 2002" by the representative European industry magazine "RetailWeek" within a year of entering Europe.