Research Of UNIQLO Launching In Vietnam
UNIQLO – is a Japanese brand which was owned by the Fast Retailing Co., Ltd. and had gained an international fame in the last decade. Since 1949, the company worked as an Ogori Shōji men's clothing store in Ube. In 1984, the first “Unique Clothing Warehouse” store was opened in Hiroshima. In the future, the name was reduced to "uni-clo". In 1988, when registering a company in Hong Kong, when writing the name, the letter C was mistakenly replaced by Q. After that, the names of internal Japanese magazines were changed, and the company was renamed from Ogori Shōji to Fast Retailing. The company’s founder is Tadashi Yanai. The next store opening in 1998 was in Tokyo.
In the area of developing new models, the R&D departments (research and development) in Tokyo and New York have created a coherent global R&D system. Quickly grasping new fashion trends around the world, it reflects them in product design and design. The centers, which are based in Tokyo and New York, are engaged in collecting the latest information on different cities, on shops and partners of the companies in the group, as well as on world fashion trends, needs, lifestyle and materials. Based on the information received, the Center develops a concept for each season, and also creates and modifies goods that meet the needs of the market in each country. This new product development system creates new values for UNIQLO. In addition, after opening a store in the UK in 2001, stores appeared in China, Hong Kong, South Korea, USA and France. In 2006, the flagship store opened in the Soho district of New York, and in 2007 - on Oxford Street in London. UNIQLO continues to evolve into a global brand. However, in foreign markets, the original UNIQLO business model did not work. It is believed that the main problem was the concept of the company, aimed at opening small shops in the suburbs and shopping centers. In Japan, this worked well, given that company has been arriving on the market for a long time and has gradually established itself, but in the USA and UK it was decided to close most of the stores for five years.
The brand offers a good-quality casual clothes for everyday wearing with the low-cost apparel. The company shares the world their personal developments of radically new materials of clothes using the best technologies, world’s best fabrics and produces innovative clothes that are universal in design and comfort. After the recession period in Japanese economy in the late period of 1990s, the company outsourced their manufacturing abroad (like many other clothing brands) so they could keep low prices and being attractive for customers.
UNIQLO concept stems from a strong desire to create ultimate everyday wear: high-quality clothes, comfortable, fashionable at the level of prices that everyone can afford. The company will continue to grow not only as a maker of trending apparel, but also as a brand that represents the brand-new category of clothing making people all over the world feel more comfortable.
The creation of UNIQLO products begins with the development of materials. The company is always committed to using high-quality materials because the quality of clothes depends on the materials. But in order to make an uninterrupted supply of goods, you need a stable supply of materials. Based on information obtained in the market and in the industry, as a result of IR activities and merchandising, the company works in contact with material development teams and Chinese manufacturing enterprises to create and supply materials.
In addition, on the basis of strategic cooperation with textile manufacturers, active work is underway to develop new materials. One such example is a strategic partnership with Toray Industries.
In terms of this international goal, 2018 year is a big year for UNIQLO, because in this year company predicts to increase their international sales and then will try to enlarge them from year to year. According to the latest report (Results summary for fiscal, 2018), the international revenue and income rose to approximately 895 billion Japenese yen, which is 25% bigger than in the previous year. It is noteworthy that in 2018 International profit expanded to the level of UNIQLO Japanese for the first time.
The main contingent of customers is families. The company aims to ensure that the stores always have a sufficient number of models required by customers in every color and size. Trying to respond to the needs of locations and customers, it opens up both small stores with an area of about 160 square meters, and huge, with an area of more than 3,300 square meters.
In addition to the entire range of products, the UNIQLO Online Store offers a variety of original models that are sold only through the Internet. (Scince February 2010, such stores operate in Japan, the UK, South Korea and China. ). Also one of the most crucial highlights of UNIQLO is that they really involved in the digital world to communicate with customers and listen to their desires and quickly transform all of into real products.
Nowadays UNIQLO operates in Japan, China, Russia, Australia & Oceania, U. S. A, several European and Southeast Asian countries opening more and more new stores every year. Operates in more than 16 countries worldwide, UNIQLO vowed to become the biggest SPA store in the world with the income of several trillions of Japanese yen per annum by 2022, showing one of the most successful modern business-models.
Thanks to a comprehensive business strategy and a powerful brand image, Uniqlo collaborates with various designers and fashion figures who share brand values. This was done in order to design the brand was more advanced. Popular capsular collections of the brand, in which Jill Sander, Jun Takahashi, Christoph Lemer, Karin Roitfeld, J. W. Anderson, Thomas Meyer and others, participated, correspond to the corporate style of collaborators and at the same time reflect the aesthetics of the “simplicity” of the brand.
90% of UNIQLO products are manufactured in China, but a part of them will be transferred to Vietnam at the end of 2018- the beginning of 2019. The company has deals with 70 partners, mainly in China. UNIQLO considers these enterprises as long-term partners and, actively providing them with technological support, consistently carries out quality control, thereby maintaining a high level of quality even for mass products produced by millions of parties.
According to the UNIQLO official business strategy, the company is interested in the development of the Southeast Asian region as in the place which quickly become fashion and philosophy trendsetter in Asia (especially Singapore, where are 25 UNIQLO stores). The Southeast Asia & Oceania sales grew to 110 billion Japanese yen and operating the income to approximately 14. 0 billion yen, improving overall company’s profits in 2017 which pushes the company onto a retentive growth path. The company has already transformed distribution structures to achieve additional effectiveness and improved personal cost ratios. UNIQLO embeds new management strategies in concrete region to achieve higher profitability and accelerate new stores openings. The aim of the strategic is to become the biggest, and the most successful brand in the region with an annual growth of around 30%, and the overall goal is to advanced worldwide current sales of 110 billion yen to 300 billion yen during the next 5 years (“Business Strategy”, 2018).
This year UNIQLO announced its launch in Vietnam with the first store in Ho Chi Minh City during the beginning of 2019. As the President and CEO Tadashi Yanai told, the entry of UNIQLO into Vietnam is an important milestone for UNIQLO in itself because the region of Southeast Asia was always a crucial driver of company’s growing and the leaders of the company were persuaded that this is a great opportunity to be a part of a fast-growing economy and retail market and to make a positive contribution to the economical and social growth where the company operates (“UNIQLO launches in Vietnam in Fall 2019”, 2018). The store which will be located in Ho Chi Minh City will be focused on establishing its presence and the brand itself before considering other areas.
So why the company decided to focus on Vietnam now? First of all, it is noticeable (according to the UNIQLO business model) that the company would like to involve in their promotion in the region the most talented young locals, which is confirmed by the fact that Vietnam has more that 85 million of people expected to grow to approximately 100 million in 20202 with over 50% of the population younger than 25 years old. Vietnamese young generation is high-skilled, has an extraordinary vision of work and has a high level of education in industries such as information technology, global economy and finances (Doing business in Vietnam, 2018).
Second, and the most trivial reason, is the location. Located in the strategically important part of Southeast Asia, the location could be a base of the large collection of people on Earth combining populations of ASEAN and East Asian countries. In addition, this region is fairly calm, relatively permanently fighting Africa and the Middle East. It cannot be said that there are absolutely no armed conflicts and other hotbeds of tension in region, but there are no significant conflicts in Vietnam, so there is no things to imped the economic life of the country.
Moreover, Ho Chi Minh City is a good place in the supply chain of UNIQLO in the Southeast Asian region in which already involved Shanghai, Dhaka, Jakarta and Istanbul. The company has a detailed marketing strategy by the marketing department for each season, which makes merchandisers being able to adjust production by style to align with demand well in advance, so they have to visit the stocks to check the production and its accordance with costumer’s desires. Customers problems are also addressed by the production department. So to make Vietnam as one more hub for production is a successful idea to pay more attention to the wishes of customers of this particular region because the Southeast Asia & Oceania occupy a big part in UNIQLO overall profits (approximately 30%). In addition, the company plans to start opening here the suburban stores, seeking to move beyond the traditional perception of shopping and shopping malls.
The key strength of UNIQLO is its established position and brand management foundation in regions, where, according to the CEO opinion (Interview with the CEO, 2018), the economic potential for growth is strong (such as China and Vietnam). Statistically, Vietnam is one of the fastest-growing economies in the world with the imposing GDP growth in the recent years (Doing business in Vietnam, 2018). Also, do not forget that Vietnam entered the system of Trans-Pacific cooperation, which gives it a direct way to interact with all participating countries, such as Canada, Australia, the United States, etc. However, among the countries of Southeast Asia there is the lowest average salary ($185), but savings in labor costs are beneficial for exporters and this situation is used to accelerate the growth of the country. Export-oriented manufacturers such as Bridgestone, the largest tire manufacturer in the world, and the Panasonic electronics group set up factories in Vietnam to take advantage of cheap salaries.
As these countries has a stable economic growth, it has led to building the society of medium prosperity and paying capacity of the population. Despite the fact that not everyone from Vietnam has enough money to buy the production now, CEO said that “Low-income people cannot buy UNIQLO for now, but after several years a significant number of ASEAN people will be able to. " The governmental concept of building the society of the medium prosperity and make people being able to have a good paying capacity in Vietnam is undoubtedly a great opportunity for UNIQLO brand at this area. For instance, the population of Japan is around 120 million people, when the number of people who are in need of working places in China and Southeast Asia are estimated about the billion of people, so this region has the potential to grow is 10-20 times faster than Japan (“UNIQLO International Powers Ahead”, 2018).
In addition, due to the fact that Vietnamese people (especially people around 30-35) wear western-oriented clothes and have nearly the same income as people in developed countries have, business in Vietnam could be incredibly successful. “Our entry into Vietnam is an exciting milestone for everyone at Uniqlo,” said Tadashi Yanai, Chairman, President and Chief Executive Officer of Fast Retailing Group, Uniqlo's parent company (UNIQLO launches in Vietnam in Fall 2019, 2018). “The Southeast Asian region was an important growth factor for us, and we are pleased and optimistic about our ability to become part of such an exciting economy and retail market. ”
In addition, Vietnamese customers appreciate natural materials in clothing. A characteristic feature of the Vietnamese light industry is the widespread use of organic silk and the almost complete absence of its own cotton. In this case the UNIQLO company might expand the number of their partner companies that supply materials for tailoring.
The UNIQLO’s idea of being launched in Vietnam fully correlates with the modern vector of Japanese foreign policy which is focused on the South East Asian region. The Japanese government is taking steps to liberalize trade in goods and services, investment activities with members of integration formations, create bilateral alliances with a focus on free trade areas and regional economic policies. The Asia-Pacific Economic Cooperation (APEC) organization is a priority in the area of trade relations. It accounts for about 3/4 of Japanese exports and 40% of Japan’s direct investment abroad. Japan is also a party to "ASEAN +3" - the countries of ASEAN plus China, Japan, Korea. It is planned to create a free trade zone with these countries.
The country's foreign economic strategy is aimed not only at developing multilateral cooperation in the field of trade, but also at bilateral relations (Diplomatic Blue Book, 2018). The Ministry of Economy, Trade and Industry has compiled a document that discusses the main activities of Japan in developing relations with individual countries in the Asia-Pacific region. In particular, Japan seeks to conclude bilateral agreements on free trade and economic partnership.
In many ways, the countries of South-East Asia are very attractive both for the Japanese companies and in terms of investing in different projects. The big role in this is played by the tangible support of the governments of Asian countries. Recently, many investment companies are opening or considering the possibility of opening offices in Hanoi, Singapore and Kuala Lumpur, so, of course, it is easier not to miss interesting projects in the early stages, which began to appear more often.
Deepening the relationship between Japan and the countries of East Asia speaks about the development of industrial cooperation between them, in which Japan performs more complex, high-tech operations. The countries of East Asia are the largest consumers of Japanese goods: 50% of Japanese exports of engineering products (machinery, equipment, parts, components, components) are in this region.
Despite the huge differences and misunderstandings between Japan and Vietnam due to the ideological differences between governments and regimes, the Japanese government is still interested in economic cooperation not only with Vietnam, but with Southeast Asian region in general. For example, on October 12, 2018, Japan and Vietnam signed investment agreements worth 12 billion dollars. According to the Prime Minister of Vietnam, the concluded agreements will bring long-term benefits to both parties. Japan is one of the most important investment partner of Vietnam now.
For example, in 2009, 208 Japanese companies were registered in Vietnam that promised to invest just over 1. 8 billion dollars. In 2010, 114 Japanese companies came to Vietnam, promising to invest 2 billion dollars. According to the results of 2017, Japan became the largest investor in the Vietnamese economy. The total investment amounted to nine billion dollars. A senior executive director of a Japanese trading house with a presence in Vietnam says that Japanese companies love the political stability of one-party communist Vietnam, which is freed from historical hostility and modern rivalry that looms over Sino-Japanese relations (Bland, 2017).
In conclusion, taking everything into consideration, it is evident why Japanese brand UNIQLO decided to launch in Vietnam and transfer their manufacture here. The international strategy of UNIQLO and the International Economic Strategy of Japan are very similar in many aspects, therefore the following attractive sides for business promotion in Vietnam can be distinguished:
- Strategically good location of the country;
- Fast-growing population;
- No serious conflicts within the country;
- Young and highly-skilled population;
- Good paying capacity of people and the future growing of this index;
- Inexpensive labor market;
- Great potential of economy and favorable environment for attracting foreign investment;
- Western-oriented customers;
- To cover the needs and desires of buyers from Vietnam and Southeast Asia at all.
All these factors represent Vietnam as an attractive country for launching UNIQLO, which can bring positive impacts to the company's future development and make the business even more profitable than it is now. In 2019, UNIQLO will be focused on its development in the debut city (Ho Chi Minh city) before expanding its network to other regions of the country.