Uniqlo announces its first move into Canada
Target’s recent tactical retreat from Canada struck many as a cautionary tale about expanding too quickly, as well as one about the dangers of a successful U.S. brand walking into an international market without a clear understanding of its customers and culture. Against the backdrop of that lesson comes the first big-name retailer to give the Canadian market a shot since Target’s flop. Japanese-owned clothing retailer Uniqlo, known for its moderately-priced but fashionable clothing offerings, announced that it is opening two flagship stores in Toronto in the fall of 2016.
Two stores are a far cry from the one hundred that Target opened in Canada within a single year, and this moderate pace seems in keeping with Uniqlo’s policy of slow expansion. After quietly testing the waters with three locations in New Jersey shopping malls (which later closed) and two temporary stores in Manhattan, Uniqlo opened its U.S., flagship location in Soho in 2007, which was for a long stint its only U.S. location.
In the next few years, Uniqlo opened two other New York City locations. The retailer did not offer online sales in the U.S. until 2012 despite being a huge hit in Soho, giving the mid-priced retailer an air of exclusivity. Wiser reported around that time about the opening of a new Union Square, San Francisco flagship that was rationing entry, only allowing shoppers to enter 25 at a time.
Now with 36 U.S. stores in operation throughout the country, according to Fortune magazine, Uniqlo is taking a step north. In an interview with the magazine, Larry Meyer, CEO of Uniqlo USA and Canada, described the company’s Canadian expansion as being approached "surgically."
"Whenever you go into new country, you want to make sure everything’s right. You want to understand what works and what the customer wants," Mr. Meyer told Fortune.
But this surgical approach does seem to conflict with the desire for massive North American growth expressed by Tadashi Yanai, CEO of Uniqlo’s parent company Fast Retailing. Yanai stated in 2012 that he intends for Uniqlo to draw $10 billion in annual sales from the U.S. by 2020.
In an interview with Buzzfeed in March 2014, Hana Ben-Shabat of management consultant A.T. Kearney said of the 2020 projection, "This is a very ambitious target for sure, and I think it will be very challenging to get there within that time frame. Even if sales could somehow reach that number, it would cost so much in aggressive expansion and marketing that it’s hard to see the business being profitable."
Fast Retailing reported that its overall profits were up 64 percent at the beginning of 2015, but reported that its U.S. profits had dropped.
- Uniqlo goes where others have been burnt: Canada – Fortune
- Uniqlo Sales Jump Ahead in Asia, Falling Short in the U.S. and Europe – Fashionista
- Why Uniqlo’s Goal Of $10 Billion In U.S. Sales By 2020 Isn’t Going To Happen – Buzzfeed
- Japanese clothier gambles on big chunk of Soho – The Real Deal
- A Unique Way to Drive Shopping Online: Uniqlo – Wiser
- Uniqlo may explore U.S. growth online – RetailWire
- Uniqlo Launches Online Shopping in the US – Uniqlo
Discussion Questions
What challenges might Uniqlo face as it approaches the Canadian market? Can Uniqlo hope to hit its 2020 numbers while still remaining an exclusive retailer with a policy of slow expansion?
As an organizational psychologist, when I hear one executive promoting massive growth and another promoting a surgical/small steps strategy I start getting my proposal for a consulting intervention ready.
For success in Canada based on what I read here, I’d go with Mr. Meyer and the surgical strategy. The big question is: Where in Toronto are these flagship stores going? Toronto’s population is bigger than Chicago and the “where” question is mission critical.
And BTW, I love that 25 customers at a time strategy. People having to line up for the chance to shop in your store has a brilliance about it! Not that I would do it, mind you.
If Uniqlo sacrifices its $10 billion goal in the interest of “getting it right,” that would be a smart move. The company has already shown a willingness to correct its mistakes when it closed its first mall-based locations and started from scratch in Manhattan, with striking results.
The Canada expansion is likely to be successful if Uniqlo shows the kind of patience that it has already demonstrated, especially with the slow start of only two Toronto locations.
The difference is that Target opened too many stores all at the same time. Uniqlo is starting small and can therefore test and improve its planning over time.