Material world: Uniqlo's Tadashi Yanai found inspiration in Hong Kong

Uniqlo founder Tadashi Yanai has designs on the global clothing trade. After learning lessons in Hong Kong, he wants his brands to dominate it

PUBLISHED : Monday, 29 April, 2013, 12:00am
UPDATED : Monday, 29 April, 2013, 8:25am

For Tadashi Yanai, Japan's wealthiest man, Hong Kong represents a special place where his vision to create a world-class apparel and retailing business was honed.

Yanai is the chairman, president and chief executive of Tokyo-based Fast Retailing and its rapidly growing subsidiary, casual-wear chain Uniqlo, which opened its 10th global flagship store in Hong Kong last Friday.

Fast Retailing is currently the world's fourth-largest apparel company, with a portfolio of seven brands, more than 1,200 retail stores and global sales of about US$9.5 billion for its past fiscal year ended August.

Yanai wants it to become the world's No 1 apparel retailer and increase its sales to 5 trillion yen (HK$393.62 billion) by 2020, led by the Uniqlo brand.

"To reach that goal, we are making clothes that fit everyone's daily needs," Yanai said last week in Hong Kong. "We hope that everyone thinks of Uniqlo when they think about clothing."

It has taken Yanai nearly 41 years to build a strong, international retail empire since he joined his family's retail business, Ogori Shoji, in August 1972, after a short stint at supermarket chain Jusco. The business was started by his father, Hitoshi Yanai, in 1963 in Ube, a city in Yamaguchi prefecture on the eastern side of Japan's main island of Honshu. It ran a chain of 22 stores that mostly sold ready-to-wear men's suits.

When the younger Yanai took over the business as managing director in 1984, he founded Uniqlo and opened its first store in Hiroshima. This warehouse type-shop sold low-priced, imported casual wear, without the Uniqlo brand, targeted at teenage boys.

The shift to selling casual apparel was apparently inspired by Yanai's visits to Hong Kong, where simple, good quality and reasonably priced Chinese-made clothes sold well to both locals and tourists.

Hong Kong's foremost purveyor of low-priced casual apparel and accessories at that time was Giordano, founded by entrepreneur Jimmy Lai Chee-ying.

In 1987, Yanai visited Giordano to meet Lai and learn from Giordano's business practices. Yanai, who was steeped in the management philosophy of consultant Peter Drucker and who had studied the operations of American retailer Gap, needed to formulate a more efficient and viable business process model for Uniqlo.

That same year, Yanai abandoned the traditional model of depending on wholesalers and manufacturers to set the prices of goods and determine what merchandise to sell. He developed a business model in which the company had control of planning, production, distribution and sales.

Yanai's first step towards achieving that started with commissioning the same factory Giordano used to produce Uniqlo-brand products under strict quality controls. That close relationship with suppliers has grown to involve more factories across the mainland, particularly in Shanghai and Guangdong province. In 1991, Ogori Shoji's name was changed to Fast Retailing. The new name reflected the kind of fast service expected from fast-food chains.

Fast Retailing then embarked on a steady domestic and international expansion, which included a string of acquisitions. In June 2006, the company approached Giordano to discuss a possible merger. At that time, Lai had already left the Hong Kong-listed firm, which was controlled by institutional shareholders that included Aberdeen Asset Management and JP Morgan Chase.

Three months later, the talks ground to a halt.

"Giordano's management had been reluctant to enter into any meaningful dialogue with Fast Retailing," he said.

The following year, Fast Retailing lost a bidding war to acquire Barneys New York, a chain of luxury department stores. Despite those and other debacles, Fast Retailing's march to global expansion has continued. Later this year, Yanai will open his company's largest flagship store at a 6,600 square metre location in Shanghai.