The price is right

Recently, I was walking through my neighbourhood on a Saturday afternoon when I saw a dozen cars waiting in line for a parking space outside one particular clothing shop. As I watched, many pedestrians also headed inside, and families reappeared laden with huge shopping bags full of shirts, trousers, fleecy sweaters, gloves, handbags, and the like. It was not yet the Christmas season, and I remembered seeing the store deserted not long before.

Back at home, I recalled an unusual full-page advert in the newspapers, which said: 'We don't sell our products at cheap prices.' It was by Fast Retailing, a company that sells reasonably priced casual wear under the Uniqlo brand name.

When the brand was first launched it caused a national sensation with its wonderful array of fleecy sweaters in dozens of lovely colours, and prices which were one-fifth to one-tenth of those for similar goods elsewhere. Soon, everyone, young and old alike, was heading to the stores. Word spread quickly about the price and quality (considered 'not bad at all') of the items, which were practically all made in China. The 'fleece boom' brought the company annual sales of 400 billion yen ($30 billion) in 2001, and Uniqlo became an institution, with stores opening every week (there are, to date, 653 all over Japan). Before long, though, other giant clothes producers had caught on, and began competing on price. Slowly, the sense of novelty over Uniqlo began to fade, and the stores ceased to attract the crowds. As a result, sales fell. The media began to say that the company had been fatally wounded by its rivals' counterattacks, and the end was nigh.

But Uniqlo is fighting back, with its new strategy of expanding its product lineup, with more emphasis on quality. As a result, the Fast Retailing group's net profit has surged 50 per cent in the last fiscal year, compared with the previous year. Sales last month rose 15 per cent on the previous year. Behind the trend is its new president, Genichi Tamatsuka, a 42-year-old veteran rugby player, who is keen on adding value to products and competing on quality while still keeping prices reasonable.

It is a good lesson for Japanese manufacturers: to be a winner in business, one has to be an innovator. For its part, the media now calls the company a 'phoenix'; rising from the ashes. For fans of casual clothes, it is also good news.

'My 10,000 yen still goes further there than in other places,' says my niece, coming back from one Uniqlo shop with two Mongolian cashmere sweaters, and a pocketful of change. Indeed, their prices have not changed much. Next weekend, I think it will be my turn to join the crowds on a shopping spree at my local shop.