Uniqlo Case Study: Expansion into Canada

This case study examines Uniqlo’s competitive advantage making it one of the top global apparel manufacturers, as well as its distribution strategy, and its expansion strategy to the Canadian market. It aims to provide insights into these areas and make recommendations for improvement.

The key marketing issue tackled is raising brand awareness and differentiating Uniqlo from its competitors in the North American market.

Table Of Contents

• 1. Fast Fashion Retailing
• 2. Uliqlo's Competitive Advantage
• 3. Success in Asian Markets
• 4. Strategy in Canada
• 5. Distribution Strategy
• 6. Recommendations

Company Introduction:

Uniqlo is a Japanese clothing retailer which designs, manufactures, and sells casual clothing. 

Established in 1984, the company is headquartered in Hiroshima, Japan. 

With over 1,000 stores worldwide, Uniqlo combines simplicity, functionality, and affordability. The company uses high-quality materials to manufacture its products. In addition to a wide range of sizes and styles, they also come in a variety of colors.

The Fast Fashion Retail Model

The competitive landscape of the fashion industry is entirely shaped by the fast fashion retail model. The fast fashion environment is dynamic, so companies have no choice but to respond quickly to trends and constant changes in customer preferences.

One of the most noticeable changes in the competitive landscape is the switch to vertical integration. Companies are adopting this channel structure to have a more efficient channel with minimum costs, as well as high effectiveness. Supply chain integration also includes having specialty stores, a model called the SPA model.

This new structure resulted in rivalry on the price level, response time to trends, as well as frequent assortment which naturally means optimizing marketing channels to maximize distribution speed.

Uniqlo’s Competitive Advantage

"We don't have a specific target customer," said Hayashi, the COO, "that's our uniqueness. We say we are made for all.” Uniqlo’s competitive advantage can be divided into three main factors:

• Intensive targeting strategy: Unlike many of its competitors, Uniqlo targets many segments.
• Competitive prices: with its economies of scale approach, Uniqlo offers some of the lowest prices on the market, appealing to price-sensitive customers, especially Canadians.
• High-quality innovative designs: The fast fashion industry is almost stereotyped as having low-quality clothes due to their low prices, but Uniqlo breaks this stereotype by offering innovative designs made with high-quality materials. 

Uniqlo’s Success in Domestic and Asian Markets

The success that Uniqlo has in domestic and Asian markets, resulted in it being the third global apparel manufacturer in 2016, with $17.31 billion in sales. Four main factors contributed to this success:

1. High brand awareness: throughout the years of executing in Asian markets, Uniqlo managed to build strong brand equity, and with it a high level of trust.
2. Cultural effect: According to Hofstede’s cultural dimensions, Asian countries have a relatively high index in both Certainty avoidance and a long-term orientation. This means that Asian customers will not switch to new brands in the market easily, making it hard for new entrants to compete with Uniqlo.
3. Consumer behavior: being a Japanese brand, Uniqlo has a significant understanding of the Asian markets, their needs, wants, and preferences. 
4. Asian’s attitude towards fast fashion: fast fashion is no new industry in Asian markets. Customers are used to the concept, and its effect on the environment is less problematic among Asians.

Uniqlo’s Differentiation Strategy in Canada

To survive in the cutthroat Canadian market, Uniqlo had to invest in differentiating itself from its numerous competitors.  

To do so, it focused on the Canadian customer. As a matter of fact, before penetrating the market, it would send Yasuhiro Hayashi to Toronto every month for nearly a year, to understand the market. Once it gained crucial insights into its target customer, it presented itself as a multicultural, affordable, chic brand. 

It focused on two dimensions: price and product variety. Its prices were tailored to the price-sensitive Canadian customer, and its products came in a large variety of sizes and styles.

Uniqlo was also determined to position itself as a high-quality brand and break the stereotype about fast fashion retailers. As stated in its central philosophy “We are not fast fashion, but we are affordable.”

Additional Differentiation Suggestions:

To better differentiate itself, Uniqlo should focus on two things: eco-friendliness, and communities.

• Uniqlo to needs to be recognized as an eco-friendly brand. For its packaging, it can use sustainable materials. The company can also plan campaigns like planting trees. 
• Further, it should satisfy the target market’s need for a sense of community. It can accomplish this by making loyalty programs that can lead to evangelism. Discounts would also be a great strategy since buyers are price-sensitive. 

Additionally, Uniqlo can focus more on its waiting time SOS (Service Output Supplied), by investing more in technology and AI.

Uniqlo’s Distribution Strategy

Uniqlo uses different channels depending on the market’s characteristics and SODs (Service Output Demanded). It would do that by investing a lot of time into segmentation through conducting market research.

The following is its distribution strategy in Canada:

• Channel Members: Uniqlo’s channel is composed of them as the manufacturer, relying on economies of scale to lower costs, with vertical integration of its intermediaries by having specialized stores. And finally, its end-users, who are consumers. Vertical integration allows them to have more control over the channel, and reduce channel flow costs, thus having lower prices. 
• Channel Intensity: Uniqlo has an exclusive distribution in Canada, this exclusivity is part of its differentiation strategy, to position itself as a high-quality brand. Additionally, the brand entered the market at a very slow pace, with only 3 stores during the first year. It did so to avoid its previous fast entry into the U.S. market, and other companies’ failures in the Canadian market, Target being one of them. 
• Number of channels: It follows a uni-channel design in Canada, that only has brick-and-mortar, as the company does not intend to start a Canadian e-commerce website yet. 

Another aspect to consider in the placements of Uniqlo’s stores:

1. Its first store, at Eaton Center, had a street-front presence. The goal was to increase brand awareness. As the COO said before “We feel we are not yet known by many shoppers”
2. Its second store was at Yorkdale Shopping Centre. Shopping centers are known to have a huge number of visitors, which explains this choice, which would result in brand visibility. Additionally, its competitors were also pacing their stores in shopping centers.
3. Its third store opened in the British Columbia shopping center (Endnotes 51) the third largest mall in the country, and was located quite close to one of its most fierce competitors: H&M. The choice of its location was to increase its visibility and recognition, even it meant risking a fiercer competition.

In terms of SODs, Uniqlo tried to match its market’s SODs by providing a high assortment and variety to meet the needs of its multicultural market.  

Recommendations and Plan of Implementation

The following recommendations are recommended:

1. Increasing brand awareness
2. Emphasizing Eco-friendliness and social responsibility 
3. Focusing on customer experience

The following is the plan of implementation: 

• To increase brand awareness Uniqlo should:
• Focus on increasing its visibility in rural areas, which highlights the brand’s USP, being accessible to everyone.
• Partner with local Canadian organizations and participate in events.
• Invest in social media marketing.
• Follow the strategy of placing its stores close to direct competitors.
• To emphasize eco-friendliness Uniqlo should use eco-friendly materials in clothes and packaging as well.
• To focus on customer experience, Uniqlo should provide Canadians with a sense of belonging and community to the brand. Through it, the brand can enhance the adoption process. 

Authorship: 

As part of the Marketing Channels course at Tunis Business School (TBS), this case study was conducted by:

• Azza Ben Attia
• Mohamed Ali Ben Ayed
• Ons Hamdene
• Sahar Dronga
• Yasmine Jedidi

all collaborators granted The Marketing Recipe the copyright of the material above.

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