UNIQLO vs ZARA 2014

© 2014 Demand Works Inc. All Rights Reserved.
DEMAND WORKS Inc.
APR23/2015
UNIQLO
ＺＡＲＡ
VS
TAKA SAITO
Fashion retail expert

© 2014 Demand Works Inc. All Rights Reserved. 2© 2015 Demand Works Inc. All Rights Reserved.
Background of the Lecturer
Taka Saito
Background
Demand Works
Inc.
Fashion retail consultant
CEO of Demand Works Inc.
since 2004. (Tokyo, Japan)
See web site : www.dwks.jp
Fashion retail expert, independent contractor.
Consultant, journalist, and lecturer.
Specialized in Supply chain management, Inventory
control, Store operation improvement, and Human
resource development of HQ personnel for emerging
fashion chains.
• Board member of a clothing chain (1999-2004, Tokyo)
• Asia export manager of fashion goods exporter (1997-1998, USA)
• Product and logistic manager of an Italian sports brand (1990-1991,
Tokyo)
• Merchandiser of Tokyo apparel div. of a trading house (1988-1997,
Tokyo)
Bachelor of Commerce, Meiji University.

© 2014 Demand Works Inc. All Rights Reserved. 3© 2015 Demand Works Inc. All Rights Reserved.
"UNIQLO vs ZARA"
Nikkei publishing Inc. JPY 1,620 incl. tax
Published Nov.19, 2014
Comparing UNIQLO & ZARA which are
positioned on the opposite ends of the
spectrum in the global clothing market.
UNIQLO (Fast retailing) has improved the standard of the
QUALITY per PRICE ratio in the basic wear market in Japan.
It’s the No.1 revenue clothing chain in Japan and it aims to
conquer the No.1 position in the world.
ZARA (The Inditex Group) raised the standard of the DESIGN
per PRICE ratio of European fashion in the world.
The No.1 revenue fashion retail company in the world since
2009.
UNIQLO & ZARA have upended the
status quo in the clothing market.

4© 2015 Demand Works Inc. All Rights Reserved.
Global top 10 of revenue ranking of
the clothing fashion chain market
Global top 10 of revenues ranking of the clothing fashion chain market (2013）
1
rank company
revenue
（B JPY）
vs previous year Operating
Profit
（B JPY）（%）
vs
previous
year
stores
vs
previous
yearGrowth
same
stores
1 INDITEX（Spain；2014.1） 2,331.3 5% 3% 4,280
(18.4%) -1％ 6,340 331
2 H&M （Sweden；FY2013.11） 2,031.2 6% 0%
3,502
(17.2%)
2％ 3,132 356
3 GAP （USA；FY2014.1） 1,660.0 3% 2%
2,207
(13.3%)
11% 3,539 132
4 FAST RETAILING （JPN；FY2013.8） 1,143.0 23% 7.3% 1,329
(11.6%)
5% 2,449 227
5 L BRANDS * （USA；FY2014.1） 1,107.4 3% 2%
1,791
(16.2%)
11% 2,923 47
6 C&A （GER；FY2012.2） 947.9 3% N/A N/A N/A 1,575 43
7 PRIMARK （UK；FY2013.9） 725.1 22% 5% 872 (12.0%) 44% 257 12
8 NEXT （UK；FY2014.1） 634.6 5％ -2％
1,225
(19.3%)
11% 541 1
9 SHIMAMURA（JPN；FY2014.2） 501.8 2% -0.5％
418
(8.3%)
-8% 1,860 52
10 ARCADIA GROUP（UK；FY2013.8） 464.1 2% -3％
373
(8%)
-2%
about
2,500
N/A
No.1
4 UNIQLO

U Z
Positioning in the Global Fashion Chain Market
1
Price point in UK market 2014
（women’s shirt & blouse ）
TrendyPractical
Price
£39.99
£34.95
£29.99
£26.00
£19.99
£17.99
£14.99
£10.00
High
Low

Historical top 5 change 2004-2013
2
From US “basic” to EUROPEAN “trendy fashion”
Worldwide TOP 5 Revenue Transition
INDITEX, SP
H&M, SW
L Brands, US
Fast Retailing,
JP
GAP, US
0
0.5
1.0
1.5
2.0
2.5
2004 05 06 07 08 09 10 11 12 13 FY
trillion yen
Note:
Compiled from each company‘s annual report, calculated at the exchange rate of the time in 2014 the end of January.

U Z
Profile of UNIQLO & ZARA
3
ZARAUNIQLO
SpainJapan
INDITEXFAST RETAILING
19751984
Design / Price ratio of trendy
fashion in the world
Quality / Price ratio of basic
clothing in Japan
The No.1 revenue chain group
in the world
The No.1 revenue chain
in Japan
vertical integrated clothing chain
model (SPA)
vertical integrated clothing chain
model (SPA)
JPY 1506 B （Jan 2014）JPY 934.4B （Aug 2013）
1,991 stores in 87 countries
90 stores in Japan
From
Group
Founded
What's changed?
Status
Business Model
Global Earning
Distributed
Brand
Briefing of UNIQLO as the No.1 in Japan and ZARA as the No.1 in the world
Share in Domestic market
Share of overseas market
5.5% of JPY 11,243B
（2012,JAPAN）
10% of JPY 3,035 B
（2012, SPAIN）
80% （Jan 2014）27% （Aug 2013）
1,299 stores in 14 countries
853 stores in Japan

U Z
Target Market
4
High quality basic
with the lowest price
in the market
Half price
of entry level product
of department store
BASIC and INNER WEAR
FOR EVERYONE
TRENDY FASHION and
FASHION BASIC
FOR WORKING WOMAN
from weekday, weekend , and
party
UNI
QLO
INNER WEAR
(NEW TIER)
BASIC
Fashion
basic
Trendy Fashion
Concept
TRENDY
FASHION
Basic
FASHION
BASIC ZARA

U Z
Consumer’s expectations
4
The timeless basic The latest trendy fashion
Mechanism
STREET
STYLE
coordi-
nation
MEDIA
THE LATEST
TRENDY STYLE
OUTPUT
COLLECTION
runway
trends
INPUT
HOT
CONTENTS
BASIC
Separates
QUALITY
IMPROVEMENT
IMPROVED
BASIC
OUTPUT

U Z
Promises to consumers
5
Improve
product quality
every year
Release
the latest trendy fashion
twice a week
6
months
Traditional fashion business
Designer
Sell what
designer
wants
Manufacture
Stores
Consumers
3
weeks
Manufacture
ZARA
Consumer
Stores
Designers
Manufacture
what
consumers
wants
lead time response time

U Z
Consumer behavior in store
5
Quick cash-out at
“warehouse”
Impulse shopping on a
whim at “closet”
visit with
practical idea
go straight to
the corner
find the shelf
easily
try
quick cash out
Don’t be short of inventory
compare and pick
customers favorite
product , color , size
quickly
Don’t make customers tired
checkseasonal
items on the rack
try 3-6 pieces
purchase2-3
pieces among
them
visit to get new
inspiration
go to favorite zone find favorite theme
color s
approach the
collections
browse
collections
touch fashion basic
on the table

Pricing strategies: simple pricing
Focus on a single or very limited “price-point” per
each item
item
UNIQLO ZARA
DEPARTMENT
STORE
PRICE RANGE PRICE
POINT
PRICE RANGE PRICE
POINT
PRICE of ENTRY
level products
LOWEST
HIGHE
ST
LOWEST
HIGHE
ST
JACKET 3,990 5,990 5,990 6,990 17,990 9,990 21,389
BLOUSE 1,990 4,990 1,990 4,990 9,990 5,990 12,852
KNITWEAR 1,990 7,990 2,990 1,990 23,900 5,990 12,852
ONEPIECE 1,990 6,990 1,990 5,990 13,900 7,990 16,740
LONG PANTS 1,990 3,990 2,990 3,990 9,990 5,990 13,500
SKIRT 1,990 3,990 1,990 3,990 13,990 5,990 13,000
JEANS 2,990 3,990 3,990 4,990 7,990 5,990 14,580
PRICE RANGE and PRICE POINT of woman’s clothing
Uniqlo: High quality with the lowest in the market
ZARA: Half price of entry level product of department store
Z
6

U Z
Promotion
7
4.6% of marketing cost.
Invest into all marketing methods.
Mainly PAPER INSERT MEDIA
（FLYERS） every Friday.
Less than 0.3% of marketing cost.
LANDMARK LOCATION, beautiful store,
release NEW PRODUCTS TWICE a week.
Prefers to “word of mouth”
PUSH
or
PULL? PULL MarketingPUSH Marketing
Clock-worked operation without fail becomes the best promotion

U Z
The Founders
Tadashi Yanai
Good at “learning.”
Aims to conquer No.1
position in the world.
" Changing clothes.
Changing
conventional wisdom.
Changing the world. "
Stores exist for customers,
thrive with shop staff, but go
bankrupt by store owner.
Amancio Ortega
Good at “listening.”
Listens to the consumer
demands carefully
through the own stores
and feedback to the
consumers quickly.”
“To have every woman
in the world to dress
well.”
Design, manufacture,
and distribute accurately
and quickly.
You need to have five fingers
touching the factory and five
touching the customer.
Name
Personality
Motto
What he likes
Famous Words
The Faith of the founders as entrepreneurs
8

Manufacturer
ConsumersWholesalers
Fabric supplier
Stores
ConsumersManufacturer Own storesDesign
Fabric supplier
Internal management
BEFORE
AFTER
Design
Vertical integrated manufacturing and
distribution model (SPA)
9
SPA : Specialty store of Private label Apparel

U Z
Stores ConsumersDesign Manufacturer
ConsumersDesign Manufacturer Own stores
How they approached to the model ?
the vertical integrated manufacturing & distribution model
9
SPA : Specialty store of Private label Apparel
ManufacturerRetailer
Manufacturer
Consumers
Design
wholesalers
Fabric supplier
Own stores
ConsumersManufacturer Own storesDesign
Fabric supplier
Internal management
BEFORE
AFTER
Outsourcing vs In-house

U Z
Expansion
10
WIDTHHow to
expandDEPTH
DEPTH
WIDTH
“BASIC” market is big enough
in a single country.
Hits key markets dominantly
(Japan, China, Korea etc)
by manufacturing
in low cost countries.
“TRENDY FASHION” market
for working woman is limited.
Sells around the world
(88 countries in 2014)
while manufacturing
in proximity to Spain(HQ)

U Z
Logistics strategies 1
What they promise to customers
11
New products
twice a week
Basic products
always in stock
Consumer’s
expectation
Don’t be short of inventory Don’t make customers tired
Consumers expect
UNIQLO carry seasonal basic
products anytime.
Consumers expect
ZARA always carry the latest
trendy fashion.
Release new products every
Mon. and Fri. without fail.
Stock plenty inventory
at the local warehouses.
Replenish the stores everyday.

U Z
Nature of the products
11
Trendy fashionBasic products Nature of
the products
Harsh Competition of
Quality/Price balance
Short self-life, while
fashion trend changes frequently
Volume to manufacture
high quality in low cost
The cost control
throughout supply chain
are
the principles
Flexibilities and Speed are
more important than low cost.
Don’t miss the chance to sell.
Leftovers lose the profit.

U Z
Key to success
11
SPEEDLOW COST How to
distribute
2020年、ファーストリテイリングはグループ年商5
兆円、2017年年商2兆5000億円を目標としてい
る
目標が達成できたら世界アパレル専門店ランキ
ングはどうなるか？
年平均22％の成長
UNIQLO brings all products in pre-
assorted BOXES unit from factories
to stores.
Such BOXES are not unpacked at all
during transportation.
ZARA centralizes all products in Spain,
then delivers from the warehouses to the
stores worldwide within 48hours.
No local warehouse outside Spain.
consumers
stores
pre-assorted
manufacture
New items arrive at stores worldwide twice weekly

from ZARAGOZA
11
Z

Bottleneck of fashion business
12
Shelf life for a single season is just 8 weeks or less.
More than 6-month-forecast is required in advance.
Long term forecast, short shelf life
Spring Summer Fall Winter
More than 6 months preparation 8 weeks

Bottleneck of fashion business
12
Consumer demand and market trend
tend to change in a season.
Good sellers will be sold out soon,
while slow sellers have a lot of leftover stock.
Most traditional fashion companies have to sell
all the merchandise with a huge discount
during bargain sales at the end of the season.
It's hard to control hit rates and the leftover.
The final profit is volatile every season.
Fashion business is all about controlling
shelf life of seasonal merchandise.

U Z
How they changed the game?
13
Sell all the products
manufactured
by PRICE CONTROL
through out
the season
Manufacture
SMALL BATCH and
RESPONSE QUICKLY
to
what consumers want
Consumers
Manufacturer
OwnstoresDesign
Fabric supplier
Control subcontractor
Manufacturer
ZARA
Consumer
Stores
Designers
3
weeks
Controls
(stop and go)
supply chain
WEEKLY
UNIQLO
Manufactures
what
consumers
want
In-house
response time

U Z
Initial retail price, Discount,
and Average Gross Profit
14
Traditional retailer model
Initial retail price Average
Initial
Gross margin
70％
Manufacturing
cost
30％
COGS
45％
Ave. Gross margin
55％
Discount
35％

U Z
14
Initial
Gross margin
70％
Manufacturing
cost
30％
COGS
45％
Ave. Gross margin
55％
Discount
35％
UNIQLO
Initial
Gross margin
60％
Manufacturing
cost
40％
COGS
50％
Ave. Gross margin
50％
Discount
25％
26
Mark down rate stays 10pts lower than industry standard.
U

U Z
14
ZARA（Indetex）
Initial
Gross margin
64％
manufacturing
cost
36％
COGS
40％
Ave.
Gross margin
60％
Initial
Gross margin
70％
Manufacturing
cost
30％
COGS
45％
Ave.
Gross margin
55％
discount
35％
discount
10％
Z
Mark down rate is much lower than traditional retail model:
10% vs. 35%.

Less Discount range generates Profit
14
 UNIQLO controls the sales volume by the frequent price adjustment.
 ZARA keeps their inventory level always very low, so that not to discount a lot.
 They replenish the goods frequently and quickly even when the additional cost
required to create an amount corresponding to sell.
 Result: lower price reduction than the traditional retail model, higher profitability.
Consumers enjoy reasonable price with better quality, too.
ZARA（Inditex）
Initial
retail price
Average
Initila
Gross
margin
64％
Manufacturing
cost
36％
COGS
40％
Gross
margin
60％
Discount
10％
Traditional model
Initial
retail price
Average
Initial
Gross
margin
70％
Manufacturing
cost
30％
COGS
45％
Gross
margin
55％
Discount
35％
UNIQLO
Initial
retail price
Average
Initila
Gross
margin
60％
Manufacturing
cost
40％
COGS
50％
Gross
margin
50％
Discount
25％
U Z

U Z
Potential for further global expansion
15
 The key to success is the
emerging working woman and
passion for promotion in new
market
 Continue sustainable 10% growth
per year since 2005 .
 Established their own platforms
to manufacture the products in
proximity and dispatch to stores
worldwide within 48hours
 The company knows not low cost,
but flexible and quick response
generates profit.
 The key to success is the
emerging middle class and
demands for quality in
developing countries.
 Planning high growth more than
20% per year.
 Huge opportunities in Asian
countries including China, India.
 Harsh competitions in the
mature countries like US, EU,
UK where strong competitors
exist already.
 Low labor cost manufacturing,
distribution to emerging
countries type of business
model will last?

U Z
Key lessons from UNIQLO and ZARA
15
 Flexibility
Design and manufacture flexibly
according to consumer demand
in season
 Operation to invite Frequent
Shoppers
Accessible store location
Reasonable price of trendy fashion
New products twice a week
 Investment into SPEED
IN HOUSE policy (from Design to
Logistic) realize sustainable small
batch manufacturing and quick
delivery.
 Focus
Basic products, Price Point ,
Quality to win in the competitive
market
 Precise Inventory Control
Manufacturing to take longer time
to improve quality. While, tight
weekly management of sales
target and inventory control
in season.
 Delegation to Store Managers
Not to miss the daily sales
opportunities, store managers are
educated and delegated to
manage the store promotion and
store inventory control.

U Z
Competition in Asia
15
Total # of stores of
Uniqlo, ZARA and
Inditex in 2014.
UNIQLO
UNIQLO
UNIQLO
UNIQLO
INDITEX
INDITEX
INDITEX
Asia
Indonesia
Philippines
Taiwan
India
Thailand
Malaysia
Singapore
China(PRC)
(incl. Hong Kong)
Korea
Japan
Uniqlo 47
INDITEX 9
ZARA 6
Uniqlo 16
INDITEX 15
ZARA 7
Uniqlo 46
INDITEX 13
ZARA 4
Uniqlo 22
INDITEX 20
ZARA 10
Uniqlo 22
INDITEX 20
ZARA 9
Uniqlo 23
INDITEX 19
ZARA 8
INDITEX 15
ZARA 15
Uniqlo 0
1449
777
ZARA
352
112
855
ZARA
352
133
49
40
456
333
152
ZARA
INDITEX

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UNIQLO vs ZARA 2014

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