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Business – My Hot Underwear Is About to Take Paris by Storm

William Pesek

Sept. 30 (Bloomberg) — Tadashi Yanai is having a good recession.

Like McDonald’s Corp. and budget airlines, cost-conscious clothing outfits are thriving. There’s fast food and there’s Fast Retailing Co., the company that Japan’s wealthiest man founded and is increasingly taking global. It’s a dynamic that Japan needs more of.

Cheap chic is in, and Yanai’s Uniqlo brand is popping up around the globe. Next stop: Paris, where Uniqlo is opening a flagship store on Rue Scribe. It’s less about hubris than reality. Even after expanding into China, Hong Kong, Singapore, South Korea, the U.K. and the U.S., Yanai’s company makes about 90 percent of its sales in Japan.

That would be fine if not for the nation’s rapidly aging population. Twenty-three percent of Japanese are over the age of 65, while less than 13 percent are younger than 15. Executives need to look abroad more and more. Globalization means foreign clothiers are cracking the Japanese market, while Japanese are turning away from luxury brands.

Three years ago, you were hard-pressed to find a Japanese woman who didn’t have a Louis Vuitton bag or three in her closet. These days, they are enthusiastically flocking to H&M, Zara, Forever 21 and The Gap. Fast Retailing, in other words, is in the right place at the perfect time.

It’s a global phenomenon. Look at the popularity of companies such as New York-based Saja, which is winning with stylish, cost-savvy wedding dresses. Japan’s sudden fascination for all things cheap is unsettling for names such as Prada and Hermes, which long flourished in Asia’s biggest economy.

Shopping at Wal-Mart

Blame it on greater self-confidence. Fewer Japanese women believe they need fancy brands to fit in or feel fashionable. The recession, too. The recent slump has done what previous ones couldn’t: drive Japanese to Wal-Mart.

The return of deflation is pumping up profits at Seiyu Ltd., a wholly owned subsidiary of Wal-Mart Stores Inc. Consumer prices fell the most in at least 38 years in August, heightening the risk that prolonged price declines may hamper a recovery from Japan’s deepest postwar recession.

Uniqlo is making the most of it. The company’s marketing campaigns are ubiquitous in Japan. Its affordable jeans, sweaters, shirts and underwear are made in China under strict control. The quality is close to the high standards demanded in Japan. I shop there regularly for everything from funky T-shirts to so-called hot underwear, which are remarkably warm given their thinness. They add a layer or two during the winter.

Hot Underwear

OK, too much information. Yet you would be surprised how many conversations in Japan include mentions of hot underwear. Well, Yanai hopes to take France by storm with his Uniqlo brand’s heat-generating undergarments and other duds.

It’s part of plans to boost Fast Retailing’s pretax profit 10-fold by 2020. The company expects to have 4,000 Uniqlo outlets worldwide in 2020, compared with 866 as of Aug. 31. The Uniqlo brand is tapping into rising global interest in all things Japanese, be it food, designers or entertainment.

Herein lies a lesson for corporate Japan. Take mobile-phone companies, which make some of the most advanced products you will find anywhere. And yet executives don’t bother taking their wares global. That was fine when demographics were on their side. Japan’s shrinking population and saturated market means they now have little choice but to venture overseas for growth.

Even though Japan seems years ahead in cell-phone innovation, it gets little global mileage out of it. Pundits call it the “Galapagos syndrome.” Companies make fascinating and status-quo-shattering gadgets in isolation. Uniqlo has no interest in making that mistake.

Nature of Contraction

Something else Japan can learn from Yanai concerns the nature of this contraction. The shift toward cost-conscious consumption isn’t a fad that will go away when growth returns.

You can bet, for example, that households will scrap “happoshu” beer when things stabilize. Local media are abuzz about the surging popularity of this low-malt, low-alcohol beverage that sort of tastes like beer — and is cheaper because of a tax loophole. The same can’t be said of the sudden love affair between Japan’s fashionistas and quirky secondhand clothing stores.

Japan’s outlook is the bigger driver. The obsessing over the yen’s surge is a reminder of just how fragile the economy is. With unemployment at record highs, deflation afoot and Japanese lacking confidence in their leaders, households are bracing for a rocky future.

The lopsided shape of Japan’s 126 million-person population has 20-somethings doubting the solvency of the national pension system. Thirty years from now, their generation will be supporting the retirement of much larger ones that went long before. Hence the desire to save more now.

Uniqlo is all over that mindset and expanding overseas with an urgency lacking in many sectors of the economy. It’s taking its underwear along, too.

(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

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September 30, 2009 - Posted by | Uncategorized |

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