The UNIQLO Business Model

BUSINESS MODEL

The business model of an organization is its means of earning revenues and recovering costs. It is the mode of value creation, value delivery and value capture followed by the organization. Its essence is the value proposition to consumers that allows the company to make money from its business.

The Fast Retailing Group is a holding company with specialty retailer UNIQLO as its mainstay operation. The SPA business model (Specialty Store Retailer of Private Label Apparel) of core UNIQLO operations is the key to its rapid growth and profitability, integrating and controlling all stages of the supply process, from product planning, through design and manufacture, inventory control and production adjustment, to distribution, marketing and final sales. UNIQLO’s business model enables it to balance relatively low price of its products with high quality. This relative product value is unparalleled even by the world’s leading apparel retailers, offering world-class quality clothing in world-class quality stores.

By continuously refining its SPA model, UNIQLO differentiates itself with its unique, original products and low costs. Its consolidated supply chain facilitates quick alteration in production, rapid response to changes in the sales environment, and minimizes store-operation costs. UNIQLO’s business model also upturned the trend with large-scale stores in the apparel industry. Typically, with increase in sales floor area, sales and profitability per square meter decreases. However, UNIQLO is able to promote sales and reduce costs with its rich product mix, particularly for women.

Rivals like Zara and H&M offer latest fashions to the masses, entailing multiple ordering of new lines to match the ongoing ‘fast-fash...

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...REAMS: The Company’s sales revenue results from sale of merchandise to customers. Marginal revenue also comes from leasing of real estate.

KEY RESOURCES: Management, Infrastructure (financial resources, Group know-how, etc.), Personnel, Foreign (avail of manufacturing capacity and marketing capabilities through strategic alliances).

KEY ACTIVITIES: M&A activities, CSR activities, Overseas activities, Monitoring activities, UNIQLO Japan.

KEY PARTNERSHIPS:

• Partner factories in China,

• Partnerships with material manufacturers,

• Strategic partnership between TORAY and UNIQLO since June 2006, resulting in successful product innovation, HEATTECH,

• Feb 2011: Global Partnership Agreement with UNHCR

COST STRUCTURE: Purchasing costs, Store-operation costs (personnel costs and rent), Promotional costs, Procurement costs, Acquisition costs, Costs of opening new stores.