Tadashi Yanai, one of the richest men in Japan, told the Wall Street Journal last week that he was “disgusted” by the video of a couple having sex in a Beijing outlet of the clothing chain Uniqlo. The video quickly went viral in China, and Internet commenters wondered if it wasn’t part of some weird publicity stunt on behalf of Yanai’s company, Fast Retailing, which owns Uniqlo.
Yanai vehemently denied the suggestion, but it’s difficult to think the newsworthiness of the story hasn’t helped his company. It certainly hasn’t hurt it. Uniqlo already operates 370 stores in China and plans to open several thousand more.
That’s a lot of retail, and while many global companies would kill for that kind of exposure in China, Fast Retailing’s success on the mainland should be balanced against its possible decline at home. After decades of invincibility, the Uniqlo brand may be on the wane in Japan.
According to a recent feature in Gendai Business, Uniqlo enjoyed worldwide sales of ¥1.65 trillion last year, which is 200 times what the company earned 25 years ago. Annual growth has continually been in the double digits, but the company seems to be hitting a wall. Domestic sales in June were down 11.7 percent compared to the same month last year, causing financial writers to ponder what might have caused such a sudden steep drop. Some thought it might be the weather. June was unseasonably cool, which usually means sales of summer clothes stall, but such considerations usually don’t affect Uniqlo.
One economics professor, Shinya Nagasawa of Waseda University, told the magazine that it’s useful to compare Uniqlo’s image in China with its image in Japan. In China, Uniqlo is an aspirational brand. The quality of both the manufacturing and the design is superior to what’s available for the same price in China, and while that price is a bit high for the average worker, these workers believe Uniqlo merchandise is “worth reaching for.”
In Japan, the brand image is different. Uniqlo is not aspirational. Though consumers agree the clothing is well made and versatile, it’s most salient trait is its low price. At one time this trait was considered a strength. Nagasawa, however, thinks it may be turning into a weakness.
Uniqlo has always stressed low prices, so much so that consumers can’t get beyond the idea when they think of the brand. When a company has an image that isn’t pegged to how much it costs, its prices can rise and fall without much effect on sales. But if consumers note that Fast Retailing is raising prices of Uniqlo clothing, they may unconsciously leave the brand because then it loses its appeal.
Last year, Uniqlo raised prices on some items owing to material cost increases and the low value of the yen, and Yanai, sensitive to the aforementioned brand sense, made a point in April of saying that the price increases did not affect sales. But the economists interviewed by Gendai think it’s only a matter of time before Uniqlo starts shedding customers in Japan. After all, there are other companies, some foreign, who follow a similar business model and stress price over design. There’s no reason for consumers to stick to one retailer if that retailer raises prices. Yanai came of age as a businessman during Japan’s long deflationary period, and he took advantage of it, but his is not the only company that has.
Uniqlo’s problem is not entirely economic in nature. There is apparently also a shift in the Japanese consumer’s basic philosophy that could cause Yanai some heartbreak. In a recent discussion in the Asahi Shimbun, essayist Kamiko Inuyama, who was born in 1981, talks about the trend among consumers toward rationalization, in particular with regard to clothing. She cites the popularity of the Japanese translation of Jennifer L. Scott’s best seller “Lessons from Madame Chic,” which describes the young American’s home stay in Paris some years ago with a French family. Scott was impressed at how effective the woman of the house, whom she calls Madame Chic, handled the family’s finances, though the part of the book that appeals mainly to Japanese readers is the one about Madame Chic’s wardrobe, which was limited to 10 items. Madame Chic is not being cheap; she just understands what looks good and doesn’t need a lot of clothing to achieve that look.
Inuyama connects the popularity of Scott’s book with that of “organizing consultant” Marie Kondo, whose book on how to throw stuff away has been translated into at least four languages. Time magazine even chose her as one of the world’s most influential people in 2015. Inuyama thinks the appeal of the two books comes down to a kind of reverse snobbishness: I know what I like and don’t buy more than I need. She thinks it’s “human nature” to want to purchase things, so people who can do with less somehow come across as more spiritually rigorous. It’s fashionable not to care about fashion.
On the surface, this philosophy, which is the basis for everything from cloud computing to the “tiny house” movement, would seem to support Uniqlo’s brand image, since Yanai has famously said he has no interest in fashion. But the whole point of Uniqlo is that the clothing’s relatively high quality and relatively low price work together to make it simple and painless to buy. People purchase it in accordance with the impulse to spend money, so when you consciously suppress that impulse Uniqlo loses its appeal as both merchandise and self-expression. It just turns into inexpensive generic clothing and, eventually, clutter.
In the end, Uniqlo could become a victim of its brand image. At the very least, according to Nagasawa, the company’s business model has “reached its limit,” which means Yanai might need to rethink it and how it is perceived in Japan. That frisky Chinese couple may have actually done him a favor. There are worse things to be associated with than sex.