Fast Retailing, Daiei partner on apparel

by Taiga Uranaka

Struggling retailer Daiei Inc. said Thursday it has reached an agreement with Fast Retailing Co., which runs the Uniqlo clothing stores, on a tieup to open a new low-price casual clothing chain, with outlets at all Daiei general merchandise stores.

Under the agreement, Fast Retailing will develop a new chain focused on inexpensive casual wear, and open outlets at Daiei’s 148 stores starting in the fall.

Fast Retailing officials said the new chain will feature cheaper items than those sold by Uniqlo, which has lately been shifting upmarket.

“We will aim for the lowest price range of clothing at (general merchandise) and volume specialty stores” for the chain, Fast Retailing CEO Tadashi Yanai said at a joint news conference with Daiei.

He said the firm picked Daiei as its partner because the new management of the retailer is open to bold ideas in revamping its general merchandise operations.

Daiei will retain its own apparel sections, which will operate separately from the new chain. The new in-store shops are expected to boost customer traffic and increase Daiei’s overall apparel sales.

Daiei President Yasuyuki Higuchi told the same news conference the tieup is part of the retailer’s plan to revive by actively seeking outside help through a revamp of its nonfood offerings.

“In the past, Daiei had a tendency to think soliciting in-store tenants would hurt its own floor sales,” he said. “It lacked the viewpoint of enhancing the customer appeal of a store as a whole.”

Higuchi, former president of Hewlett-Packard Japan Ltd., was brought in to take the helm of the retailer last year.

The move by Fast Retailing and Daiei follows the announcement late last year of plans by Seven & I Holdings Co. to acquire Millennium Retailing Inc., which runs the Seibu and Sogo department store chains.

Seven & I’s general merchandise chain, Ito-Yokado, has been suffering from declining apparel sales and the firm’s management hopes the acquisition of the department stores will turn things around.

For Daiei, which has been restructuring with the assistance of the state-backed Industrial Revitalization Corp. of Japan, sprucing up its apparel sections is also a key to the retailer’s revival.

Fast Retailing has been rapidly diversifying its business portfolio to achieve its sales target of 1 trillion yen by 2010, as prospects for high future growth for Uniqlo in the domestic market wane.

Fast Retailing’s Yanai said he wants to make the yet-to-be-named chain a main brand alongside, hinting at the possibility of overseas expansion if it succeeds here.

Fast Retailing and Daiei battled in court in 2001, when Fast filed for a court injunction against Daiei’s PAS casual clothing stores, claiming they were copying the design of its Uniqlo stores. The two companies reached an out-of-court settlement in 2002.