UNIQLO is a success story of Japan’s iconic industrial manufacturing capability. Launched in 1949, the label is known for its simplicity. In just two years in the 1990s it created a new market in Japan by popularizing wool, which until then cost too much and was not fashionable – bought mainly by climbers and trekkers. Uniqlo launches a line in 50 colors at affordable prices under $20. Over the next 12 months it sold over two million wool – or one to every third person in Japan.
Now the clothing brand is trying to capture markets outside China, where sales have taken a hit since COVID-19 and show no signs of picking up anytime soon.
In Asia, Uniqlo’s sales outside Japan and China increased by more than 70% in the six months to February compared to the same period last year. Its operating profit was up 48% during the same period. Fast Retailing, the label’s parent company, is one of the 10 largest listed companies in Japan.
Media reports quoted Fast Retailing founder and billionaire Tadashi Yanai as saying that Uniqlo aims to become the largest selling retailer in India. Like Apple, expanding into India is a way for Uniqlo to de-risk growing investments in China and capitalize on the promise of the consumption market here. Media reports suggest that Fast Retailing is planning to manufacture more in India and now for the Indian market as well. As of now, it manufactures here exclusively for export.
As of last count, Uniqlo had 227 factories in China, 54 in Vietnam, 33 in Bangladesh, 13 in Indonesia and 16 in India, leaving tremendous scope for expansion in India. News reports say the company has lined up 20 production partners for a planned expansion of its manufacturing presence here (it operates through outsourced manufacturing rather than its own factories).
This planned expansion is an opportunity that India must capitalize on to showcase its promise of globally competitive apparel manufacturing and establish itself as the preferred location for factories of global apparel giants.
Clothing manufacturing is a traditionally labor-intensive industry, but Uniqlo, like other Japanese industrial giants, is increasingly using automation and artificial intelligence in its factories in Japan to cope with the country’s growing population. Its warehouses in Japan are operated by robots, which in some cases replace up to 90% of the human workforce. The resulting savings have been spent to raise workers’ wages, especially as the country’s political leadership has called for businesses to offer steady wage increases. Uniqlo’s global supply chain has not been immune to the rapid adoption of automation.
However, India’s demographics remain favourable. If the country’s consumption market appeals to Uniqlo, its manufacturing plans could be a good fit for India’s economic ambitions, especially if they can help increase the supply of jobs for millions of young, low-skill Indians.
For India, achieving sustainable economic growth will depend on whether it can generate jobs for a sizable portion of its rapidly growing workforce. While apparel manufacturing can easily absorb a large number of low-skill young Indians, production of high-tech goods such as semiconductors and iPhones cannot.
Uniqlo should be given the same priority as Apple under ‘Make in India’. While both are high-profile companies, Apple’s shift here will help reduce India’s dependence on imported gadgets, creating massive jobs for Uniqlo.
Thus the central government and the states should do everything in their power to facilitate Uniqlo’s plans. They should offer India’s labor abundance as an advantage to global textile brands, while simultaneously facilitating the creation of jobs in a way that ensures decent minimum wages and minimal red tape. This will help in creating a virtuous cycle of expansion of domestic consumption and investment.
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UPDATE: June 30, 2023, 04:26 PM IST