How Uniqlo's low-priced cousin GU is expanding in Asia

By Chang-Ran Kim, Reuters

Posted at Jun 18 2014 10:18 AM | Updated as of Jun 18 2014 11:30 PM

Chief Executive Osamu Yunoki of GU, the low-priced cousin of the group's better-known Uniqlo brand, poses at the store in Shibuya, Tokyo. Photo by Issei Kato, Reuters

GU to enter Korea, Hong Kong, Southeast Asia from next year

TOKYO - Japan's Fast Retailing Co Ltd aims to establish its GU clothing brand in neighboring markets before tackling the West in a few years' time with the low-priced cousin of casual marque Uniqlo.

Asia's top clothier has almost 280 GU stores at home plus one in Shanghai. It intends to open two in Taiwan in the coming months, with more in South Korea, Hong Kong and Southeast Asia from next year, the brand's top official said on Tuesday.

GU, a play on the Japanese word 'jiyuu', or 'freedom', accounts for just 7 percent of Fast Retailing's revenue. But the brand's speedy growth will boost the group's chances of quintupling revenue to 5 trillion yen ($49 billion) by 2020 as planned, to overtake Spain's Inditex as the world's No.1 apparel retailer.

GU stores mainly sell clothing for less than 1,000 yen ($10). Costs and prices are kept down by employing half the number of staff than at Uniqlo, and stocking most items on hangers to save the trouble of folding.

"We'll expand in Asia first, starting next year, and if all goes well, we plan to enter Europe and the United States within several years," Fast Retailing Vice President and GU Chief Executive Osamu Yunoki told Reuters in an interview on Tuesday.

To go global, GU needs to become an understated yet stylish brand with an appeal extending beyond teens and 20-somethings, and without competing head-on with Western rivals, Yunoki said.

"What I envisage is for GU to become a mega-convenience store for clothes," he said. "We would carry the essential stuff as well as the fast-changing trendy items - both at low prices, just like convenience stores."


The overseas push comes as GU's revenue target for the business year ending Aug. 31 is over 100 billion yen for the first time, at least a fifth more than last year.

Helping the brand reach that goal are marketing gimmicks such as fashion advisers and "Wonder Closets" - fitting rooms adorned to evoke fashion capitals London, Paris and New York, for instance, where shoppers are encouraged to take selfies, or self-portraits using their mobile phones.

One GU store, opening this week, will even experiment with letting shoppers walk out wearing GU clothes - before purchase - to look for matching outfits around town. Rejected items will be used for mannequins.

But the company may need more than quirky marketing in its push west where Inditex, Hennes & Mauritz HMb.ST and Gap GPS.N overwhelmingly dominate.

Even rushing into Asian markets is risky, said Roy Larke, editor of industry researcher

"It's a very crowded market. They should take it slowly overseas," said Larke. "The segment that Uniqlo is going for in the United States - even that is extremely competitive. Uniqlo should be (Fast Retailing's) first priority."

But in the years ahead, Yunoki said he saw a bigger role for GU within the Fast Retailing group.

"We're starting to open the brands in the same stores, and that has helped boost sales at both Uniqlo and GU," he said.

"A lot of people need both - Uniqlo for the long-lasting, basic stuff and GU for cheaper, trendy items. More and more, there's no split in the target audience."