To a T

Two global clothing retailers are trying on the Philippine market for size. Is it good fit?
By Eileen C. Ang
[A 2012 unpublished feature article written for Entrepreneur Philippines]

Nothing lasts forever, and nowhere is this bit of common wisdom more starkly apparent than in the
fashion industry. What's in today can be out tomorrow... only to come back again 10 or even 20 years
later. Case in point: the recent resurgence of '80s silhouettes, colors (neon, anyone?) and styles. It's
essentially the same look as before, just tweaked to suit 21st century sensibilities.

Despite its frivolous surface, fashion is serious money-maker worldwide. According to international
research firm Datamonitor, the global apparel retail industry posted a growth rate of 3.4% in 2011,
reaching a value of around $1.17 billion. By 2016, this sector is projected to be worth approximately
$1.34 billion a 14.7% boost since 2011.

In the Philippines, Datamonitor found that clothing and footwear retail sales rose at a compound
yearly growth rate of 1.3% from 2004 to 2009. In addition, market intelligence firm Euromonitor
reported that a growing Filipino middle class boosted its consumption and changed its "purchasing
patterns and brand preferences, which resulted in stronger volume and value growth for apparel in
2011."

Based on Euromonitor's data, local player Suyen Corp. remains the number one clothing vendor in the
country. The company, which is behind popular brands Bench and Human, also retained its market
leadership in men's outerwear, with a 3% value share in 2011. Meanwhile, another homegrown
company, Golden ABC Inc. (GABC), stayed on top of the women's outerwear segment, accounting for
3% value share in the same year, fueled by the "strong performance" of its own brands Penshoppe,
Oxygen, ForMe and Memo.

Despite the ascendancy of Filipino brands, there is no lack of international style options in the country.
From European names like Promod (France), Zara (Italy) and Topshop (UK) to Asian brands like
Giordano (Hong Kong) and m)phosis (Singapore), plus American labels like Gap and Banana Republic,

the fashionable shopper is practically spoiled for choice.

It is this kind of competitive landscape that two foreign retailers are facing as they seek to gain a
foothold in the Philippine apparel market: Uniqlo from Japan and Forever 21 from the US. Both have
chosen SM Retail as their partner in the country, so Uniqlo outlets the first of which opened in June
2012 and F21 branches, which put up its maiden branch in July 2010, can be found exclusively in SM
malls.

ENTREPRENEUR Philippines talked to top executives of Uniqlo and F21 and discussed the challenges and
opportunities in the local market. What can they offer that other clothing brands can't? Read on to
find out.

Uniqlo: Classic, comfy, casual

"We do not limit ourselves to any market. We are 'Made for All', so that means anybody can purchase
and enjoy our products, whether you're rich or not, stylish or not."

That's how Tadashi Yanai describes Uniqlo, the flagship brand of Japan-based Fast Retailing Co., Ltd.
Yanai, the holding firm's founder, chairman and CEO, is also Japan's richest person, with assets worth
$10.6 billion, according to a list released in March 2012 by US business magazine Forbes. Fast Retailing
also owns other global labels including Theory, Helmut Lang, PLST, g.u., as well as French chains
Princesse Tam Tam and Comptoir des Cotonniers. Uniqlo, whose philosophy is "Made for All",
contributes 85% of the group's sales.

The company may be called Fast Retailing, but it is not in the business of fast fashion. "If you think we
are fast fashion, then I have to do my job better," laughs Katsumi Kubota, COO of Fast Retailing
Philippines, Inc. In fact, Uniqlo follows what's called the SPA (specialty store retailer of private label
apparel) model. This means its activities are completely linked from design to sales, including
materials sourcing, product development, and inventory management, among others. As Kubota puts
it, "Do we follow trends? No. We try to pick the real needs of the people, and then we offer them the
very best products."
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On the other hand, fast-fashion companies like Zara the premiere example for this business model
"concentrate on change, change, change; they follow trends," explains Kubota. They live to capture
the current fads, which are mostly dictated by what's seen in the catwalks of celebrated designers and
luxury brands. As Tony Hines and Margaret Bruce point out in the book Fashion Marketing, "Digital
photography and information and communication technology are used to transmit visual data back to
in-house design team to sample and cost."

Be they military-inspired tops or animal-print accessories, these trendy products will be designed,
made and then displayed for sale within two to four weeks, according to industry estimates. This has
disrupted the traditional fashion cycle, which takes about six months to complete. The result?
Shoppers can have the hottest styles immediately, at a fraction of the cost of designer goods.

In contrast, Uniqlo sticks to stylish but functional basics. From colorful tees and simple oxford shirts to
unfussy dresses and frills-free denim, Uniqlo's well-made clothes are can be worn regardless of season
or trend, enabling it to build sustainable and stable consumer demand. As such, its supply-chain
practice is different: it places huge work orders well in advance (as early as a full year ahead), allowing
it to bargain for the lowest possible costs for high-quality craftsmanship. Whatever savings Uniqlo gets
are then passed on to consumers. Uniqlo's price points range from P190 to P1,990.

This essentials-not-fads approach is also expressed in Uniqlo's focus on using great fabric. Uniqlo has a
"takumi team", or a stable of textile masters who have over three decades of experience in the
Japanese industry. Experts in factory-management skills like knitting, dyeing and spinning, this group
provides technical support for around 70 contract-manufacturing facilities across Asia 85% of which
are in China.

Uniqlo may not chase trends, but that hasn't diminished its cool factor. One of its best-sellers is the UT
(Uniqlo Top) product line, which feature shirts created by hip designers like Irish print queen Orla Kiely
and British accessories whiz Lulu Guinness. It also licensing deals with pop culture greats like Disney
characters (Mickey Mouse, Winnie the Pooh) and The Beatles (titles of their songs as designs).
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There's another "C" that Uniqlo excels in. "We are famous for comfort," shares Kubota. The brand,
which manufactures over 600 million items per year, is well-known for clothing technologies like
Heattech. This innovation, which was developed in collaboration with Japan's Toray Industries, Inc.,
combines original fibers with a special milk protein to create fabric that has anti-perspiration and heatretention properties. The outcome is a range of innerwear that's soft and smooth on the skin.
Heattech is one of Uniqlo's most popular lines, with 100 million items flying off the shelves in the 2011
fall/winter season.

Uniqlo is going to need more and more shoppers snapping up product because of a goal set by Yanai
himself: Fast Retailing will be number one in the world by 2020, hitting $50 billion in annual revenue.
"We want to be the favorite clothing brand in each country [we're in]," adds Kubota. To achieve this,
Uniqlo has to surpassing the industry's top three, namely, Inditex the parent company of Zara
Swedish retailer H&M, and American label Gap.

Kubota also says that Uniqlo considers its Philippine business as a way "to open other windows in
Asia." Just a few months after the first outlet in SM Mall of Asia approximately 1,550 sq m in size
opened, it will be followed by a new one in SM North EDSA in Quezon City. Moreover, Kubota expects
the company to put up "50 stores in the next 3 years", making good on its mission to give Filipinos
(and people all over the world, in fact) "the joy, happiness and satisfaction of wearing truly great
casual clothing."

Despite this, Uniqlo is wants "to be careful not to expand too fast in the country," relates Kubota. One
reason for this cautious attitude is the brand's commitment to consistency, especially in service. The
best place to experience this? Why, the Uniqlo store, of course. "You'll be treated like a Uniqlo
customer from the moment you enter the store until the time you leave the store. Because the
customer is everything for us. If there is no customer, there is no business. If what you're doing is not
for customers, then you're doing something wrong. That's how we think."

And with that kind of thinking, Uniqlo may not have to wait too long to win its prize.
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Forever 21: The Young and the Restless

"For our customers, the first priority is new products, new fashion every day. Whenever they visit our
stores, they like to see new things. That's why our customers, they run. They rush [inside] instead of
walking."

Alex Ok, president of Forever 21, certainly knows his brand's clientele, the same way he knows his
business. "We are fast fashion. Others have a seasonal collection, [so they do] monthly shipments. If
they're fast, they have weekly shipments. But at Forever 21, we have [shipments] every single day.
That's why when our customers come in, they're excited. Good thing our prices are affordable. As a
retailer, I believe keeping low-cost operations is so important." Most of F21's goods are priced
between P150 to a little over P1,200.

Controlling expenses and price points has paid off for the California-based firm, which was founded by
South Korean immigrant Do Won Chang. F21 ranked #162 in Forbes magazine's list of America's
Largest Private Companies in 2011. It jumped 34 places from its 196th spot in 2010. Because of its
business structure, it's no surprise that the Chang family is a major and visible part of operations.
Chang also serves CEO, while his wife, Jin Sook, is the chief merchandising officer. Their daughters,
Linda and Esther, serve as chief marketing officer and chief visual officer, respectively.

The involvement of the Chang sisters both in their 20s in F21 reflects its youthful vibe and drive. Its
core customers are teenage girls and women under 25, although this has changed as the business
grew. In a Datamonitor report, Larry Meyer, F21's executive vice president, said that 80% of the
brand's shoppers are over 18 years old. Those older than 24 years account for 35% of its clientele,
while 45% of its customers are between 18 and 24 years old. The remaining 20% are under 18 years of
age.

Though F21 does have a men's line called 21 Men, it primarily caters to females. [For a discussion of its
product lines, please refer to the sidebar.] That's completely in sync with market realities. According to
Datamonitor, women's wear is the largest segment of apparel retail, responsible for 51.1% of business.
As Ok says, "Even though economy is down, women love shopping. Our shoppers buy two to three
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items each visit." This echoes the observation of Hines and Bruce in Fashion Marketing, who write
that fast fashion is "gender-biased towards female customers simply because they tend to purchase
more clothing frequently and spend more on clothes."

Another key point about fast fashion, state Hines and Bruce, is how it "allows retailers to make up-todate product offers to their customer base frequently." Put simply, it means shoppers can get what
they want, pronto. In addition, stocks in these stores "tend not to be replenished," encouraging
customers to buy on sight and return often because once an item is gone, it's gone. With pocketfriendly prices and products "for immediate wear", brands stand to benefit as "customers will need to
repurchase within a short time frame."

Like other fast-fashion retailers, F21 reacts swiftly to consumer demand. Basing on sales of each item
or category, the company can gauge whether shoppers fancy mint-colored jeans or studded skinny
belts. "If it doesn't work, we decide right away to change and move on," shares Ok. This probably
explains why F21 "cycles through at least 100 million different tops, trousers, belts, and socks per
year" to meet demand, estimates Elizabeth Cline, author of the book Overdressed: The Shockingly
High Cost of Cheap Fashion.

This desire to provide an abundance of inexpensive but chic options is in line with the goals of SM
Retailing, F21's Philippine partner. "With the market getting more global, we wanted to serve a new
generation of customers who are more fashionable and more brand-oriented. At the same time, we
wanted to maintain SM's association with affordable shopping. Forever 21 is a perfect fit, reveals
Dixie Li, business unit head of F21 Philippines.

F21 has outlets in SM Megamall, SM Makati, SM City Cebu, SM City North EDSA, SM Mall of Asia and
SM Davao. "We intend to have more stores in the coming years as we redevelop our existing malls and
build new malls," says Li. The company seems to be in an expanding steak, as it opens "85 to 90 stores
every year across the world," says Ok. He expounds: "Last year, we opened 11 stores in 5 different
countries in Europe. We opened our first store in Hong Kong in May 2012. We've opened 55 stores this
year so far." F21 is bent on capturing the Chinese market, setting up shop in Beijing last August and in
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Shanghai last September. It has also established its presence in Mexico and Columbia, launching its
maiden outlets there.

As it continues to grow, one has to wonder: how can F21 offer up-to-the-minute fashion in all its shops
every day? Ok doesn't elaborate, saying that operations are "a company secret". And as a private firm,
F21 is not obliged to disclose certain kinds of information. But Ok offers an explanation: "This is
nothing new to us. We've been developing our system for 28 years. We have our system of buying,
and we have production in China and other countries as well. Running the company is not by me.
There's a strong team that handles logistics, store operations, merchandise, warehouse, visual
presentation, those kinds of things."

Ok also contends that servicing various markets isn't a problem because for F21, fashion is "80 to 90%
the same" around the world. But he does acknowledge there are some differences, like colors, sizing
and taste levels. "In Japan, for example, one-shoulder dresses never work. Tube top? Never works. We
have 11 stores there."

This catch-it-while-it's-hot approach to fashion may be a hit with shoppers, but it has also gained
criticism for F21. Designers like Anna Sui and Diane von Frstenberg as well as brands Anthropologie
and Harajuku Lovers (owned by singer Gwen Stefani) have accused F21 of duplicating their designs. Of
course, fast fashion is known for its knock-offs, but the allegations against F21 have gone legal: the
company has faced copyright-infringement lawsuits. F21, however, has always denied these claims
despite persistent rumors. It has consistently made out-of-court-settlements and has never been
found guilty of any wrongdoing.

F21's relationships with designers, however, are not always tenuous. In fact, it has collaborated with
up-and-coming designers for limited-edition goods. In 2010, it tapped Brian Lichtenberg a favorite of
recording superstar Lady Gaga to do a 12-piece collection that included graphic tank tops and tshirts. The year after, F21 also released a Hello Kitty line, featuring the lovable Japanese cat on tops,
socks, hats and other accessories.

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Ok believes that nowadays, the fashion-conscious can get the look of the moment, wherever they may
be. "The trend in Japan, the trend in the UK, the trend in Manilait's all the same. I think we all learn
from each other because of the trend forecast and websites," he says. And F21 is going to be where
the action is, moving nimbly and in style.

[SIDEBAR 1] Fast Facts

Uniqlo
High-quality but affordable clothing essentials "made for all"

Company name: Uniqlo Co., Ltd.

Type of business: Wholly owned subsidiary of holding firm Fast Retailing Co., Ltd.

Place of origin: Japan

Date established: 1949

Chairman, President and CEO: Tadashi Yanai

Number of stores: 849 in Japan, 276 overseas (as of June 2012)

Number of employees: 57,000 worldwide (latest estimate)

Net profit: around $185.4 million (or P7.86 billion, as of second quarter 2012)

Forever 21
On-trend, youthful and inexpensive fashion pieces available now

Company name: Forever 21, Inc.

Type of business: Private company

Place of origin: Los Angeles, California

Date established: 1984

Founder and CEO: Do Won Chang

Number of stores: over 480 across the world (as of fiscal year 2011)

Number of employees: 22,278 (as of fiscal year 2011)

Net profit: $126 million (or P5.35 billion, as of fiscal year 2011)

Sources: Official websites of Fast Retailing Co., Ltd. and Wall Street Journal, plus Forbes.com

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[SIDEBAR 2] Line by Line

Forever 21 "covers almost all demographics", says Jane Kingsu-Cheng, the brand's marketing manager
in the Philippines. For ladies in their early teens and up, the main label Forever 21 is their best bet. For
collegiate-age and preppy-minded shoppers, there's the Heritage 1981 line. Those with more
sophisticated styles who aren't afraid to mix it up, Love 21 offers a wide selection of choices.
Customers who are in their tweens can also have the F21 experience with the Forever 21 Girls
collection, while curvy or full-figured women will have a field day with the Forever 21 Plus range. The
brand didn't forget style-savvy men: there's 21 Men for them. In addition, F21 also offers a vast array
of fun accessories and intimate wear.

[SIDEBAR 3]
Uniqlo Milestones
1949

A men's clothing venture called Ogori Shji opens in Ube, Yamaguchi.

1984 to 1991

Tadashi Yanai builds on the Ogori Shji business to put up a store in Hiroshima that offers
casual wear for both sexes. He calls it "Unique Clothing Warehouse", eventually shortening the
name to "Uniqlo".

By 1991, the company name "Ogori Shji" is replaced with "Fast Retailing".

2001

Uniqlo opens its first overseas shop in London, taking its first step towards international expansion.

2004

The company works with Toray Industries to create Heattech, an innovative, proprietary fabric
designed to generate warmth.

2005

Fast Retailing expands by opening Uniqlo stores in Hong Kong and New Jersey, US the first
for each area. The American venture, however, folds in 2006.
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The company adopts a holding firm structure to pursue more business opportunities.

2006

It jumps back into the US market by opening a branch in Soho, New York that serves as Uniqlo's
first international flagship store.

2009

Uniqlo hires semi-retired German designer Jil Sander as design consultant. The collaboration
results in sold-out, multi-season collections under the brand +J, which reflects the brand's
minimalist approach to dressing.

2010

Fast Retailing partners with Grameen Bank, a microfinance institution and community
development bank, for a social-business joint venture in Bangladesh

2012

Serbian tennis superstar Novak Djokovic becomes Uniqlo's brand ambassador and is spotted
wearing a Uniqlo shirt while playing at Wimbledon and the French Open.

Uniqlo launches AIRism, a line of "functional innerwear" made from ultra-fine fibers designed
to regulate air circulation.

Fast Retailing partners with SM Retail to enter the Philippine market. The first outlet, located at
SM Mall of Asia in Pasay City, opens in June. The second branch, slated to begin operations in
November 2012, will be at SM City North EDSA in Quezon City.

[SIDEBAR 4]
In Good Company
Uniqlo and Forever 21 are steadily and aggressively growing, but the industry front-runner remains
Industria de Diseo Textil, S.A. or Inditex. The company, whose flagship brand is Zara, is the largest fashion
vendor in the world, in terms of earnings and market capitalization. Its founder, Amancio Ortega, has stepped
down as chairman, but he still owns 59% of the Spanish firm. The 76-year-old entrepreneur the world's
third richest man, according to the Bloomberg Billionaires Index is not only famous for his success but also
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for his elusiveness: he has never given an interview and is rarely photographed. This shunning of publicity is
echoed in Inditex's policy of minimal advertising for its brand concepts.

In the age of globalization and cheap labor, Inditex is still based where it all began: the port town of La
Corua in Galicia, a rural region known for its seafood and meat. Since the clothing retailer's main
market is still Europe it accounts for 70% of Inditex's 2011 sales this works in their favor, given its
affordable price tag and short supply chain. More than 50% of the firm's goods are sourced and
manufactured in Spain, as well as nearby countries Portugal and Morocco. Most apparel brands get or
make majority of their products from Asia, particularly China, because it's more economical. Inditex's
business model costs more, but because of its quicker lead times, it can immediately react to
consumer demands and new trends.

As such, Inditex doesn't have to guess what the next "in" look will be. It just has to observe what
shoppers are actually picking up in stores and then produce them accordingly. This practice allows
Inditex to refresh best-selling stocks often and halt production of slow-moving items fast. Indirectly,
the company avoids markdowns or discounts and slashes inventory costs.

Little wonder, then, that Inditex has become practically synonymous with "fast fashion". Each year,
Zara launches approximately 10,000 new designs, and it only takes the brand around two weeks to
develop products and to bring them to storesa far cry from the industry average of six months. It's no
small feat, given that Inditex designs and products almost all of its goods by itself.

The company is also looking to create new markets. It seems to be focusing on Asia, as it opened 179
new shops in the region (156 of them in China alone) last year, according to its annual report. In the
Philippines, there are six Zara stores and three Massimo Dutti outlets. Both brands are under Store
Specialists, Inc. (SSI), which is part of the Rustan Group of Companies.

Industria de Diseo Textil, S.A. (Inditex)

Place of Origin: Galicia, Spain

Date established: 1975

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Chairman and CEO: Pablo Isla

Number of employees: 109,000 across the globe (as of 2011)

Number of stores: 5,618 stores in 84 markets worldwide (as of April 2012)

Net income: 432 million (or nearly P22.8 billion, as of first quarter 2012)

Brands: Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqe

Other notable apparel groups include H & M Hennes & Mauritz AB or H&M. The Swedish retailer,
whose slogan is Fashion and quality at the best price, is the world's second leading clothing vendor.
Like Inditex, it offers the hottest trends and basic wardrobe staples. Unlike its closest rival, however, it
isn't shy about courting attention, especially from glossy fashion publications, for its campaigns.

H&M, the group's main brand, is also famous for its collaborations with global pop stars such as
Madonna and Kylie Minogue, as well as luxury designers like Karl Lagerfeld of French fashion house
Chanel and Italian brand Versace. Every time it launches these limited collections, shoppers go into a
buying frenzy, lining up way ahead of operating hours and grabbing merchandise off shelves and racks
in a matter of minutes.

H&M is present in Asian countries including Singapore and Japan, but it does not have outlets in the
Philippines.

H & M Hennes & Mauritz AB (H&M)

Place of Origin: Vsters, Sweden

Date established: 1975

Founder: Erling Persson

Managing Director and CEO: Karl-Johan Persson

Number of employees: about 94,000 worldwide

Number of stores: 2,575 stores in more than 40 countries (as of May 2012)

Net income: $750 million (or around P31.2 billion, as of second quarter 2012)

Brands: H&M, COS (Collection of Style), Monki, Cheap Monday, Weekday and & Other Stories
(to be launched in 2013)
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Arcadia Group Ltd., the U.K.'s biggest fashion retailer, is known for championing British style and
design. A major sponsor of educational institution Fashion Retail Academy, the group's most wellknown brand concept is high-street chain Topshop, a brand beloved by fashion conscious and stylesetting shoppers like H.R.H. The Duchess of Cambridge, a.k.a. the former Kate Middleton. The brand
previously worked with Alexander McQueen a British fashion designer known for his outrageous
creations and sharp tailoring and British supermodel Kate Moss in 2007 for a hugely successful 50piece collection that included clothing, shoes and accessories like bags and belts.

The privately-held company recently announced its collaboration with American reality TV star Kim
Kardashian. Her "Kollection", which will feature clothes, lingerie, as well as bags shoes and other
accessories, will be part of Arcadia's Dorothy Perkins (DP) brand. Plans for a Topshop outlet in
Johannesburg are under way, marking the group's first foray in South Africa.

Topshop, Topman and Dorothy Perkins have been popular with Filipinos since Robinsons Specialty
Stores, Inc. (RSSI) brought these British brands to the country. The latest Arcadia brand to hit the
Filipino market is Miss Selfridge, which opened a store at Greenbelt 5, Makati City, in June 2012.

Arcadia Group Ltd.

Place of Origin: United Kingdom

CEO: Sir Philip Green

Number of employees: a little over 44,000

Number of stores: more than 2,500 company-owned outlets, plus 600 franchised stores in
36 countries (as of 2011)

Net income: 297.4 million (or around P19.9 billion, as of fiscal year 2011)

Brands: Topshop, Topman, Dorothy Perkins, Miss Selfridge, BHS, Burton, Evans, Outfit,
Tammy, Wallis

Sources: Official websites of Inditex S.A., H&M and Arcadia, plus Businessweek.com

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[CONTACT INFORMATION]
FAST RETAILING PHILIPPINES, INC. (UNIQLO PHILIPPINES)
www.uniqlo.com/ph/
SM Corporate Offices, SM Mall of Asia Complex,
Jose W. Diokno Blvd., Pasay City 1300
On Facebook: www.facebook.com/uniqlo.ph

FOREVER AGAPE & GLORY, INC. (FOREVER 21 PHILIPPINES)

www.forever21.com
SM Corporate Offices, SM Mall of Asia Complex,
Jose W. Diokno Blvd., Pasay City 1300
On Facebook: www.facebook.com/Forever21ph

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