Business Week has a good article about how Uniqlo, the successful chain run by Japanese retail conglomerate Fast Retailing, stumbled last year. The company tried to go toe-to-toe with firms such as Zara, which has been invading the Asian market. Zara, of course, specializes in "fast fashion" - being a very rapid follower on hot fashion trends. Zara has a constantly changing product mix, and it is adept at producing and buying small batches of new fashionable items. Uniqlo's strength traditionally focused on producing large quantities of high quality basics at a reasonable price. As it shifted toward fashion, it stumbled. The Uniqlo value chain simply was not designed for fast fashion, while Zara's was intentionally designed for that type of strategy (and perhaps less cost effective at the basics business). Now, Uniqlo has announced that it is reversing course, focusing back on basics.
Of course, the firm has one additional challenge. It remains highly concentrated in Japan, where the economy continues to be quite stagnant. It has announced plans for aggressive growth in the US, but it has yet to move beyond its flagship store in the Soho section of Manhattan. The firm will need global expansion if it wishes to grow in the future. Building a global brand won't be easy, as the competitive space is crowded. However, remaining so concentrated in Japan will spell trouble for them for sure.