Uniqlo goes where others have been burnt: Canada

January 26, 2015, 4:36 PM UTC
Fast Retailing Co. Opens First German Uniqlo Store
The logo of Uniqlo, the fashion clothing retailer operated by Fast Retailing Co., sits on display as the company opens their first German store in Berlin, Germany, on Friday, April 11, 2014. Fast Retailing, Asia's biggest clothing retailer, fell the most in 10 months in Tokyo trading after lowering its annual profit forecast, citing higher costs and weak demand. Photographer: Krisztian Bocsi/Bloomberg via Getty Images
Photograph by Krisztian Bocsi — Bloomberg via Getty Images

Uniqlo, the Japanese clothier and retailer, is jumping into Canada with a plan to avoid some of the problems that have bedeviled other retailers who have tried their luck in the Great White North.

The company, which is part of Fast Retailing and beloved of fashionistas looking for some tech in their clothing, said on Monday it would open two stores in Toronto in late 2016, making Canada its 18th market overall. The move is part of Uniqlo’s long-term plan to diversify away from the aging Japanese market, still its biggest by far.

While China is the absolute center of its international expansion, Uniqlo has also been expanding in the United States, where it opened its first store in 2006 and now has 39. But now the time was ripe to go a step further and enter Canada, Larry Meyer, CEO of Uniqlo USA and Canada, told Fortune. Still, keenly aware of the pitfalls of a new international market, Uniqlo is doing so “surgically,” starting with the Toronto stores and then going into Vancouver.

“Whenever you go into new country, you want to make sure everything’s right. You want to understand what works and what the customer wants,” Meyer said.

Uniqlo, known for its HeatTech line of clothing and Ultra Light Down jackets, along with low-priced cashmere sweaters, was patient in choosing the right spots for its stores—indeed, the two Toronto stores will be in high quality malls where the fast growing, and cautious, luxury department store Nordstrom (JWN) is also opening two of its planned Toronto locations.

Many retailers underestimate the challenges of entering Canada, the biggest example being Target (TGT), which has abandoned the market after two unsuccessful years and $7 billion lost, largely because of poor store locations, uninspired merchandise and attempting to open 124 stores in an untested market in one fell swoop. Others have not failed spectacularly, but still stumbled: J. Crew struggled in Canada when it entered a few years ago when customers balked at the higher prices there in relation to the U.S. stores many had frequented.

While Uniqlo has been expanding in the U.S. beyond its original Manhattan flagships into regional malls, its U.S. results “fell short of plan” in the September-November quarter, when a lot of discounting hurt profit and low brand awareness in new markets pinched sales. So a successful foray into Canada would help Uniqlo mitigate the ups and downs of the U.S., where it competes with Gap Inc (GPS), along with fellow international fast fashion chains H&M and Inditex’s Zara. And those are the retailers Fast Retailing hopes to surpass to eventually become the world’s largest apparel retailer. Maybe Canada will give it an assist.

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