UNIQLO - Opportunities in Brazil

Anne Chen International Advertising & Promotions November 20, 2012

Strengths. Weaknesses. Threats.

Opportunities.

Brazil Shows Promise for UNIQLO’s Globalization Strategy

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When renowned global research agency Millward Brown compiled its BRANDZ Top 100 Most Valuable Global Brands 2012 report, the company summarized why many of today’s businesses either hoping to expand their international reach or join the global battleground for consumers are eyeing Brazil as a promising venture: “Expanding middle class drives brand growth.”1 The effects of this phenomenon stem beyond economic ones – such as improving family fortunes, a rise in disposable income and Brazilian consumers’ purchasing power, and a growing economy to meet all the new demand; they can be seen as well in how Brazilians think about themselves relative to each other, as well as relative to the rest of the world. More importantly for UNIQLO, the change has transformed how businesses who are hoping to woo the Brazilian consumer market should go about doing so, as “everyone wants to dance with the new [Brazilian] middle class.”2

WHO TO TARGET Brazil’s national history has been riddled with unequal income distribution, most notably the problematic distinction between the “underdeveloped North and the wealthier, more industrialized South”.3 But this has changed significantly since Brazil’s transformation into a middle-class country, a result of nearly a decade of steady economic growth and “an array of cash-transfer social programs that pay Brazilians a stipend for meeting social goals.”4 UNIQLO’s preliminary research about the Brazilian middle-class consumer should investigate two fundamental categories: demographical data and lifestyle. Demographical data would delve into information such as per capita income, average age, relationship status, education, literacy, employment, etc. Lifestyle – or psychographics – can include the actual daily rituals of a typical Brazilian middle-class citizen, as well as cultural and ideological beliefs, consumer shopping behavior, leisure activities and interests, celebrity and peer reference groups, etc. A useful tool to use to assess the latter is the segmentation scheme developed by SRI Consulting Business Intelligence, called VALS (Values, Attitudes, and Lifestyles5.

It’s important to note that the rising income level of the middle-class population doesn’t mean that these consumers are spending all of their money haphazardly and pooling all of their earnings into their disposable income budget – in fact, as Millward Brown reports, “Brazilian consumers [have] perfected strategies to bridge the gap between what they aspired to buy and what they could afford.”6 UNIQLO can take advantage of this mindset, as when it comes to the

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two essential product/brand attributes that the middle-class Brazilian seeks, the fast fashion retailer offers the best of both of both worlds: reasonable prices and the latest high-quality fashions.

WHERE IS YOUR TARGET AUDIENCE Another initial step for UNIQLO’s strategy to penetrate into the Brazilian market is to research exactly where this promising middle-class consumer group is living, playing, working, travelling, etc. – such information will tie neatly in with the findings of the research described in the previous section. One effective method to approach this step is to see what UNIQLO’s competitors are doing – specifically, who is in Brazil and, if a competitor is in the country, how exactly did they do it? Interestingly, two of UNIQLO’s major competitors – GAP and H&M – do not have physical brick-and-mortar sites in the South American country; however, GAP does sell its products to Brazilians via its e-commerce site, and there have been rumors of H&M opening locations in Brazil in 20137.

Zara, however, has had substantial presence in Brazil since 1999 – according to the company’s Web site, out of its 1,671 total stores, thirty-four of them can currently call Brazil their home. This substantially high number of physical retail locations can probably be explained by a insightful quote from Joaquín Gutiérrez, regional manager of international franchises for Grupo Simán: “Zara is a phenomenon in Central America for the same reasons as in the rest of the world: Stores are stocked with new merchandise twice a week, which stimulates clients to visit several times throughout the year.”8 Interestingly, much of Zara’s success in the country is due to its “fans aplenty in Latin America’s malls”9; this means less upfront-capital would be required of UNIQLO for its Brazilian venture, as building actual free-standing locations is a much more expensive investment compared to simply renting storefront space in popular malls found in one of Brazil’s key shopping cities, such as Sao Paulo or Rio de Janeiro.

Sao Paulo and Rio de Janeiro were actually the locations of Zara’s earliest Brazilian stores.10 As the nation’s premier business center, Sao Paulo shows much promise as a potential launch site for UNIQLO’s first stores in Brazil. In fact, the city is the site of the largest South American fashion show, which it hosts annually during its Fashion Week. And with two major train stations and two airports, Sao Paulo offers both its citizens and visitors easy and convenient commuting, a promise that will only continue to culturally enrich the city such that it will more than willingly embrace UNIQLO’s “MADE FOR ALL” slogan.

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HOW TO REACH YOUR TARGET MARKET In the same aforementioned 2012 report, Millward Brown offers five tips for effective brand building in Brazil: “reach out digitally”; “be prepared for competition”; “recognize distinctive cultures”; “be emotional”; and “help build Brazil”.11 UNIQLO can deduce from the first insight that the Brazilian middle-class shopper patrons modern technologies such as mobile phones and the Internet, and will turn to these devices as favorable options to not only network with friends and families, but companies. UNIQLO recently just launched its U.S. e-commerce site; the company thus obviously has both the financial and innovative resources to captivate and communicate with consumers around the world via technological channels. And mix in UNIQLO’s marketing-driven business model, its talent at creating the most unique and memorable promotional campaigns, and its ability to infuse both its products and selling tools with the latest technology, and the result is a company that is well-equipped to build a lasting and loyal relationship with the tech-savvy middle-class Brazilian.

Yet it is one thing to successfully enter into a new consumer market; it is an entirely different challenge to sustain this success. Hence, UNIQLO can look to Zara again for some strategic options, and the heading of a press release from the Spanish retailer dating back to 2011 summarizes how Zara has maintained its prominence in Brazil: “Inditex implements pioneering procedures in Brazil for controlling the supply chain in collaboration with unions, NGOs, academic institutions and business associations”.12 Of course, thanks to its “SPA” business strategy (Specialty store retailer of Private label Apparel), in which UNIQLO oversees all company operations, whether they be related to design, manufacturing, retailing, research and development, sourcing, quality control, or inventory management, UNIQLO already has a healthy knowledge of what is entailed for exceptional supply chain control. And readers Zara’s 2011 press release can deduce that Brazil is a country with established institutions – i.e. unions, NGOs, and schools – which seem to be quite receptive of foreign retailers pursuing growth in their nation.

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Works Cited 1. Millward Brown. BRANDZTM Top 100 Most Valuable Global Brands 2012. Valuation and methodology by Millward Brown Optimor. 2012. page 22. Print.

2. Associated Press. “Brazil’s growing middle class spurs economy.” San Francisco Chronicle. updated 10, Aug. 2012. Web. 18, Nov. 2012. para. 6. <http://www.sfgate.com/world /article/Brazil-s-growing-middle-class-spurs-economy-3780376.php>.

3. “Economy: Brazil.” The World Fact Book. Central Intelligence Agency. 4, October. 2012.

Web. 29, October. 2012. <https://www.cia.gov/library/publications/the-worldfactbook/geos/br.html>.

4. Associated Press. “Brazil’s growing middle class spurs economy.” San Francisco Chronicle. updated 10, Aug. 2012. Web. 18, Nov. 2012. <http://www.sfgate.com/world /article/Brazil-s-growing-middle-class-spurs-economy-3780376.php>.

5. VALSTM Types. VALSTM. Strategic Business Insights, 2009 – 2011. Web. 7, Oct. 2011. <http://www.strategicbusinessinsights.com/vals/ustypes.shtml>.

6. Millward Brown. BRANDZTM Top 100 Most Valuable Global Brands 2012. Valuation and methodology by Millward Brown Optimor. 2012. page 22. Print.

7. Editorial. “H&M arrives in Brazil in 2013.” VOGUE Brasil. 22, May. 2012. Web. 19, Nov. 2012. <http://vogue.globo.com/moda/news/hm-chega-ao-brasil-em-2013/>.

8. Picó, María Bird. “Spain’s Zara Finds Fans Aplenty in Latin America’s Malls.” ICSC: Retailing Today. 2006 Feb. Web. 18, Nov. 2012. para. 24. <http://www.icsc.org/src h/sct/sct0206/dept_retail_zara_latin.php>.

9. Picó, María Bird. “Spain’s Zara Finds Fans Aplenty in Latin America’s Malls.” ICSC: Retailing Today. 2006 Feb. Web. 18, Nov. 2012. <http://www.icsc.org/srch/sct/sct 0206/dept_retail_zara_latin.php>.

10. “Zara opens its first stores in Brazil.” INDITEX. Press Release. 25, Nov. 1999. Web. 19,

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Nov. 2012. <http://www.inditex.com/en/press/press_releases/extend/00000085>.

11. Millward Brown. BRANDZTM Top 100 Most Valuable Global Brands 2012. Valuation and methodology by Millward Brown Optimor. 2012. page 22-23. Print.

12. â&#x20AC;&#x153;Inditex implements pioneering procedures in Brazil for controlling the supply chain in collaboration with unions, NGOs, academic institutions and business associations.â&#x20AC;?

INDITEX. Press Release. 14, Sept. 2011. Web. 19, Nov. 2012. <http://www.inditex.com /en/press/other_news/extend/00000876>.

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