Fast Retailing open its first Uniqlo store in Ho Chi Minh City of Vietnam on Friday, December 06, 2019 as the company makes its foray into the sixth market in Southeast Asia which is also one of the fastest growing economies in the region.
Chairman Yanai calls Vietnam, Southeast Asia’s growth engine country ‘land of promise’ as sales and manufacturing hubs
With the latest move, Fast Retailing hopes Vietnam will drive its regional growth as consumption rises and at the same time, become a manufacturing hub for the company in the face of a prolonged U.S.-China trade war. AKANE OKUTSU and TOMOYA ONISHI reports on Nikkei.
Located next to other fast-fashion brands H&M and Zara, Uniqlo’s store in a shopping mall in Dong Khoi in Ho Chi Minh City will be one of its largest stores in Southeast Asia with a gross floor area of 3,107 sq. meters and three stories high.
“I think Vietnam has massive potential and will be one of the biggest consumer markets in the world,” said Fast Retailing Chairman and CEO Tadashi Yanai at a news conference in Ho Chi Minh City on Thursday. Yanai referred to Vietnam as a “land of promise” due to high economic growth and a large young population.
Vietnam is one of the key markets for Uniqlo, which currently has more than 2,000 stores worldwide and plans to quadruple stores in Southeast Asia to 800 in 10 years. Fast Retailing hopes to increase sales by 30% every year in India — where it opened its first store in October — Southeast Asia and Australia.
Yanai told reporters he wants the second Vietnam store to open soon in Hanoi, the capital in the north. “We are not talking about 100 stores in Vietnam. Much more,” Yanai said.
Fast Retailing chief Tadashi Yanai speaks ahead of the opening of the first Uniqlo store in Vietnam. © Kyodo
Apart from capturing the retail market, Fast Retailing also counts Vietnam as its second largest manufacturing hub after China. It has 50 disclosed suppliers in the country.
Yanai said that Uniqlo exports $3 billion worth of products from Vietnam annually. He said that the quality of Vietnamese-made products are high so that they are accepted worldwide. “Vietnam will have increasing presence in the world market,” he added.
Yanai told media earlier this year that the company’s dependence on Chinese suppliers would decrease over time as it expands production faster in other countries, in hopes that the diversified supply chain would absorb geopolitical risks and economic changes. In about two years, the number of disclosed factories in Vietnam rose by 60%.
Uniqlo’s suppliers are also hopeful about Vietnam’s growing domestic market, and that the entry of such brands would bring them more business.
“We are excited to see our products under [the] Uniqlo brand finally being sold in Vietnam, after exports to Japan, ASEAN, the U.S. and EU for [so] long,” said Pham Xuan Hong, chairman of Uniqlo supplier Saigon 3 Garment, referring to the 10 countries in the Association of Southeast Asian Nations. His company has had a partnership with Uniqlo since 1999 and supplies more than half of its products to Uniqlo.
“Uniqlo is among few Japanese brands [that his company supplies to] that are spreading its network to five continents,” said Pham Dang Khoa, business development manager of Kim Thanh Group, which produces six different fashion brands, with more than 50% of its output going to Uniqlo.
Hong added that Uniqlo’s entry into Vietnam comes at “the right time” as producers are facing a slowdown of the global economy.
Being one of five largest worldwide textile exporters, Vietnam’s garment industry is crucial in bringing in export revenue. According to Sheng Lu, associate professor of fashion and apparel studies at the University of Delaware, factors such as the EU-Vietnam trade agreement and other trade deals makes Vietnam an attractive manufacturing hub.
Uniqlo is not the only international brand investing in Vietnam and other increasingly important markets like Cambodia. As many companies have moved production bases to Vietnam to avoid additional U.S. tariffs imposed on Chinese products and amid rising labor cost in China, manufacturers are investing heavily to upgrade their factories. This includes equipping them with digital technology to improve efficiency as well as the quality of the products.
Officials from Saigon 3 and Kim Thanh group, who are also Vietnamese suppliers of Uniqlo, said they are under pressure to upgrade production lines and to automate systems to meet Uniqlo’s standards. They are feeling the heat from Chinese players who are also investing in technologies to increase productivity.
According to one Japanese apparel manufacturer, Vietnamese factories are now so popular that it is difficult for small brands to secure Vietnamese suppliers.
By AKANE OKUTSU and TOMOYA ONISHI, Nikkei staff writers
Before it posted here, this article appeared on Vietnam Insider