03/01/2023
Lesson Learned - First Retailing
First Retailing is widely known as UNIQLO & GU brands owner.
The CEO, Tadashi Yanai is the richest man in Japan (wealth: USD30.8b)
Not many knew this:
20 years back they tried to venture into a different business.
Which unfortunately flopped.
The business was "UNIQLO vegetables", or officially named SKIP.
Why would UNIQLO - a fashion company - start a vegetable business?
UNIQLO knew its strengths:
1. Good products, low prices
2. Streamlined production & distribution
3. Waste elimination
Vegs & fruits supply chain back at the time were inefficient.
People also began to pay attention to food security.
One of the directors, Osamu Yuzuki saw this opportunity.
He wanted to replicate UNIQLO's expertise in the clothing business to food industry.
Mr Yuzuki proposed SKIP business to the board of directors.
Everyone opposed - except the CEO, Mr Yanai.
He said: "Give it a try".
And in 2002, SKIP was launched.
SKIP handled a total of 100 farm products.
90%+ of them were sold online.
They are using "Nagata Farming Method" which minimizes cost while maximizing quality.
Distribution costs are reduced by limiting delivery places.
The first six months were successful.
But then the business subsequently slowed down.
SKIP tried to rebound by opening physical stores in prime locations in Tokyo.
Also expanded their online sales to entire Honshu region.
But still...
1.5 years later, the business was over.
3 billion yen was lost.
The reason SKIP failed:
1. Not taking customer's POV
Busy housewives want to buy everything in one place.
SKIP only sells vegetables.
And with online shopping, "hand-picking" the best produce is impossible.
2. Lack of industry-specific knowledge
UNIQLO thought their experience in planning, production, and distribution are enough.
In reality, agricultural industry has been struggling for decades - especially in finding contract farmers and crops instability.
3. Impact on stakeholders
SKIP failed to meet the expectation of the contract farmers.
The farmers expected more sales.
Department stores where SKIP opened physical stores also expected more profit and traffic.
All these lessons are taken greatly by First Retailing.
Especially SKIP president, Mr Yuzuki.
A few years after the business flopped, he was appointed as VP of a business that was on the verge of bankruptcy.
The business was G.U.
Mr Yuzuki knew this time - the business needs to has impact on the consumers.
Not to the company.
He introduced 990 yen jeans.
It was a huge hit.
GU was brought back to life.
And the rest is history.
UNIQLO has taken on many new challenges.
Made many mistakes.
But even when they fail, they are quick to see through and cut their losses.
And it certainly learns from its failures.
That is why UNIQLO is unstoppable 💪
