What They'll Wear to the Revolution

Uniqlo's well-made, well-priced casual clothing has become a global retail phenomenon. Can its iconoclastic CEO bring some of that magic to Japan?

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Toru Yamanaka / AFP / Getty Images

Uniqlo's flagship in Tokyo. The company aims to have 200 outlets in the U.S.

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Yanai takes "change or die" seriously: a framed sheet of paper bearing the maxim in English hangs in the corridor outside his large but utilitarian office in an otherwise nondescript building in Tokyo's Akasaka district. He talks of the times he faced that choice. He inherited his parents' menswear stores in his native Ube, a small town in a coal-mining region of Yamaguchi prefecture. Yanai had grown up above the first shop, but by the time he took over, the business was in trouble: customers were departing for better opportunities in Japan's booming new industrial centers. If he didn't follow, the business couldn't possibly thrive. So in 1984, Yanai opened a store in Hiroshima, selling casual wear. He called the new shop Unique Clothing Warehouse, abbreviating it a year later to Uniqlo.

Japan's retail industry was dominated by big department stores supplied by a network of designers, producers, wholesalers and distributors. Inspired by the Gap, Yanai shunted aside this cozy, high-cost arrangement and took control of the entire process, from design to production to distribution, ringing down prices for customers. He outsourced production to factories in China and passed most of those savings on to shoppers whose spending power was constrained by the economic downturn. Uniqlo's first big hit was a fleece jacket launched in 1998 at a price of only 1,900 yen, about $15. By comparison, the average men's shirt cost roughly $40 at the time.

Uniqlo's supply-chain management meant that Yanai could control quality as carefully as costs. As a result, Uniqlo's appeal was not limited to those looking for a bargain. "Yanai and Uniqlo made a revolution" in Japan, says Kensuke Kojima, a fashion-business consultant in Tokyo and author of the book Uniqlo Syndrome. The brand's cachet is so broad, Kojima says, that "rich people, poor people, everyone wears Uniqlo." Sales topped $2 billion for the first time in 2000.

While Uniqlo's growth at home progressed apace, Yanai stumbled in some of his early forays into foreign markets. In 2005, Uniqlo launched its first three U.S. outlets in shopping malls in New Jersey, where nobody had heard of the brand. By 2006, all three were shuttered. Yanai tried again in 2011, this time choosing prime real estate like New York City's Fifth Avenue. A high-visibility advertising campaign featuring Orlando Bloom and Charlize Theron ensured that the brand was no longer unknown. Uniqlo now has seven outlets in the U.S. and is aiming for 200 by 2020.

Hands-On Honcho

the rapid expansion of his business hasn't changed the way Yanai runs his company. In the most notable departure from the norm, he has eschewed the typical Japanese style of managing by consensus. "Yanai sees traditional Japanese management practices as a bottleneck," says Takayuki Kito, a partner at consulting firm Roland Berger in Tokyo. He single-handedly dictates the firm's direction and is especially hands-on in design and marketing. Yanai approves every marketing slogan--sometimes doing a last-minute rewrite himself--and (a rarity for Japanese CEOs) occasionally drops in unannounced at Uniqlo outlets for a personal look at the displays and service.

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