Chairman, President & CEO, Fast Retailing Co., Ltd.
Tadashi Yanai profile - Kaori Enjoji
A rendezvous with Japan's richest man, Tadashi Yanai, as his retail empire spawns obstacles that even he didn't see coming.
About Tadashi Yanai
Tadashi Yanai, chairman, president and CEO of Fast Retailing, discussed the company's global strategy and economic challenges in a 2015 interview. He stated that globalization and digitalization are the two key trends that companies must adapt to in order to succeed. Yanai described China's population of 1.3 billion as "an incredible opportunity" and said that if China's economy were to collapse, it "may trigger a global great depression," though he expressed confidence that the world would cooperate to prevent that. He noted that sales in China were improving at the time, while group sales in Japan had declined 11.7% in June of that year. Yanai also addressed the impact of the yuan devaluation on his business, explaining that since Fast Retailing pays suppliers in U.S. dollars, they were benefiting from the devaluation. He said the company would begin negotiations with suppliers about returning some of those gains. Yanai outlined plans to replicate the company's success in China across neighboring countries, Europe, and the United States, aiming to achieve a sales target of 5 trillion yen within five years.
Transcript (29 segments)
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Interviewer0:00
Welcome to Managing Asia. In 30 years, Tadashi Yanai has shot from being the owner of one store to retail legend. He's built Japan's largest apparel empire and has plans to dominate the world. Today we meet the winner of CNBC's Asia Business Leader's Lifetime Achievement Award. For Tadashi Yanai, this is the culmination of his life's work. He turned Fast Retailing into a household name in Japan, took the affordable apparel market in Asia by storm, and is now out to conquer the world.
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Tadashi Yanai0:43
Globalization is a test. If you want to succeed in your business...
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Interviewer0:47
I met Yanai in his office for insights driving Japan's richest man. From pop stars to athletes, the signatures that adorn his walls show the breadth of Yanai's influence and how far he's come from starting out at his father's business in Yamaguchi Prefecture. Humble roots, but a dream big. In 1984, he opened his own shop called Unique Clothing Warehouse, the origin of Uniqlo. Today he found his niche in affordable apparel. The mantra back then was go west to America, the land of riches. Many of his generation aspired to as Japan emerged from the ashes of war.
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Tadashi Yanai1:46
This is very famous. Also, Rock 'n' Roll and all the time, 3D movies, because our age—born in occupied Japan, yes, by the USA. American culture rushed into Japan. So many TV shows, you know, Rawhide. So I had some American dream.
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Interviewer2:30
A dream that has pushed him to the big leagues. Since the last time we spoke on Managing Asia six years ago, the difference is that back then we were focused solely on Asia. Today the buzzword is globalization. Barely a week goes by without a new overseas store opening. In a few months, Fast Retailing will have more stores outside than in its home market. To accelerate the drive, he's partnering beyond the traditional fashion sphere, like in Shanghai with Disney, all in an effort to triple sales to 5 trillion yen by 2020 and become the biggest apparel empire on earth.
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Tadashi Yanai3:11
Like any company in the world today, I think the challenge is to deal with the following two trends: first, the fact that globalization has entered the real world, and the other is digitization. I believe whoever manages to adapt to these two things will become the winner. This is the biggest challenge.
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Interviewer3:26
Until very recently, Fast Retailing's sales have been on a straight path up. Revenues exceeded 13 billion US dollars last fiscal year, fueled by strong demand in China, Hong Kong, and Taiwan. Japan's largest retail company seems to be cut from a different cloth. While the competition is struggling to remain profitable, Fast Retailing, which owns Uniqlo, has been bucking the trend. But can it continue to stay fashionable? Fast Retailing missed its last annual profit targets, a rarity that started to raise questions about the pace of its growth. With so much vested in China, the recent troubles facing China's economic growth have added to the uncertainty. You were recently in Shanghai for the opening of the store within the store with Walt Disney. Everybody in the world is concerned about the slowdown in China. What are your impressions?
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Tadashi Yanai4:26
I'm not at all concerned, whether it's short-term, mid-term, or long-term. However, I think there are economic challenges. But if they have to transform from an export-led, manufacturing-based economy to a consumer-led economy, if they are to elevate the standard of living, if the middle class is to expand, I believe these are the necessary changes that come with these things. The fact that they have a population of 1.3 billion—that's the US and Europe combined—this is an incredible opportunity.
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Interviewer4:55
How long do you think this rebalancing in China is going to take?
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Tadashi Yanai5:00
I don't know, but if China's economy were to collapse today, it will be a major problem. It may trigger a global Great Depression. But the world is going to come together and cooperate in order to prevent that from happening.
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Interviewer5:13
So you see no impact on your sales in China in recent weeks at all?
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Tadashi Yanai5:21
In fact, it's getting better.
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Interviewer5:22
Not in China, but sales at home have skidded lower. Group sales in Japan tumbled 11.7% in June, its biggest drop in the last two years. Can I ask about your overall business performance over the last three months? Some people are worried. Are you worried?
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Tadashi Yanai5:43
These past three months haven't fared so well. Part of it had to do with the weather; there were many factors. But we now understand very clearly what caused it, so things will begin to improve.
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Interviewer5:55
What was the main reason?
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Tadashi Yanai5:58
Well, the main cause was that the performance of the first three months of this semi-annual period was too good, and the SKU management of our products or the introduction of new products were insufficient. So this is a logistics thing—logistics, planning for new products, and SKU management. I think these three were the main factors.
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Interviewer6:17
How do you improve that?
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Tadashi Yanai6:22
For instance, this is something that only applies to Japan domestically, but we are rebuilding all of our distribution centers, and this will be completed soon. Also, our transportation from abroad and distribution centers will all be revamped. We will also make our SKU management much more clear to keep track of each individual store, and we will also introduce new ideas towards the end of the season.
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Interviewer6:46
Rising prices could also be putting a dampener on sales in Japan. Uniqlo has raised prices again this year, following about a 5% across-the-board increase in retail prices a year ago. You're raising prices at your stores again?
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Tadashi Yanai7:03
Yes, they've been gradually going up.
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Interviewer7:06
Is this in response to the weaker yen, or is it a bigger branding change for Fast Retailing?
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Tadashi Yanai7:17
This is solely due to the exchange rate. The fact that the dollar went from 80 yen to 120 yen—that means the yen has devalued by about 34%. And this is true for anyone. No matter how hard you try, selling the same product, you can't sell at the same price. If we try to sell at the same price, the quality will be reduced. So to avoid that, we raised the prices. We do want to do our best and try to suppress the price hike, but a 34% change means most likely a 10 to 15% price hike. We believe the prices were raised to an absolute minimum required level.
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Interviewer7:52
Are you asking suppliers, for example in China who manufacture your products, because of the devaluation of the yuan, to lower prices to offset some of this price increase?
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Tadashi Yanai8:04
The yuan was just devalued very recently, so this is something we will start negotiating. We haven't been negotiating based on the yuan; it's all been based on a dollar settlement. So I don't think there will be hardly any effect.
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Interviewer8:22
So there will be no pressure on the suppliers to reduce prices as a result of the yuan devaluation?
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Tadashi Yanai8:26
Because we are paying them in US dollars, they are benefiting from this. So maybe you can say we were asking them to return some of what they have gained.
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Interviewer8:37
Rising import costs aside, overseas sales is expected to keep boosting its bottom line and help Yanai achieve his goal of 5 trillion in the next five years. So in terms of location, is it still China, China, and China?
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Tadashi Yanai8:52
No, no. We will replicate the success we had in China in neighboring countries, in Europe, and in the United States. And we will also implement what was successful in Japan in China, Europe, the United States, and in Asia.
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Interviewer9:09
Stay with us. Uniqlo may be upping its fashion game, but is it going upmarket? More with Tadashi Yanai, the CEO of Fast Retailing, after this break.