Fast Retailing, the parent company of Uniqlo, is planning to expand its manufacturing presence in India through 20 'production partners’, according to a report in The Economic Times (ET).
Uniqlo, one of the world's most valuable clothing retailers, already has multiple production partners in the country and is looking to expand this network through a large investment.
Uniqlo’s existing production partners in India include Shahi Exports, Brandix Lanka, Tangerine Design, Maral Overseas, Shingora Textiles, Silver Spark Apparel, SM Lulla Industries Worldwide, and Penguin Apparels.
A source said that the investment amount will be significant because Uniqlo views India as an important market and the production partners that Uniqlo will bring to India will be specifically meant for the domestic market, according to the ET report.
One of the company's production partners told ET that their current mandate is to produce only for exports.
Tadashi Yanai, Uniqlo CEO, has indicated that he wants Uniqlo to become the “best-selling retailer in India”.
The Japanese brand opened its first store in India in September 2019. It has stores in Delhi, Lucknow and Chandigarh. The brand is now planning to enter Mumbai and Bangalore.
Uniqlo does not own any factories and it outsources production of almost all its products to factories outside Japan. This helps the brand to keep its breakeven point low and improve return on investment.
As on March 1, 2023, Uniqlo has 227 factories in China, 54 in Vietnam, 33 in Bangladesh, 13 in Indonesia, and 16 factories in India and Japan, according to the ET report.
India has evolved as an attractive market for apparel brands. Over the past decade, global brands such as Zara and H&M became market leaders in the fast fashion segment in the country.
Devangshu Dutta, the founder of Third Eyesight, a retail consulting firm, said, “For global brands, India should be one of the most logical sourcing hubs, given its large vertically integrated manufacturing sector on the one hand and large, growing domestic market driving demand on the other hand.”
Dutta said that the weight in the sourcing baskets has historically been low in India due to several reasons, in spite of China being visible for decades to the management teams of brands and retailers as a concentrated sourcing risk.
Uniqlo International said its revenue in the first half of 2023 stood at $5.25 billion, and its operating profit was $852.93 million, according to the ET report.
The company said regions like India “reported significant revenue and profit gains as they enter a full-fledged growth phase”.