This Man Wants to Clothe the Planet

TADASHI YANAI, FOUNDER OF THE GLOBAL clothing retailer Uniqlo, is on the other end of a videoconference screen. From his Tokyo office, Yanai-san speaks enthusiastically about Uniqlo's innovative fabrics. "Americans believe cotton is best," he says, "but we've invented new fabrics that will change your lifestyle." First, Yanai marvels over Heattech, a proprietary warmth-generating Uniqlo cloth developed in partnership with the Japanese company that provides carbon-fiber for Boeing 787 Dreamliners. Next, he boasts that Airism, Uniqlo's cooling fabric, is "so light you don't even know you're wearing it. It is the number-one must-buy product for summer."

I ask if he wears it on steamy Tokyo workdays. He smiles broadly and, at that moment, the richest man in Japan unbuttons his shirt to show me his Uniqlo underwear.

Yanai is refreshingly open about his goals these days: making Uniqlo the number-one apparel retailer in the world. His target—$50 billion in yearly revenue by 2020—will require whiplash gains above Uniqlo's current revenue of $12 billion, driving the company ahead of front-runners Inditex (which owns Zara), H&M and Gap. This swaggering ambition might ring hollow if Yanai hadn't already turned heads among apparel-industry cognoscenti. He established a beachhead in the American market, opening three attention-getting stores in New York City—including a gargantuan flagship on Fifth Avenue, the second-biggest store in the Uniqlo empire. He lured designer Jil Sander out of retirement for a wildly successful multi-season collaboration. And then there's the retail environment: Yanai's scripted sales techniques and sleek spaces are studied by Uniqlo managers in Japan before being spread to markets around the globe.

Uniqlo will open two new U.S. stores this fall—in San Francisco and New Jersey—while also launching an e-commerce site. The company hopes to add "hundreds and hundreds" of stores here, from coast to coast, at a rate of 20 to 30 a year. In short, Uniqlo is vowing to beat Gap at its own game, clothing all of America in basics at affordable prices. Can a brand rooted in Japan—one employing a distinctly minimalist aesthetic—become a mainstream U.S. retail force, invading malls in the Midwest and in Sunbelt suburbs?

Yanai thinks it can, largely because he sees zero difference between shoppers in Manhattan and in Milwaukee. In this sense, he draws inspiration from a noted American minimalist: Steve Jobs, another retail entrepreneur who had boundless confidence and a knack for turning simplicity into chic. It's become almost cliché to compare successful emerging brands to Apple, or to equate an iconoclastic business leader to Jobs. But this is precisely how Yanai views his mission and himself. To him, Uniqlo is less like other clothing companies and more like Jobs's high-tech corporate temple: on a constant quest for innovation, guided by a holistic vision that aims to do much more than simply move merchandise. Read the whole story at WSJ

Understanding How the Internet Is Transforming Personal Connections in China

Photo Credit: Patrick Butler

The internet has transformed China's closed inner circle of personal connections, referred to as guanxi, into a more open chain of relationships, said social-media giant S Y Lau of Tencent.

S Y Lau delivers a presentation at the Ad Age Digital Conference Tuesday afternoon in New York. 

Speaking at Ad Age's Digital Conference on Tuesday, Mr. Lau described the opportunities for marketers that understand the values of Chinese consumers -- from lack of brand loyalty to a hunger for respect. Mr. Lau is senior exec VP-president of online-media business at Tencent, which includes the QQ messaging service, with 721 million active accounts. Just 14 months ago, Tencent developed a smartphone-messaging app, Weixin, that now has 100 million users, Mr. Lau said.

The numbers are staggering in a country with 513 million internet users: Every day, more than 164,031 Chinese go online for the first time and 17 million new smartphones are activated. Jeremy Lin has 5.4 million fans on Tencent's social networks in China, and 370,000 people play mahjong on the networks at the same time, according to Mr. Lau.

Mr. Lau said that the Chinese are impressionable and intrigued by imagery but unlikely to remain loyal to brands. Creating content -- such as a campaign Tencent did with Nike that led to the formation of 62,000 virtual basketball teams -- helps build brand intimacy.

Consumers' skepticism is often a challenge for marketers participating in big events, Mr. Lau said. In a move to counter that, two years ago Tencent and BMW aimed to create a huge volunteer network by mobilizing consumers in a viral campaign to spread the spirit of the World Expo held in Shanghai.

Chinese also seek respect, or "face," meaning a good reputation in front of one's peers. One expression of that is a huge market for virtual products. "Personal image is vital here," Mr. Lau said. "[People] spend billions of yuan on virtual goods to maintain their online image."

In a Q&A session at the conference, John Quelch, professor of international management and dean at the China Europe International Business School, said that the government does block search results on a few topics and that Chinese web companies understand these limitations.

"But if you look at the upside of having 500 million to 600 million internet users, and the information being exchanged, no central authority can control all that," Mr. Quelch said. "There are restrictions on sensitive issues. There was a temporary shutdown for three days of the comments feature of microblogging sites. The government didn't attempt to shut down the posting or forwarding features, just comments. ... Reason prevailed, and after three days the restrictions were lifted. Maybe because they were ineffective, maybe because there was such a popular outcry."

Mr. Quelch said Chinese society was built around fear, with citizens close to only "six people around my banquet table." But that's changing, he added. "Chinese are learning to be social in a much broader societal sense."

That's an important message for marketers. When one blogger posted a bad review of a Siemens refrigerator, the negative message was retweeted 170 million times in China, he said....

By: Laurel Wentz | Published: April 18, 2012. Please go to Ad Age to read the whole story and comments.

The End of Cheap China

The End of Cheap China is a fun, riveting, must-read book not only for people doing business in China but for anyone interested in understanding the forces that are changing the world.

Many Americans know China for manufacturing cheap products, thanks largely to the country's vast supply of low-cost workers. But China is changing, and the glut of cheap labor that has made everyday low prices possible is drying up as the Chinese people seek not to make iPhones, but to buy them. Shaun Rein, Founder of the China Market Research Group, puts China's continuing transformation from producer to large-scale consumer - a process that is farther along than most economists think - under the microscope, examining eight megatrends that are catalyzing change in China and posing threats to Americans' consumption-driven way of life.

Rein takes an engaging and informative approach to examining the extraordinary changes taking place across all levels of Chinese society, talking to everyone from Chinese billionaires and senior government officials to poor migrant workers and even prostitutes. He draws on personal stories and experiences from living in China since the 1990s as well as hard economic data. Each chapter focuses on a different aspect of China's transformation, from fast-improving Chinese companies to confident, optimistic Chinese women to the role of China's government, and at the end breaks down key lessons for readers to take away.

Qualcomm Gets A Fourth Mirasol Device: Taiwan's Koobe Jin Yong E-Reader

Early this year, Qualcomm broadened the audience for its mirasol display technology by announcing a new, mirasol-equipped e-reader from Taiwanese company Koobe. The Koobe device, known as the Jin Yong Reader, is the fourth mirasol e-reader to be announced in the past 10 weeks. The rapid adoption indicates increased interest in a technology Qualcomm has spent years developing.

The Jin Yong Reader joins the C18 from China’s Hanvon, the Bambook Sunflower from China’s Shanda Networking Co. and the Kyobo eReader from South Korea’s Kyobo Book Centre. The four companies have been able to bring out e-readers in quick succession because most of them utilize the same base hardware. The Hanvon C18 is an exception; with a thickness of 10 mm and weight of 300 grams it is thinner and lighter than the others, including the new Jin Yong Reader.

The Jin Yong Reader is almost identical in design to the Kyobo eReader, but stands out as the first mirasol e-reader for the Taiwanese market. Qualcomm is currently pouring a reported $1 billion into a mirasol manufacturing facility in Taiwan. Once that “fab” comes online in late 2012, Qualcomm hopes other tech companies will take up the technology for phones, tablets and other devices. Having a mirasol device on sale in Taiwan, where many computing components are made and gadgets are designed, could help popularize the technology.

San Diego-based Qualcomm has been refining mirasol since acquiring the technology from a startup in 2004. Mirasol displays eliminate the need for backlights by reflecting light between two conductive plates. Qualcomm says the setup enables bright colors in direct sunlight, weeks-long battery life and an image refresh rate fast enough to support video.

The combination is key because for years e-readers could not offer color and interactivity without negatively affecting outdoor visibility and battery life. Qualcomm generates most of its revenues from licensing mobile technology and selling mobile chips to other companies but considers mirasol a potentially valuable side business.

Like the other mirasol e-readers on the market, the Jin Yong Reader has a 5.7-inch “XGA” format touchscreen display (1024 x 728 pixels, 223 ppi resolution) and runs on a 1.0 GHz Snapdragon (S2, single-core) processor from Qualcomm. Its operating system is a custom interface on top of a Google Android (version 2.3) base. The e-reader takes its name from the popular Chinese novelist and will come pre-loaded with all 15 of Jin Yong’s books.

Koobe has not disclosed pricing or exact availability for the Jin Yong Reader, but the device is expected to be available soon in Taiwan.

Koobe introduced its first e-reader in 2010. That device was black-and-white-only. The company considers the mirasol-equipped Jin Yong Reader to be its “next-generation” e-reader. Both devices were unveiled at the Taipei International Book Exhibition, the largest book fair in Asia.

If you are interested in reading more from Elizabeth Woyke, please go to Forbes.

Why 7-Eleven is successful in China?

Every day during the lunchtime rush hour, 7-Eleven stores in Shanghai are packed with young urbanites. But they’re not there for cigarettes or magazines. Most of them head directly to the food counter to order their lunch.

Welcome to 7 Café, part of the Japanese chain’s formula for blending a small supermarket with a food and beverage retailer.

The concept isn’t unique to China. 7-Eleven also operates a fast food offering in Thailand, as well as in its home market of Japan. But many of its 1,792 Chinese outlets are now offering shoppers the kind of fare more likely found at a local restaurant than a corner store. Customers queue up for fried eggs with tomato, eggplant with minced pork or (for the more adventurous) Japanese stewed fish-paste on a stick.

Sales have been on an uptick. 7-Eleven’s Shanghai outlets, consistently record double the daily store revenue of their rivals.

Hot food is a major contributor. And according to Southern Metropolis Weekly, 7-Eleven’s food service delivers as much as 60% in margin. As a result, the convenience store chain boasts a 32% gross margin in China, much higher than the industry average.

Why the popularity when consumers can find a quick meal on most street corners? One reason is price. A 7-Eleven lunch box costs around Rmb20. For office workers in city-centres, it certainly offers a cheap and convenient option.

The chain also faces little competition. That’s because most domestic convenience stores do not have the licences required to serve hot food, due to concerns about hygiene and food safety.

Somewhat bizarrely, neither does 7-Eleven (in fact, the chain doesn’t even have a licence to sell magazines), reports Southern Metropolis Weekly.

While the chain has never revealed why the authorities agreed to let it sell hot food without a permit, industry insiders think that it made clear that cooked food and magazines would be part of its offering when it negotiated market access in 1992. If that’s right, the 7-Eleven negotiating team should be hiring itself out at vast expense to other multinationals seeking better China market access.

Another reason for the chain’s success is that it maintains tight control over its franchisees. In fact, to become a franchisee is far from straightforward.

In Beijing, for instance, the terms set out are unbelievably tough, says Beijing Business Today. The franchisee is required to invest Rmb300,000 ($47,600) in the store and 7-Eleven demands that prospective candidates (and at least one relative) serve as full time trainees at other stores for a lengthy period beforehand.

The more sales the franchisees make, the more they have to turn over to the chain. When a franchisee makes monthly profits of Rmb40,000, for example, 7-Eleven can take 56%. The proportion rises to 86% if profits are between Rmb100,000 and Rmb220,000. Franchisees also complain about the long hours and 7-Eleven’s requirement of at least one family member joining the business.

One industry observer says the tight supervision of franchisees is no surprise as 7-Eleven is keen to protect its brand.

Despite the grumbling, many people have willingly signed up. The reason? Given its product range, the chain has carved out a niche for itself. A pretty decent living can be made by store managers. For example, by the company’s calculations for Beijing, as long as the franchisee makes daily sales of Rmb15,000, it will earn about Rmb18,000 a month (versus the capital’s monthly average salary of Rmb4,762).

According to 7-Eleven’s own statistics the average store in Beijing turns over Rmb16,672 each day.

If you want to know more about China Consumer, please go to Week in China.