When we think of Japanese companies, more often than not we think of electronics or cars from the likes of Sony (NYSE:SNE) and Toyota (NYSE:TM). However, as the second-largest economy in the world, Japan has a number of large, vibrant, consumer companies that compete well against U.S. firms internationally, particularly in Asia.
A few Japanese consumer products companies, such as Shiseido and Kao, have also ventured into the U.S. to compete and have had a fair amount of success, but neither receives much attention. And in retail the Americans and Europeans are dominant, not just in the states, but also globally. All that may change in the next couple of years, as Japan's Fast Retailing is getting ready to make a go of it stateside.
Fast Retailing is best known in Japan for its Uniqlo brand, which focuses on the everyday casual clothing that is most comparable to what you might find in Gap (NYSE:GPS) stores. I think it's fair to say that the Gap's Old Navy brand and the Gap brand itself are the two closest competitors to Fast Retailing's Uniqlo.
In Japan, Uniqlo has been a massive success, growing from seven stores in 1984 to more than 650 now. The majority of its shops are in Japan, but the Uniqlo brand already extends to England and China, and later this year it will reach South Korea. Based on revenue, Fast Retailing is already the seventh-largest specialty apparel retailer in the world, according to the company's 2004 annual report. This puts Fast Retailing just behind Liz Claiborne (NYSE:LIZ) and just ahead of Ralph Lauren (NYSE:RL).
Still, I'm very wary of companies pursuing an international expansion strategy. Particularly retailers, because shoppers like to be catered to in different ways in different parts of the world and what works in one place often won't work in another. Let's not forget that despite Gap's best efforts, it still has its struggles internationally. However, it's important to note that Fast Retailing has already seen the Gap, J.Crew, Zara, and the Limited's (NYSE:LTD) Victoria Secret set up operations in Japan and the company feels that in order to compete more effectively with these companies in Japan and Asia it needs to compete with them on their home turf, as well.
It is also encouraging to see that the company will move slowly. Based on comments made by management, it appears Fast Retailing has learned from its problematic expansion into England that it pays to take time, gain profitability at the store level, and then begin to expand from a profitable base.
Unfortunately, there is not an easy way for U.S. investors to participate in Fast Retailing. At the moment the company's shares are only available as a thinly traded issue on the Pink Sheets or in Tokyo. However, for folks who are curious and want to learn more for the future, the company does offer a wealth of information on its website in English.
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Fool contributor Nathan Parmelee has no financial interest in any of the companies mentioned.
