Going global: the 1,000-tsubo flagship in New York SoHo (2006)

A store strategy that kept raising the resolution of failure

The heart of this decision lay not in the glamorous headline of overseas expansion, but in converting the failure of the UK suburban slump into the precision of the next move. A company that had succeeded with the Japanese roadside format carried that success straight overseas and failed; from the contrast with the large Hong Kong store it drew the lesson that “in a market with no name recognition, you can only overwhelm with floor space and convey the brand.” Hypothesize, fail, learn from the contrast, and raise the resolution of the next bet — the same pattern of learning as the 1984 shift from Hiroshima’s downtown to the roadside was at work here too.

Behind daring to choose fiercely competitive New York first lay a back-calculation: spread to other countries the model that proved out there. The 1,000-tsubo scale was not merely a big store, but an investment to convey the brand concept itself to customers in high-rent, prime locations. The move from the roadside’s “cheap, good-quality everyday clothes” to a company that speaks its brand in a city’s prime location came with a rise in price band, and stood back-to-back with the same year’s founding of GU that filled the domestic low-price gap.

The reason a tiny menswear shop in Ube, Yamaguchi reached a global company was neither special foresight nor abundant capital, but the learning cycle in which, each time he hit the limit of where he stood, Yanai Tadashi revised his hypothesis and kept raising the resolution of the next move. The 2006 global flagship strategy is a suggestive example of that learning not stopping even when it crossed borders.