Founding GU: filling the low-price gap (2006)

Filling a price-band gap behind the global push

The heart of this decision lay not in the flash of a new business, but in getting ahead of and filling the side effect its own success would create. The more Uniqlo moved, via global flagships, toward a high-quality urban brand, the more a vacancy opened in the domestic low-price band it had once held. Hand that vacancy to a competitor, and eventually its own customers would be shaved away. Fast Retailing chose to fill that hole not with another company but with its own separate brand, carrying over the existing asset of Uniqlo’s SPA to bring a cost advantage.

The structure in which a single company runs several brands by price band is the same form as Spain’s Inditex, which holds Zara and Bershka. GU was designed not as a follower but as a vertical complement to Uniqlo. That the global flagship strategy and the founding of GU were played in the same year, 2006, shows this was a two-sides-of-one-coin judgment that ran the move to raise the price band and the move to defend the band below it at the same time.

The stronger the mainstay business, the harder it is to notice the hole its own success opens. The 2006 choice to tend, in the same year, both Uniqlo’s move upmarket and the defense of the domestic low-price band is suggestive as a case of getting ahead — with the asset of a separate brand — of the blind spot that a mainstay’s growth brings.