Japanese multinational retail holding company Fast Retailing launched the everyday basics brand GU in 2006, adding the business to its portfolio of apparel brands, including J Brand, Helmut Lang, Theory and most notably Uniqlo. The name GU is based on the pronunciation of the Japanese word “jiyu,” which translates to “freedom,” and comes from the brand’s mission to provide high-quality and trendy fashion to a broad audience. In 2022, GU opened its first pop-up in the US, locate
Japanese multinational retail holding company Fast Retailing launched the everyday basics brand GU in 2006, adding the business to its portfolio of apparel brands, including J Brand, Helmut Lang, Theory and most notably Uniqlo. The name GU is based on the pronunciation of the Japanese word “jiyu,” which translates to “freedom,” and comes from the brand’s mission to provide high-quality and trendy fashion to a broad audience. In 2022, GU opened its first pop-up in the US, located in the SoHo neighborhood in New York City, and following its success, GU opened its first permanent brick-and-mortar location in the US in New York City in September. Even though Uniqlo is a Japanese brand, it has clearly gained traction with American consumers. This is evidenced by its aggressive expansion strategy in the North American market. However, some retail experts have raised doubts about GU’s ability to do the same.Can GU capture the American consumer’s attention?Since launching nearly 20 years ago, GU has opened 476 locations across Japan, China, Hong Kong and Taiwan. Even though it is a smaller business than its “older sister” Uniqlo, which operates over 2400 stores, GU’s annual revenue is nothing to sneeze at. From March to May 2024, GU’s revenue jumped 5.4 per cent year-over-year to reach $610 million, with $310 million in gross profit. In that same period, Fast Retailing reported $5.27 billion in revenue. But while GU has been steadily gaining market share in Asia, it won’t be easy to replicate that success in North America, especially with players like Shein, Temu and H&M all vying for consumers’ focus. Melissa Minkow, a director of the retail strategy at CI&T, is relatively optimistic about GU’s chances for success.“I think there’s always a chance for any brand to succeed when it’s appealing to consumers’ cost-consciousness. Gen Z is especially appreciative of better prices, and since it already has the connection to the Uniqlo brand, it has a level of credibility automatically,” the retail expert noted. Can GU differentiate its image from Uniqlo?Minkow cautioned that American consumers may have a harder time finding points of differentiation between GU and its more established counterpart. GU operates more-or-less in the same price range as Uniqlo, and the styling of its products is similar to boot. “I’ll be curious to see how they attempt to differentiate themselves not just from the fast-fashion retailers that have questionable sustainability reputations, but from Uniqlo as a brand as well,” Minkow mused. However, all hope is not lost. As Minkow noted, GU is able to play around with trends in a way that its more “classic” sister brand can’t. While Uniqlo offers classic pieces like cotton and cashmere pullover sweaters and straight-leg chinos, GU provides more trendy offerings like barrel-leg jeans and mini-skirts, which are likely to appeal to its Gen Z consumer base. “GU has a point of differentiation in that it has a curated offer and is focused more on elevated basics rather than trying to be at the cutting edge of fashion: that may well resonate with shoppers,” Neil Saunders, GlobalData’s managing director and retail analyst, noted. Another factor that may help GU’s success in the American retail market is the location of its flagship at 578 Broadway in SoHo.“A brick-and-mortar presence will certainly help with localized name recognition, but the brand will have to rely on digital to gain reach,” Minkow warned. “Their app, website and social media channels will be crucial in continuing through the North American retail market, especially considering Shein and Temu have such widespread app usage.”For now, as Osamu Yunoki, CEO of GU, commented, the brand’s North American expansion strategy will start out cautiously, with New York as its trial base. Much like with its first US pop-up, if the brand’s permanent brick-and-mortar New York store proves to be a success, it is highly likely GU will start locking down other store locations across the US in the not-so-distant future. “One of the interesting things to watch will be how Fast Retailing expands GU alongside Uniqlo,” Saunders said.“There is scope for both brands to grow in the US, if only because they have low penetration among [American] consumers. The primary challenge is getting into the right retail locations and building visibility. Uniqlo has now found its stride in doing this, but GU is effectively starting from scratch and it will need to work hard to stand out.”