TOKYO, Japan — One of Japan’s leading fashion retailers, Cross Company, will launch a new chain of fashion stores this Autumn, specifically targeting the US and European markets, as well as Japan. Details remain sparse, but the new chain will have stores ranging from 700 to 1,500 square meters in size and offer both men’s and women’s fashion (most Cross Company stores, today, are only around 250 square meters and largely cater to young women).
The scale of the project is genuinely ambitious — the chain aims to generate sales of ¥1 trillion (about $9.8 billion) per year — and is more similar to the approach developed by Inditex and H&M than the approach characteristic of Japanese fashion retailers, which tend to expand through a portfolio of smaller chains. To date, the only apparel chain with sales of close to ¥1 trillion in Japan is Uniqlo, which generated sales of ¥934 billion last year.
The scale of the ambition also far surpasses Cross Company’s current size. With around 1,000 stores (across brands like Earth, Music & Ecology, E Hyphen World Gallery, Green Parks and Sevendays=Sunday) Cross Company was forecasting group sales of around ¥100 billion for the year ending January 2014 — more than double what the group generated four years ago, but still a fraction of its current ambition.
Apart from the ambitious sales target, one of the most interesting aspects of the new chain is its emphasis on ethical and eco-friendly sourcing, which the company hopes will resonate amidst growing concern about both the environmental impact of fast fashion and the working conditions of textile workers. The new chain aims to be a counterpoint to fast fashion, offering good quality, durable clothing, that's ethically sourced, at reasonable prices. If all goes according to plan, 100 percent of its production will be sustainable and ethical by the end of 2016.
To achieve this, Cross Company has reportedly spent the last two years building a new supply chain network. As always, it is working closely with partners for both fabric and apparel production, but is reducing the number of suppliers it works with from 400 to 100, in order to make it easier to manage and monitor them.
A new team of designers, planners and logistics staff has also been set up. Given the company's global ambitions, finding overseas staff is critical and Cross Company is reportedly using its contacts through suppliers, as well as through US subsidiary Thom Browne, to recruit talent.
Unsurprisingly, transparency will be a key part of the new chain's marketing strategy, which will emphasise ethical and eco-friendly sourcing, and provide details on fabric sourcing, the conditions of workers in manufacturing plants and the ecological footprint of shipments. Stores are also being designed to minimise energy consumption and use renewable energy wherever possible. In fact, Cross Company has already made relatively significant efforts in some of these areas, installing LED lighting at its stores as well as solar panels at its head office. The company also runs community welfare schemes in its hometown of Okayama.
Since inception it has also made staff welfare a key value. It was one of the earliest Japanese companies to introduce genuinely flexible working conditions for working mothers, one of the reasons it was able to hire top-level talent from competitors even when it was a small company — one of the key reasons for its success.
But, to date, Cross Company has little overseas operational experience. The firm does operate stores in Asia, notably Earth, Music & Ecology. It first began wholesaling to Hong Kong in 2005, adding stores in Taiwan in 2008 and exports to China in 2009. In 2011, it signed a China-focused deal with I.T. Limited, a leading Hong Kong-based fashion distributor. But compared with its present overseas operations, the newly planned chain is on a different scale altogether.
Cross Company is nothing if not ambitious and has long stated that it has the potential to become a ¥1 trillion business, an ambition that is lent credence by its relentless expansion: with sales up more than 7,000 percent in the last decade, Cross Company has posted the fastest growth of any apparel retailer in Japan.
It also has a good record on delivering on its promises: four years ago Cross Company said it would hit sales of ¥100 billion in FY2013 and it looks to have achieved this target. It is forecasting a further jump to ¥120 billion in FY2014 with 200 new stores (77 overseas) rising to 1,635 total stores in FY2016 and sales of some ¥160 billion at which point the privately-owned firm plans a listing on the Tokyo Stock Exchange.
Make no mistake, the creation of a ¥1 trillion chain is still a long way off. But Cross Company’s record to date and the quality of its management team, not to mention backing from many of Japan’s leading trading firms, suggests its plans should not be written off.
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