Uniqlo looks to cash in on Bangladesh's middle class

http://www.bbc.co.uk/news/business-23222484

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Koli Ahmed browses through the brightly lit clothing store just off Elephant Road, one of Dhaka's busiest shopping streets, with an unusual familiarity.

It seems odd because this Uniqlo outlet, the first of any major global retail clothing brand in Bangladesh, has only just opened.

Sales staff eagerly explain to shoppers what is on offer - basic polo T-shirts, jeans, and some traditional wear.

A lot of it is similar to what you can find at any of Japanese company's much larger flagship stores in London, New York or Tokyo.

"I have known Uniqlo for a long time. My brother lives in Tokyo, and I have clothes from their store," says Ms Ahmed, who runs a small business.

"I am really glad that they are now available in my country. I can now buy them here."

Producer to consumer

There is another similarity between what shoppers such as Ms Ahmed can now buy and the Uniqlo stock available to her bargain-hunting Western counterparts.

They are all "made in Bangladesh", at factories just a few kilometres from the new store.

As the world's second-largest exporter of High Street clothes, after China, the country is a top destination for global brands looking to make garments at a low cost.

"Bangladesh has, originally, been an attractive production base," says Yukihiro Nitta, chief executive of Grameen Uniqlo, the social business set up as a collaboration between the Nobel Prize-winning founder of Grameen Bank, Dr Mohammad Yunus, and Uniqlo.

But by opening retail outlets here, the company is acknowledging what economists have been pointing out for a few years.

"The economy is growing rapidly. There are 160 million people living in Bangladesh. So, we found that we have a great opportunity to start a retail business," says Mr Nitta.

Nearly $100bn (£66bn) is spent on private consumption in the country every year, according to the latest World Bank data, with non-essential items such as fashion retail accounting for a growing proportion of that number.

As is the case among many of its Asian neighbours, this rapid consumption growth is being fuelled by the growing middle class of Bangladesh.

"Within the last decade alone, the size of the middle class has nearly doubled to more than 30 million. During this same period, their incomes have doubled too," says Dr Zahid Hussain, a senior economist at the World Bank.

These Bangladeshis have more disposable money to spend from their growing incomes.

Until now they have been well catered for by local clothing brands, and a steady trickle of imported global ones.

There also exists a burgeoning market of counterfeits and rejected export items.

But their wish list is growing.

"Many Bangladeshis are travelling abroad, taking holidays abroad," says Prof Imran Rahman, vice chancellor and director of the School of Business at the University of Liberal Arts Bangladesh.

"They are being exposed to how people in neighbouring countries live, what kind of clothes they wear...

"The increase in their expectations and growth in disposable income will create a situation and market for foreign branded items to come in here."

And there are already hints of that happening. Inside the Uniqlo store, Golam Kibria has nearly filled up his small blue shopping basket with special launch-edition T-shirts and denims.

"I have heard of the brand Uniqlo. And I have also seen the brand abroad. I have visited a few [of their] stores," Mr Kibria, a young professional, tells the BBC.

Safety plan

Like other major global brands, and as Asia's largest retail clothing chain with growing global ambitions, Uniqlo's owner, Fast Retailing Company, has been manufacturing clothes in Bangladesh since 2008.

But the collapse of a garment factory on the outskirts of the capital, Dhaka, in April, which killed more than 1,100 people, has put pressure on global clothing retailers to improve safety standards and increase labour rights in factories that make their clothes.

Since the April disaster, 70 retailers and brands, mainly from Europe, have joined a legally binding international safety accord for Bangladesh launched by global trade unions.

Major US retailers have also launched their own alternative safety alliance.

However, Uniqlo is yet to join either of these plans.

Fast Retailing Company has told the BBC that they are scrutinising the details of the global accord, and they expect their own investigations into safety at partner factories to last till the middle of September.

The Japanese retailer says it has established its own code of conduct for production partners, and monitors their working conditions.

Most Bangladeshi labour unions have rejected the North American plan, pointing out that it lacks accountability.

On Uniqlo not joining the global safety pact yet, Kalpona Akter, executive director of the Bangladesh Center for Worker Solidarity, says, "The plan, which is now in the implementation phase, is still open. I will call on all other brands, including the Japanese one (Uniqlo) - they all should sign this accord because it is legally binding.

"The workers will get the privilege to give their voices in the improvement process.

"If they (Uniqlo) want to go with their own safety standards, I would say it will not be acceptable because for one garment industry, we cannot have multiple policies," adds Ms Akter.

Made by locals, for locals

Fast Retailing Company added that even though it was operating as a commercial venture, Uniqlo's business in Bangladesh is styled as a social business under the Grameen Uniqlo brand.

The basic idea is to reinvest profits and create local employment through the manufacturing of clothes and its planned nationwide network of stores.

Made by locals, for locals - as the company puts it.

Back at the new Uniqlo store, like any self-respecting shopper Koli Ahmed was out for a good bargain.

The clothes are priced between 195 and 1,209 Bangladeshi taka ($2.50 to $15.50; £1.70 to £10.50).

Her verdict? "Quite reasonable."