Cross Company opens fairtrade fashion chain, targeting ¥1 trillion globally

When a retailer launches a new chain and says it will have sales of more than ¥1 trillion one day, suppliers and competitors take notice– although such extreme targets are a little too common among leading apparel chains these days. But when that company has a record as the fastest growing fashion retailer since 2000, there is a chance the target may turn out to be realistic. Then when the same chain says it will only sell fairtrade and sustainably sourced merchandise, it becomes intriguing.

Cross Company opened the first store for its much vaunted new chain Koe at the end of September. Koe has been billed by Cross Company as its big hope for global expansion, saying it expects to see it become a ¥1 trillion chain. Globally to date, only five apparel retail groups have broken sales of ¥1 trillion. Cross Company itself saw sales exceed ¥100 billion for the year ending January 2014 – more than double four years before but a long way from its new target – from 600 stores across brands like Earth, Music & Ecology, E Hyphen World Gallery, Green Parks and Sevendays=Sunday.

Koe is not just about global ambitions. It also reflects the Okayama-based firm’s determination to create the first sustainable fashion chain of real scale. It plans to source solely from environmentally friendly and ethical ‘fairtrade’ producers by the end of 2016. It already works with 50 factories in China that have cleared these stringent conditions, and has initially employed six staff dedicated to factory checks, including two based in China.

The low ecological footprint and ethical sourcing policy will feature heavily both in stores and in advertising. Cross Company plans to make transparency of supply a key part of the branding, providing details on fabric sources, conditions of workers in manufacturing plants, and the ecological footprint of shipments. Stores are also being designed to minimise energy consumption and use renewables where possible. In essence, Koe aims to be a counterpoint to fast fashion, offering ecologically sourced, high quality and durable clothing at reasonable prices. 1% of net profits will be donated to charities.

The first store opened in Cross Company’s home town of Okayama, a 630 sqm stand alone store – future stores will be around 700-1,500 sqm. Two more stores of similar size opened last month, one in Takamatsu in Shikoku and the other in Niigata. One more store may open this year, with 10 planned for 2015, and another 25 in 2016, including the first five stores in overseas markets, likely to be cities like London, Shanghai and New York to start with. By 2020 Cross targets 200 stores within Japan and 100 overseas.

Located in a hip ex-warehouse area 20 minutes from the city centre, the sleek white facade of the Okayama roadside store is echoed inside; a bright white minimalist interior focuses the eye on the merchandise, other than the huge artificial tree in the centre of the store created by renowned flower artist Makato Azuma. The store sells men’s, women’s, children’s and maternity wear as well as underwear, accessories and footwear with a core target of late 20s and 30s consumers. Fashion basics predominate, with a muted colour palette, other than childrenswear which looks the most original and dynamic collection. Above all, Koe is emphasising quality and fairtrade. Prices are around ¥17,000 for outerwear, ¥5,000 for shirts, ¥7,000 for knits and ¥6,000 for skirts, and for childrenswear, skirts average ¥5,000 and cotton tops ¥4,000.

To maximise logistics efficiency, Cross Company has bought a logistics package from Fujitsu that incorporates RFID tags for all merchandise, making it easy to track inventory, complete stock checks and reduce theft, freeing shop staff to focus on customer service and reduce the number of staff needed per store. Cross estimates per staff sales will rise from an average of ¥27 million per year to ¥40 million as a result, and plans to introduce the same system across all its chains within a year. At the till, the RFID tags will be read by a sensor and once the purchase is made, the tag will automatically be wiped allowing the item to leave the store without an alarm going off. This obviates the need for dedicated security tags and the additional time required to remove them. At the same time, sensors in shop furniture will guide staff as to where to place merchandise.

By 2020 Cross Company expects sales of Koe alone to exceed its current company turnover of ¥100 billion. Cross has also said it may consider an IPO in 2016-17 due to the high cost of leasing stores in key capitals around the world, particularly London and New York. If it can maintain growth levels and make Koe a success, it is likely to be well-received by investors.