Japanese retailer MUJI offers simple charms for its unbranded products. The name refers to unbranded good-quality products. MUJI has achieved a big success in Japan and Southeast Asia over the last four decades. However, MUJI is facing sluggish growth in the China market, where several knock-off brands copy its minimalist style.
MUJI was founded in 1980 during Japan’s economic boom, when the domestic market witnessed the rise of 100 million middle-class consumers. While many local Japanese consumers were attracted to western luxury brands, the MUJI founders decided to take the opposite approach and offer simple, affordable quality products with elegant design.
Muji started with only 40 products and opened its first store in 1983. Its no-brand strategy and minimalistic style became popular when Japan’s economic bubble burst in the early 1990s. Many Japanese started going back to the essential.
Japanese brands like Toyota, Sony and Canon have become household words across the world since the 1980s. MUJI also expanded its presence in Hong Kong, Taiwan, Singapore, Europe and the United States. It has also achieved great success in China.
MUJI now has 260 shops in mainland China, 20 in Hong Kong and 48 in Taiwan. The number of shops in Greater China is expected to reach 500 soon, surpassing the number of MUJI shops in its home country. The company regards Greater China as its most significant market for future growth.
However, in the last 12 months, the share price of MUJI, which is listed on the Tokyo Stock Exchange, has plunged over 50 percent to close at 19,620 on Thursday, from a peak of 41,200 yen in June last year, with its market cap dropping to 553.14 billion (US$5.04 billion).
By contrast, Fast Retailing, the parent company of Japanese retailer Uniqlo, saw its share price surge nearly 40 percent in the same period, with its market cap reaching 6.9 trillion yen.
Rapidly deteriorating sales revenue in China is the key cause. MUJI’s same-store sales revenue fell 4 percent in the second half of last year, from a 0.2 percent decline in the first half. It marks the first decline since MUJI opened shop in China.
In recent years, MUJI has been battling against the Chinese copycats. Since MUJI is built on the core concept of “no brand”, competitors can easily replicate the model and outstrip the company with lower pricing but similar quality.
MINISO, a Chinese retailer, has copied MUJI’s business model, offering pretty much the same products at lower prices.
Since its launch in 2013, MINISO has seen the number of stores in its network grow rapidly to more than 3,000 worldwide.
It is said that MINISO has already lured big investors such as Tencent (00700.HK) and Hillhouse Capital, securing from them a 1 billion yuan (US$144 million) strategic investment. Its latest valuation has surpassed 50 billion yuan.
MUJI’s expansion plans in China can be dragged down by these copycat brands. In that sense, Japanese clothing brand Uniqlo, which is also offering affordable clothing with simple designs, is facing a similar risk factor in the Chinese market.
This article appeared in the Hong Kong Economic Journal on May 23
Translation by Julie Zhu
[Chinese version 中文版]
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