A lesson from MUJI's experiences in HK and China

May 28, 2019 17:34
A MUJI store in Hong Kong. The Japanese retailer has witnessed some ups and downs in its overseas business. Photo: MUJI

Last week’s story on the copycat challenge faced by Japanese retailer MUJI has made many fans worry about the brand's fate in the Greater China market. Amid this, I received an email from a former MUJI executive wherein he shared his observation that Hong Kong has been key to MUJI’s rise and fall in overseas markets in recent years.

MUJI opened its first Hong Kong store in 1992, making the city one of the first overseas locations  the brand tapped into. However, the first shop was shut around one year later, as the headquarters changed the firm's overseas expansion strategy. Then in 1995, MUJI came back to Hong Kong and opened four shops.

Unfortunately, MUJI was badly hurt by the economy in the Asia region during the 1998 Asian Financial Crisis. The management agreed that MUJI’s aggressive expansion in overseas markets was one of the major factors that led to a huge loss. As a result, the company decided to shut down overseas shops completely. And once again, all of the four Hong Kong MUJI stores were shut down in December 1998.

Tadamitsu Matsui, the former chairman of MUJI, revealed in a book about MUJI that he had visited MUJI shops in the late 1990s, as he found that the firm had made some bad decisions with regard to location of overseas stores. He cited MUJI outlets next to Disneyland park and Musée du Louvre in France as examples, ventures that resulted in hefty rents and retail locations unfit for the brand’s minimalist style. That prompted the top management to close all shops overseas, including four in Hong Kong, which were running well.

However, while MUJI fled the market, Hongkongers shows an unexpectedly strong fascination with Japanese products and brands. It's said that a large number of Hong Kong customers kept writing letters to MUJI’s headquarters, requesting the brand to reopen stores in the city.

Tadamitsu Matsui was overwhelmed by the enthusiasm from Hong Kong consumers, and as a result, MUJI came back to Hong Kong, with a more cautious approach this time. It cooperated with Seiyu (Shatin) Department Store in 2001, and later moved to Lee Theatre Plaza in Causeway Bay and opened a flagship store there.

The flagship store in Causeway Bay has set a record for a single day sales in MUJI, as it turned out to be a big hit for the brand overseas. The success convinced the company to revive its overseas expansion. MUJI now has over 20 shops in Hong Kong, and it has extended its ambition to get a strong market presence in mainland China, with plans to ramp up the number of shops in the mainland from 260 to 500.

The success in the flagship store in Hong Kong affirmed the MUJI management’s belief that Chinese shoppers (Hong Kong shoppers to be exact) highly prefer Japanese products, and brought high expectation in relation to the growth prospects of MUJI in Chinese cities.

However, the brand witnessed sluggish sales in mainland China in recent years. The slide came amid increased threat from Chinese homegrown copycats, but it was also a reflection of the fact that mainland Chinese were not that “frenetic” about Japanese styles and products, compared with Hongkongers.

If there is a lesson in this for Japanese brands, it is that they could learn a bitter lesson if they copy the same strategy in Hong Kong to the mainland market.

This article appeared in the Hong Kong Economic Journal on May 28

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist