Muji, the Japanese retail chain stores reputable for its minimalism&recycling product design, no-brand branding, claimed to hit a record high of its revenue and profit lately. And no big surprise, China is its biggest overseas market, which took up 17% of its total operating revenue of USD 963.5 million in the first quarter of 2018 (BTW, its domestic market Japan accounted for 65%). Ironically Europe and North America are regions where Muji is struggling and even losing money.
Currently, Muji has over 934 stores in 25 countries and more than 200 of them are located in China. However, Muji now considers its expansion in China is simply not expansionary enough. Hence the pace of launching 30 stores every year will probably speed up to 50, mostly focusing on 3rd tier cities. Its men’s wear is the most promising category in term of growth engine in China. Meanwhile, it decided to muscle up its weapon of “reducing price” to strengthen its loyal customer base, and is planning to achieve the same pricing strategy between Japan and China by the end of 2018. Such a move is quite drastic for a Japanese company, considering it had not changed its pricing during its first-decade presence in the country. It only started to lower the price in recent years amid the threat from a string of local imitators like Xiaomi, Alibaba, NetEase, Suning…yes local giants are not only copying Muji’s concept store but also undercutting its higher price in China. In Japan Muji’s popularity relies on creating low cost, high-quality products, but in China the price of Muji spikes.
Muji’s e-commerce foray in China remains fairly conservative. Aside from its independent online shop, in 2014 it set up a flagship store on Alibaba’s Tmall. Last month, it just announced a partnership with JD and rolled out one more.
Its brick&mortar innovation arrives at the idea of a hotel neither luxury nor cheap. Room rates start at RMB550. The first one debuted in January this year in Shenzhen and the second one quickly unveiled in Beijing. The reviews of the hotel experience seem rather mixed; especially some customers complained the service standard does not necessarily meet up the brand’s usual premium image in China. However, it does not stop Muji’s admirers flocking to the hotels just for the sake of posting photos on the social media. The hotel even does not bother leveraging online travel agency to attract traffics, and all the bookings have to be done through its corporate channels as Muji fully believes the power of word of mouth from its fan base. Few joked this tactic acts like a typically self-restraint and indifferent style of Muji, which many Muji fans actually found very tantalizing and attractive. For Muji, the hotel is the perfect showroom to display its wide range of products, and if the user experience ever triggers a sudden impulse of purchase, the hotel makes sure there would be a Muji store downstairs.
Even though Muji already realized China is its most important battleground, the short-term gain does not necessarily guarantee a rosy future in the long run.
By: Cecilia Wu