What Happened To Muji's Parent Company For The First Time In 8 Years?

In the past more than 10 years, lifestyle brand MUJI has been one of the most famous Japanese brands in the world through simple design and daily practical goods.

Facts have proved that "Less is more (less is more)" is a popular concept of life, but if it is a long-term business strategy, it needs constant evolution. In April of this year, MUJI's parent company's good plan announced its annual results, and sales fell short of analysts' expectations. Operating profit declined for the first time after eight years of continuous growth, and the same store sales in the Chinese market also declined.

In the 2019 fiscal year ending February 28, 2019, the core business data of the good plan are as follows:

Sales increased by 7.9% to 408 billion 850 million yen (about 26 billion 100 million yuan).

Operating profit fell 1.2% to 44 billion 740 million yen over the same period.

Net profit increased by 12.4% to 33 billion 850 million yen, a record high

Sales in China increased 11.6% to 75 billion 90 million yen (4 billion 800 million yuan) compared with the same period last year, while same store sales fell 2.1%. Benefiting from the steady implementation of the renovation of new stores and old stores, mainland market sales increased by two digits, but procurement plans and preventive shortages still need improvement.

The worry of investors is that in 2013~2018 years, the market value of the good plan increased by nearly two times, but last year, its share price dropped by nearly 40%.

In 1980, MUJI was born in the form of its own brand of Xi You department store, which is intended to provide limited selection of low-priced products. At that time, Japanese consumers were extremely critical and extravagant, and the products whose quality did not reach the specific standard were only lost. MUJI goes the other way. The first batch of products includes mushrooms with gaps, which are sold at a discount price, of course. Such a practice is one of the performance of the good quality plan "reasonable low price" concept.

Emphasizing the practicality and sustainability of products, the design of MUJI has become a major feature of many years. In addition, MUJI's product design also follows the minimalist style. Taking its famous drawer type sorting box as an example, all boxes are as deep as the width and height changes.

In 1989, Xi You Department divestiture plans to set up an independent company. With its unique ideas, affordable prices and comprehensive product lines (food, stationery, bags, furniture, etc.), MUJI soon attracted a large number of loyal fans.

In 1991, MUJI opened its first overseas store in London, but the time for the brand to actively expand its overseas market was 20 years later. In 2012, MUJI opened a number of stores in China. By the end of fiscal year 2019, the total number of overseas stores in MUJI was 497 (358 in China), and 20 Cafe&Meal stores. In the local Japanese market, including direct and authorized stores, a total of 420, Cafe&Meal stores 29. Local market sales account for 60.2% of total sales.

Matsuzaki, President of Satoru Matsuzaki, has said before: "I hope that by 2030, there will be MUJI stores in important cities all over the world, and consumers will buy and use our products every day. To do this, we need to break many things and build a lot of things. "

Matsuzaki Kyo hoped that MUJI could also maintain its original idea when expanding globally. Fourth years after he took office, he led the new projects of MUJI Hotel and MUJI bus design, and actively extended to new markets such as India and Switzerland. In April this year, MUJI's first Japanese hotel was officially opened.

In order to boost sales growth, Mr Song made several plans, such as shifting production to cheaper locations and launching products specifically designed for Chinese consumers. MUJI said in 2017 that it plans to add 40 new stores to China every year in the next 4 years, from 200 stores to 360 at that time. The company will continue to open stores in other Asian countries and regions. By 2021, the number of overseas stores increased by 60% to 640.

China's market strategy reform

Although the number of overseas stores in MUJI has exceeded that of the local market, the brands sold in all stores are the same. They do not adjust to the local market demand. The specifications of pencil bags are no problem, but the brand takes ten years to change the sheets sold in China to Chinese bedding standards.

At the same time, MUJI's "no brand" brand strategy, direct and no change design, makes its "cheap imitation copy" in China emerge in endlessly. Part of the price problem is affected by tariffs, but more importantly, the price range of MUJI in the domestic market is "fast fashion", but in China, it is positioned as the "middle end" brand. In China, a small notebook of MUJI sells for 25 yuan, and its retail price in Japan is 315 yen (about 20 yuan). MUJI mobile fan, which sells for 190 yuan, originates in Guangdong, China. It sells only 39.9 yuan for Miniso.

Yoshinori Fujikawa, a professor of management at Hitotsubashi University's Japan School of international strategy, said: "what MUJI needs to do is to recognize the positioning of suppliers with high cost performance products. They must cut prices so that everyone in the world can afford it."

In order to achieve the goal of lowering prices, MUJI will adopt more local production local sales in the future, but the beauty product line will continue to maintain Japanese production. Next year, the company will launch more than 200 locally produced products in India stores. In addition, the company will shift more production to cheaper Southeast Asia.

In the Chinese market, MUJI set up the first product development office in September 2018, and the staff are responsible for monitoring the lifestyle trends in the Chinese market. Matsuzaki Kyo said: "we have to sell lifestyle products that Chinese consumers need. So far, they are still rushing to buy our products with MUJI brand, but in the future we will be part of their lives."

In the face of the problem of "Shanzhai", MUJI may have to cut down its products sharply, and choose the styles with huge sales potential from the current 7000 products to retain. It also needs to speed up production and create larger stores in prime locations. However, the new strategy may be contrary to the original intention of the brand creation, and it may also cause the old fans' antipathy.

Jefferies Japan Ltd analyst Mike Allen said that although MUJI has the reputation of "good brand", rapid expansion has created a series of problems. "They put their fingers into all cookies in the world, but some of them are biscuits, others are mice. In my opinion, it's more time to bite than to get cookies. "

The core financial data of the good plan are from March 1, 2019 to May 31st, the first quarter of fiscal year 2019.

Sales increased by 5.5% to 112 billion 300 million yen compared with the same period last year.

Operating profit fell 22.3% to 10 billion 350 million yen over the same period.

Net profit fell 30.9% to 6 billion 590 million yen over the same period.

China's market sales increased 5.7% to 30 billion 820 million yen compared with the same period last year, operating profit fell 4.2% to 3 billion 340 million yen.

Note: the current 100 yen is about 6.4 yuan.