TOKYO -- Ryohin Keikaku, the operator of Muji household goods stores worldwide, is shifting focus to the U.S. market after expanding its business in China.
Muji's unassuming products offering simple designs but high quality and functionality have been received well in China, where the number of stores reached 140 as of the end of November. A giant store opened in Shanghai's main commercial area in December, with people waiting in lines of several hundred meters to get in.
Deeper roots in China
Ryohin Keikaku's East Asian operations, excluding Japan, saw group operating profit jump 110% on the year to 11.6 billion yen ($102 million) in the March-November period. The earnings, most of which were generated in China, further narrowed the gap with the company's business in Japan, which posted a group operating profit of 14.6 billion yen for that period.
Muji stores' products will gain in popularity as Chinese consumers mature, some experts predict. Growth in same-store sales there is slowing amid the country's economic slowdown, but the brand is taking deeper roots in the market. Its Chinese operations likely will prove more solid than many believe.
"Consumers' values shift as the domestic economy slows," an analyst at a foreign brokerage said. As this change takes place, Chinese "consumers' support for Muji's simple product concept will rise."
"Chinese consumers' focus is shifting from vanity to real needs," Ryohin Keikaku President Satoru Matsuzaki said. "Until recently, they believed owning brand products would differentiate them from others, but they are thinking differently now. This change has been serving as a tailwind for us."
Ryohin Keikaku's key challenge now is that overseas operations, except for Chinese stores, are not contributing to earnings. The company is working to turn things around, such as by renovating old stores in the U.S. and Europe and opening a large shop on Manhattan's Fifth Avenue. But the Japanese company has been running operating losses in those major consumer markets. For Muji to achieve sustainable growth, bolstering overseas operations outside China is a must.
"Our next target is the U.S. market," Matsuzaki said. Fortunately for the company, Muji brand products enjoy a good reputation among U.S. consumers.
Ryohin Keikaku will begin a new medium-term business plan after the existing one concludes at the end of the current year through February 2017. The new plan will be a showcase for Matsuzaki, who has spent many years working in overseas markets.
"I will be adding my own personal color starting in the next medium-term business plan," the president has said on multiple occasions.
The company's chosen goals in the new business blueprint and the strategies to achieve them will hold the key to success for Muji stores in the U.S.