Muji under financial pressure

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Investors are worried about the minimalist Japanese brand Muji. On top of the drop in operating profit, its financial outlook fell below analysts’ expectations. And despite the fact that the value of Muji’s parent company Ryohin Keikaku Co. tripled from 2013 to 2018, shares have fallen nearly 40% in the past year.

 

Muji President Satoru Matsuzaki commented that the brand would need to work hard to thrive in international markets to compete with the global success of its rival Uniqlo. In order to succeed, he said, “we need to break down and build up a lot of things.”

 

Matsuzaki, who has pursued an agressive store-opening policy from China to Kuwait, plans to steer the brand through these tough times to achieve growth while sticking to the brand’s original philosophy. The brand’s full name, Mujirushi Ryohin, translates as ‘non-branded quality goods.’ When the brand launched in 1980, it aimed to offer quality products at affordable prices with a ‘less-is-more’ design aesthetic.

 

Stationery and office storage was a key component of its minimalist offering, which included luggage, office furniture and neutral-tone clothing. Muji put minimalism in the mainstream and made it affordable. International expansion began in earnest in the 2000s, with the brand launching in China in 2012. Overseas stores now account for around 40% of all sales.

 

Muji’s financial problems have arisen in part from being undercut. Its unbranded, simple design ethic makes it a target for copying. Low-cost imitations abound in China, where the price of real-deal goods are inflated by taxes and tariffs, making the homegrown Chinese replicas far more affordable.

 

Experts in Japan have suggested Muji needs to reduce its prices in order to remain true to its original philosophy of providing low-cost essentials globally.

 

Its strategy is to produce more products in the countries where they are to be sold. In India, for example, the company will introduce more than 200 items made in India for the Indian market. The brand has opened its first development office in China, with the aim of monitoring lifestyle trends there. Instead of imposing Japanese style on the Chinese market, they will develop products specifically for China.

 

Only time will tell if these strategies pay off, and Muji turns the tide of falling profits.

 

www.muji.eu

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