Edit | Yuer Lake
Produced | Tide Rising Network "Yu See Column"
In today's iterative upgrading of consumer groups and the innovative and changing commercial market of consumption scenarios, many consumer brands with unlimited scenery in the past are facing severe tests of the times. This makes their marketing strategy, product positioning, brand image, etc. need to be adjusted to adapt to the new market environment.
It is understood that since MUJI entered the Chinese market in 2005, it has set off a "MUJI trend" and has been welcomed by many consumers. However, in recent years, MUJI's development in the Chinese market has not been smooth, not only has its performance declined, but it has also fallen into the dilemma of "increasing revenue without increasing profits".
Emerging home and daily brands have sprung up, and the competitive environment facing MUJI has become more severe. Consumers' pursuit of MUJI's Japanese minimalist style is no longer what it used to be, and coupled with the twists and turns in the overseas strategy, MUJI's business performance has continued to decline has become the norm.
The development dilemma of increasing income without increasing profits is because it cannot keep up with the pace of the times
MUJI, a grocery brand from Japan, was born in 1980. Over the course of more than four decades, MUJI has indeed created many business myths.
MUJI advertises itself as a symbol and embodiment of life culture, and its products are positioned to provide high-quality basic life commodities, and the pricing is biased towards the middle and high-end. But in the end, it is still a brick-and-mortar retail enterprise, and the essence of business is to pursue profit maximization.
Due to the weakening yen and higher raw material prices, MUJI's product positioning makes it more vulnerable to inflation, while consumer demand for purchases has not increased.
MUJI's parent company, Good Product Plan, announced its 2022 results, with revenue up 9.4% from the same period last year, but operating profit down 22.8% and profit attributable to parents down 27.6%.
According to the financial report, the sales of the three revenue pillars of MUJI's "clothing, food and housing" decreased by 6.9%, 3.2% and 4.6% respectively year-on-year during the reporting period. The biggest decline in apparel may be due to a market prediction error in product positioning. In 2021, MUJI launched "genderless clothing", that is, clothing that can be worn by both men and women, but apparently consumers are not interested, and it has not led to an increase in clothing sales.
Looking back at the data of the past few years, it can be found that since 2016, the development of MUJI in the Chinese market has begun to hit a wall. Negative growth in 2017, followed by sluggish revenue growth from 2018 to 2019. Under the influence of the epidemic in the first three years of 2020, same-store sales have declined significantly, which can be said to be even worse.
In previous years, we can see that MUJI stores need to rely on frequent promotional discount days to maintain the popularity of the past. But in 2022, MUJI's past methods of reducing prices and expanding consumer groups to increase revenue have had little effect.
Reflected in the financial report, that is, the flow of people has not changed, but the sales of the store have declined, which means that most customers who enter MUJI stores are "just shopping but not buying".
The Chinese market is the largest market for MUJI's overseas development, and in order to stop the decline, MUJI plans to accelerate the opening of stores and increase revenue by expanding the scope of store radiation.
According to the plan in the financial report, MUJI plans to add 36 new stores in fiscal year 2023 and 50 stores in China in fiscal year 2024.
However, the core reason for the development of MUJI does not seem to lie in the number of stores, but in the superposition of various internal and external factors. Whether in its home country of Japan, China and other countries, MUJI is suffering from new retail brands such as don Quijote, and MUJI's problem can no longer be solved by opening stores or low prices.
The first is the issue of product pricing. In the Chinese market, MUJI's high prices have been controversial among consumers, and MUJI has repeatedly lowered the prices of some products.
MUJI implemented nine price reductions in just four years from 2014 to 2018. and continue to increase the proportion of local product development in China to achieve product production cost reduction.
The second is the declining quality of products. Recently, the Jing'an District Administration for Industry and Commerce issued a notice and punishment on a product produced by MUJI (Shanghai) Co., Ltd. that did not meet national standards, and imposed a penalty of more than 100,000 yuan.
This is not the first time that this kind of thing has occurred, and there have been cases of Muji's children's clothing sampling unqualified and fined more than 50,000 yuan before.
In the Chinese market, the price of MUJI's products is on the high side. However, the news that MUJI has been repeatedly punished by regulatory authorities has made consumers question the root: Why can there be quality problems with such a high-priced product? The materials used for design and workmanship are not as good as before, is it contrary to the original intention of MUJI?
Finally, in the face of fierce market competition, MUJI's response measures are too slow. The wind of instant retail has been blowing for several years, and MINISO launched local life platforms such as JD Daojia and Meituan and Ele.me in 2018. MUJI did not join forces with Meituan until June last year to deploy instant retail.
Unable to quickly keep up with the pace of the times, it is only a matter of time before MUJI has business problems.
The positioning of products that have been questioned as "IQ tax" is gradually moving away from consumers
Generally speaking, enterprises that experience a major decline in their operations are not affected by unexpected situations, but have some persistent diseases.
MUJI, a Japanese national brand, is an affordable brand in Japan, but after coming to China, it has been transformed into a mid-range brand positioning of "quality", and the consumer groups targeted are mainly petty bourgeoisie and middle class.
When it first entered China, MUJI captured the love of many consumers with its unique design style. With its own distinct brand recognition, it has created a wave of "MUJI", but these have become history. According to data, in the first half of 2022 in the Chinese market, MUJI's revenue was 350 million less than expected.
MUJI first entered China in 2005, and as of August 2022, 325 of MUJI's 579 overseas stores are in China, accounting for more than half of the total number of stores in China. Historically, MUJI's products in China have been priced around 25%-30% more expensive than in Japan, and a few products are even twice as expensive.
The reason why MUJI can successfully obtain a premium in terms of pricing is firstly due to the blind obedience of Chinese people to foreign brands in the past, and secondly, due to the lack of development of the market environment at that time, MUJI has the advantage of entering the market early.
Despite entering the Chinese market early, MUJI did not establish a dedicated product R&D department for the Chinese market until 13 years later, in 2018, announcing the development of a series of products "needed by China" and readjusting product pricing.
Now it is belatedly "currying favor", it seems that MUJI has recognized the market situation. Over the past eight years, MUJI's prices in China have dropped 11 times, but some consumers still believe that buying MUJI is paying an "IQ tax."
Also a Japanese-style brand developing in China, the two stores often live next to each other in the same mall. Both also advocate Japanese minimalist style culture, but UNIQLO's products are often innovative, and cross-border design products emerge one after another; MUJI, on the other hand, is unable to meet diversified consumer demand due to slow product innovation and research and development.
Flat replacement brands continue to emerge, and MUJI is not competitive enough
MUJI's overseas market revenue accounts for 40% of the parent company's revenue, and from the performance of revenue performance in recent years, MUJI has realized the crisis it is facing in overseas markets.
In recent years, many MUJI "flat replacement brands" have appeared on the market, and even some of them are menacing and have good strength. The most typical is "MINISO", on which you can find the figure of three Japanese-style brands: Uniqlo, Daiso and MUJI. MINISO, which has been made by everyone, has also achieved great success.
MINISO takes the low-price route, and similar products can be bought at a much cheaper price than MUJI, naturally stealing part of the market share. At present, MINISO has 3226 stores in China. As of June 30, 2022, MINISO's revenue in China was 7.442 billion yuan, surpassing MUJI.
In addition to MINISO, there are also new consumer home brands such as NOME and KKV. Compared to MUJI, these up-and-coming brands are younger and more aware of the new generation of consumer trends.
Today, MUJI is facing a double attack between offline and online. Offline there are MINISO and KKV, and online are retail home furnishing brands launched by two strong enterprises, NetEase Yanxuan and Xiaomi Youpin.
There is no doubt that MUJI's past success has given many inspirations to its competitors. Under the attack of these brands, the development prospects of MUJI gradually dimmed.
Sustained price reductions have not allowed MUJI to get out of the development dilemma, coupled with the threat of competitors, MUJI has continued to carry out a multi-format layout in recent years, from fresh food stores, coffee shops, hotels and convenience stores, to selling electric vehicles with Honda.
The success of the new business model remains to be seen over time, but there is no way to improve competitiveness in the short term.
Reviewing MUJI's growth process, behind its victory experience, it seems that it is more just a matter of luck. At present, China's new consumer brands are rising rapidly, and brands with a high degree of overlap with MUJI's business are emerging. Especially when the first- and second-tier markets have become saturated, it is difficult for MUJI to open a larger market.
Today's MUJI attempts to shape the image of a lifestyle leader on multiple levels in order to expand its reach to a wider range of people. However, whether such a strategy works will need to be determined by looking at the performance of the next fiscal year.
epilogue
Even if the domestic daily chemical brand market is gradually expanding, but the consumption of the general environment is sluggish, consumers' consumption concepts have also changed. As a result, MUJI's brand positioning has been fundamentally shaken and caught in a dilemma. However, under the premise that profit is the lifeblood of enterprises, price reduction is certainly not the best way.
From boom to recession in just over a decade, there are now internal worries and external troubles. How MUJI will successfully turn over in the future seems to be on its own to find the right answer.