Muji, whose performance is weak, has offered the "three major moves" of price reduction, ecological building, and side business. However, it still failed to improve the core "root cause".
Author: Mak Zhiqing Editor: Lu Xinyi
出品：零售商业财经 ID：Retail-Finance
MUJI's "coffee story" has added a few more strokes.
Not long ago, the country's first coffee pop-up store was unveiled in Suzhou, and at the same time, the first store of Café MUJI in Shenyang officially opened. One is the first pop-up store, the other is the first store in the city, and with the blessing of "scarcity", both stores have staged a grand queue.
Source: Internet
In stark contrast, Café & Meal MUJI in Hong Kong's Harbour City ceased operations.
Behind the "two-level reversal" is the manifestation of MUJI's overall strategic focus shifting to the mainland. In 2021, MUJI announced plans to expand its stores in China in 2024, opening 50 stores in China every year. In February 2024, MUJI opened China's largest flagship store in Chaoyang Joy City, Beijing, covering an area of nearly 5,000 square meters. In May and June of the same year, 17 new stores were set up in China, covering more than 10 cities.
The acceleration of store opening is the main starting point for MUJI to try to "exchange store size for performance growth". Since 2016, Muji's revenue in mainland China has continued to decline, and in order to save the decline, it chose to use expansion to "flat" the decline in the performance of single stores. For example, the intensive opening of 5 new stores in December 2023 directly increased the year-on-year growth rate of revenue from 33.6% to 47%.
However, this is not a long-term solution, and if it fails to improve the profitability of existing stores, overexpansion will only increase the risk of future losses. As a result, cross-border coffee production has become a part of MUJI's efforts to improve the profitability of a single store.
The Suzhou pop-up is a typical case, now on the eve of the opening of the Suzhou Yanlord Cangjie store on August 16, the pop-up store on the basis of retaining the MUJI-style simple aesthetics on the basis of local conditions into the Jiangnan style, in addition to the conventional products, but also specially launched limited products and peripherals, continue to convey the brand culture at the same time, but also undertake the task of building momentum for the new store.
It remains to be seen how effective the cross-border will be, but the meaning of Muji's drunkard is not "coffee", this move is just a "curve to save the country".
01 "Strength" is not enough, "limit" to make up
Around this pop-up coffee shop, Muji put a lot of thought into it.
First of all, Suzhou can provide the greatest boost to the operation of coffee shops.
On the one hand, Suzhou's Kunshan is a "rookie" coffee producing area in recent years, and in 2022, Suzhou's coffee cargo volume will reach 90,000 tons, ranking first in the country; On the other hand, Suzhou, as a new first-tier city, has developed a coffee mentality. The advantages of origin and crowd have laid the foundation for MUJI on both the supply and demand sides.
On the site selection side, the pop-up store is located in the heart of the ancient city of Yanlord Cang Street, Suzhou, and is only a two-kilometer walk away from famous attractions such as the Humble Administrator's Garden, Suzhou Museum, and Pingjiang Road, ensuring the flow of people to the store. In addition, as a high-end commercial district, Cangjie's main consumer groups are also in line with Café MUJI's mid-to-high-end positioning.
On the site design side, the pop-up store combines the minimalist style of MUJI with Jiangnan characteristics. On the front, the blue tile and white walls and the Chinese-style window lattices reflect each other, showing the Suzhou garden style; On the back, the color of MUJI wood is the main color, and the woven sack is decorated to present the natural storage scene of coffee beans, showing the "MUJI-style" philosophy of life.
Source: Internet
However, the pop-up store is small, with only a few chairs at the door and a lounge area behind it that can only accommodate a handful of customers. The open venue, under the scorching sun, has a little less sense of experience.
On the product side, MUJI has "rubbed" a wave of Soviet-style gardens and launched three limited drinks, all of which are matcha products, with white and green color schemes, which are called "Soviet-style style". The price of the three drinks is 28 yuan, which continues the usual pricing of Café MUJI. In order to enhance exposure, the "limited-time benefits" also launched a Xiaohongshu check-in, adding topics and giving away mini ice cream activities.
The price of the pop-up store is in the same price range as nearby coffee brands Starbucks, M Stand, and Peet's Coffee, which means that Muji's coffee pop-up store has to compete head-to-head with mid-to-high-end brands in the coffee world. The core competitor is Starbucks, the third intangible cultural heritage concept store in the country next door.
Similar to Muji's playstyle, the intangible cultural heritage concept store also focuses on cultural export, and the store fully interprets various Soviet-style intangible cultural heritage elements, including winding paths, window openings, pavilions and pillars and other garden style decorations. It is reported that there is also an intangible cultural heritage skills experience area in the store, where activities are held from time to time, so that customers can understand and learn intangible cultural heritage knowledge and experience intangible cultural heritage handicrafts while tasting coffee.
Pictured: Starbucks Suzhou Intangible Cultural Heritage Concept Store
In contrast, the Café MUJI Suzhou pop-up store is relatively shallow in terms of cultural heritage, and only stays at the level of scene decoration.
The only highlight may be the unique Suzhou characteristics of the limited badge periphery (pipa and garden), buy two cups can be given, the current idle fish fried to 50 yuan a piece.
However, although the badge is hot, it can only bring "new ones", and what can really support "repurchase" and attract traffic to stores depends on coffee products. However, the quality of Café MUJI's coffee did not match the high price, and most consumers reported that they could still try it for the badge, but the coffee taste was really difficult to compliment.
It is worth noting that Café MUJI's pop-up store will last for three months, and it is debatable whether its subsequent sales force will continue to be strong after the badge popularity fades.
"Retail Business Finance" believes that MUJI's coffee pop-up store plays a greater role in attracting traffic to subsequent new stores than the significance of making coffee, and the so-called "Soviet-style" in the promotion is also a little insincere. It is true that the Suzhou pop-up has generated traffic and promoted brand interaction, but if the coffee fails to win word of mouth for its price-performance performance, it may ruin the brand's goodwill and pose a hidden danger to the long-term development.
02 Is coffee the "savior" of MUJI's performance?
Investing so much energy in coffee flash mob is inseparable from the current situation of the brand's own worrying performance.
MUJI is facing a "double loss" situation both online and offline, and on the offline side, I don't know when, MUJI has fallen into a delicate dilemma: the store is crowded, but customers are mostly "wandering", the willingness to buy is sluggish, the "guess the price" game is prevalent, and the high customer flow has failed to translate into actual sales growth.
In addition, most of Muji's stores are located in mid-to-high-end shopping malls, and their stores cover a large area, and the already high store operating costs and low conversion rates have put pressure on the performance of its offline stores. In 2018Q2, its comparable same-store growth rate showed negative growth for the first time. In August 2023, Muji said that sales growth at its Chinese stores was slowing, Nikkie Asia reported.
On the upper side, MUJI has successfully exported the brand symbol of "MUJI style" in China, which is not only its core competitiveness, but also its biggest weakness. The concise packaging and product design, and the unchanged style for thousands of years, make it extremely easy to copy. As a result, many white-label merchants have sprung up online, with lower prices and similar styles, to share the cake of Muji.
The problems on the sales side are directly reflected in the financial situation, according to the Q2 financial report for fiscal year 2024 released by MUJI's parent company, Liangpin Plan, from September 2023 to February 2024, the company's revenue and net profit reached 319.839 billion yen and 15.8 billion yen, respectively, a year-on-year increase of 12.88% and 114.3%.
In 2021, former Uniqlo executive Nobuo Dozen became the president of the Ryohin Project (the parent company of Muji), and in his first year, he set a goal of achieving revenue of 700 billion yen by August 2024. Now halfway through 2024, judging from the current performance, it will be difficult for MUJI to achieve its goal.
The root cause of the current predicament is the serious premium of Muji in the Chinese market. After entering the Chinese market, the brand deviated from Japan's local "low price and high quality" positioning, and instead pursued the light luxury brand route, and the pricing strategy was relatively simple and crude. Data shows that in China, Muji's domestically produced goods are priced 25%-30% more expensive than in Japan.
In the early days, the story of the brand was still "moving". The aesthetic trend of young people in China is deeply influenced by Japan and South Korea, and MUJI has become a landmark choice for the domestic white-collar class with its simple, fashionable and high-quality design concept, and its brand charm has made many consumers willingly pay the "brand premium".
Source: Internet
However, with the rise of the "quality-price ratio" trend, domestic consumers no longer worship "brand" blind consumption. At this time, MUJI has no price advantage and no absolute quality, and it is frequently caught in quality and safety turmoil, and the products have repeatedly failed to pass the sampling inspection, which inevitably leads to weak performance.
Muji is clearly aware of the root causes of the malaise and is working to change its business philosophy in Japan.
Since 2014, Muji has reduced prices 11 times in a row, and former president Akira Matsuzaki is determined to adjust the price in the Chinese market to the same level as the Japan market, but this goal has not yet been achieved.
In addition to direct price reductions, MUJI has also adopted a variety of disguised price reduction methods. Since 2018, it has added long-term discount zones to its stores in China, combining the winter and summer discount seasons to further attract customers. At the same time, through cooperation with shopping malls, payment platforms and banks, multiple discounts have been launched so that consumers can enjoy an unimaginable low-cost shopping experience.
However, the effect of price reduction is limited, and it can only improve performance in the short term, and long-term price reduction will damage brand value.
Second, the focus shifts to the brand ecology and strengthens its own brand effect. For its main business, MUJI focuses on product differentiation and design localization, such as the first launch of new products such as AI-flavored fries at the Beijing flagship store, and attracts traffic through differentiated new products; The Henan dialect slogan of the Zhengzhou store, the tie-dye and flowers of the Yunnan store highlight the uniqueness of the brand IP, continue to bring consumers a sense of freshness and shorten the distance.
Source: Little Red Book
The third is to "engage in side business". MUJI has launched a variety of business formats such as home improvement services, apartments, supermarkets, hotels, wet markets, restaurants, and cafes, aiming to deeply penetrate MUJI's unique design aesthetic concept into the daily life of Chinese consumers through diversified touchpoints, and continue to strengthen the brand mark of "MUJI style".
However, the MUJIcom convenience store and Powerlong Apartment Designed by MUJI projects launched in 2020 have not been able to continue to operate, and have been closed or changed hands one after another. However, the growth of the scale of hotels and other formats is limited, and there are currently only three MUJI HOTELS in the world, and the influence is not large.
Price reductions hurt brand value, long-term maintenance is required for ecological building, and side businesses put forward high requirements for costs, and Muji's "three steps" in China have their own worries.
It can be seen that coffee shop may be the simplest business format at present, that is, it can build a "MUJI-style" living space, display and disseminate brand products and concepts, and establish an emotional connection with customers; Coffee's low unit price, high-frequency repurchase and wide user base have become a powerful drainage channel.
03 Coffee is just a shot
Using a side business to drain traffic to the main business is a proven strategic play.
In 1956, the home furnishing company opened an IKEA restaurant in the IKEA store in Älmhult. Later, IKEA restaurants played a huge role in IKEA's difficult times, attracting many consumers to come to the restaurant with one-dollar ice cream, three-dollar hot dogs, unlimited refills of coffee with membership cards and distinctive Sweden meatballs.
Today, more and more brands are using this business strategy to use coffee as an entry point to attract traffic. In March 2024, Gucci opened a week-long pop-up café in Beijing, Shanghai, Shenzhen, and Chengdu. In April, Decathlon's first coffee shop opened in the form of a "shop-in-shop" in Decathlon's Shanghai Wujiaochang store. In July, the country's first Coach Café officially opened in Shanghai Daimaru Department Store......
It can be seen that the coffee shop is only the surface of the business layout, and the scene marketing and experience marketing behind it are also the core driving forces for its entry.
Offline scene marketing focuses on the collaborative reconstruction between the elements of "people, goods and yards". In the context of product homogenization, it is difficult to make a difference between "goods", and brands will make more fuss on the "field", that is, to build a space that carries and conveys brand concepts, and realizes differentiation through brand beliefs.
For example, Muji's coffee shop products also include homogeneous products such as "raw coconut latte and duck feces fragrance". The only product that can be used as a differentiator is limited to different cities, but most stores only have 2 models, which accounts for a relatively small amount. On the scene side, it continues the creation of "MUJI style", which can attract consumers as a unique style and main brand effect.
This "flash mob" in Suzhou is also a test of the new format. In addition to being the "first" pop-up, this is also the first time that Café MUJI has combined urban characteristics with MUJI aesthetics in store design, and it is the first time that it has been presented to consumers in the form of an independent coffee shop. Previously, the regular Café MUJI was either a stand-alone storefront of nearly 200 square meters or existed as a shop-in-shop.
If the test is successful, Café MUJI may support the premium space of coffee in the future through urban specialty stores and limited editions; There may also be a more diverse store layout.
However, the side business of coffee cannot replace the main business after all, and it is a difficult challenge for Café MUJI to attract traffic, realize the conversion from traffic to main brand customers, and effectively maintain the private domain ecology. How to undertake this wave of traffic for its main products is a question that MUJI needs to think about urgently, and the answer may be contained in the brand name.
Whether it is making coffee or selling groceries, in addition to having "print", there must also be "good products", and the reason why MUJI cannot sell products is not that consumers are unwilling to spend money, but because they are unwilling to spend "unworthy" money, and cost performance is the "root cause" of MUJI.
In order to stand out in the Chinese market, the brand is no longer the decisive factor, and MUJI can no longer regard Chinese consumers as the "big wrongs" paid by the brand, and should also devote more energy to the product itself, in addition to the brand.
Moreover, given the current trend, the number of brands in cross-border coffee marketing will only increase in the future. When this marketing method gradually moves towards homogenization, the novelty fades, the traffic is diluted, and in order to retain consumers who like the new and hate the old, we should stick to the two "positions" of brand and product.