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Tuesday, May 9, 2017
Japan's Muji Predicts Big India Growth After China Success
A Japanese retailer famous for minimalist products and no-logo branding is betting big on the world’s most colorful retail market as it pushes forward with an aggressive overseas expansion.
Strong growth and demographic trends will eventually make India the second-largest international market for Muji stores after China, Satoru Matsuzaki, president of Muji-owner Ryohin Keikaku Co., said in an interview in New Delhi. Although China accounts for about half of the company’s 403 international locations, Matsuzaki said India has huge potential. He plans to open two to three stores annually in the South Asian country, including a flagship store in Mumbai next year.
Ryohin Keikaku, which operates around 400 additional stores in Japan, earned nearly $3 billion in revenues in fiscal 2017. The firm’s international locations are set to surpass the number of Japanese stores as the company capitalizes on Asia’s rising middle class and moves away from its home market, which is struggling with deflation and a shrinking, aging population.
Shares of Ryohin Keikaku have gained about 15 percent this year in Tokyo, compared to the 4.4 percent rise in the benchmark Topix Index. The stock dropped as much as 0.8 percent Wednesday.
Muji will open 15 to 20 stores each year in Japan, compared to between 50 and 60 stores internationally, Matsuzaki said.
Despite Japan’s negative macro trends, the company’s home territory remains "healthy", he said. "Japan, for us, is not a shrinking market," he said, adding the firm expects to maintain 10 percent growth or more in sales and revenue.
The international expansion hasn’t been without hiccups. In March, a Chinese television show accused Muji of selling food items allegedly contaminated by radiation, hitting the firm’s stock price. Matsuzaki said the company had done nothing wrong.
In India, the company has three stores -- in Mumbai, Bangalore and now New Delhi -- which is a far cry from China’s 200 stores. Matsuzaki said this year Ryohin Keikaku will open another store in the national capital region -- in Noida, just outside of New Delhi -- before opening the flagship location in Mumbai next year. "We’ve only just begun in India," he said.
Asked whether the brand’s trademark minimalist products, often in muted tones, could do well in India’s colorful, status-conscious retail market, Matsuzaki said the same concerns had been raised when the company prepared to open stores in China, where red is seen as an auspicious color.
"Everything that we’ve got in China has had an amazing response," he said. "There is a pattern there. As countries grow economically, and there’s high momentum, people tend to steer toward simpler and more functional products."