My Yahoo!Back to basics at Muji
A retail-chain makeover.
In the late 1990s, when many of Japan's large department stores struggled to sell designer brands to increasingly frugal consumers, a small Tokyo retailer attracted legions of fans with its logo- and label-free brand of clothing, housewares and stationery products.
Mujirushi Ryohin, known as "Muji" outside Japan, defied the ways of a brand-obsessed society, marketing its own form of chic, minimalist design. In earth-tone hues of white, brown, beige, slate and silver, it turned generic into stylish. The very name Mujirushi Ryohin means "no-brand goods."
Muji started out as a line of generic goods by Japan's Seiyu supermarket chain in 1980. Nine years later it spun out on its own; today Seiyu holds 7%.
The solid quality of today's product line--which now includes luggage, bicycles, furniture and electronics--combined with a "lower price for a reason" selling pitchto impress its customers--typically, young women. And Muji's operational model, which cut out expensive middlemen in Japanese distribution, mirrored that of another rare 1990s success story in the country, Fast Retailing, whose Uniqlo casual-wear stores are in some ways a competitor of Muji.
Net income for the parent, Ryohin Keikaku (which has no other units), more than tripled in four years, to $53 million (¥5.8 billion) in the year ending February 2000. In that same period, sales more than doubled, to $967 million, leading to the company's qualifying for a spot on the FORBES GLOBAL Best Under a Billion list. The antibrand brand has also gained cachet overseas; it has outlets in the U.K., France and Hong Kong.
But Muji got ahead of itself. It stumbled in 2000 after racing to open 45 domestic stores before Japan implemented a new law designed to check the rise of "big box" (usually foreign) stores.
Profits dipped, by 3.3%, for the first time in Ryohin Keikaku's history. Results worsened further in the year ending February 2002, with the net down to only $97,000 after the company had to write off $29 million of unsold apparel. Sales for that year kept inching up. But Muji has dropped its plans to open 50 stores throughout Europe and has closed five unprofitable units in Belgium and France, including one in the basement of the Louvre in Paris.
"The failure was that some of the stores were so big [at 3,300 square meters, half the size of a soccer field] that we had to produce many items to fill up the space," said Masao Aoki, Ryohin Keikaku's general manager of finance. "Because of our extraordinary expansion rate, we weren't careful to see that each new product was consistent with the Muji concept." For instance, it experimented with clothing in other colors, such as red and pink.
Now Muji needs to restore its health. Dairo Murata, an analyst with Credit Suisse First Boston in Tokyo, predicts a recovery. He points to an absence of long-term debt, a result of the company's policy of not borrowing to buy real estate. (It leases all its stores, factories and warehouses--a plus in deflationary Japan.)
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