Once Again, Has The Muji Been Abandoned By The Chinese Middle Class?

MUJI has been cut.

Recently, life home brand Muji has re priced some products, involving two sides of yarn, pajamas, underwear for men and women, and part of life products. The price range is between 10% and 25%.

MUJI's star products, the ultrasonic aromatherapy machine, also cut prices by nearly 30%.

Regarding the reason of price reduction, the relevant person in charge of Muji told reporters that the move was to make better products delivered to consumers at a more reasonable price.

Since the launch of the "new pricing" campaign for Chinese consumers in October 2014, Muji has chosen to cut prices for some commodities at a frequency of two times a year. The latest wave of price cuts has been the tenth in 5 years.

It is worth noting that after repeated price cuts, Muji still does not stop consumers from leaving.

According to its parent company's good plan, the 2019 fiscal year (March 2018 -2019 March) released in January this year, sales of Muji in the first three fiscal season (March 2018 to November) dropped 9% in China compared with the same period last year.

From the early entry into the Chinese market, the "middle class standard", which has been frequently depreciate, is still unable to restore the decline. What happened to Muji?

From prosperity to decline

For Muji, the best time to stay is in 2015.

After entering China in 2005, Muji has been dormant for 7 years.

By 2010, the number of new MUJI products in China was only 8, and the number in 2011 was 12.

But since 2012, Muji has been expanding at 30~50 stores in the country every year.

By the end of 2013, the number of mainland Muji outlets had reached 100.

This rapid growth is related to the trend of the downward trend of luxury goods industry and the rising trend of fashion.

In 2012, the luxury goods industry faced a crisis, and a group of luxury vertical business operators collapsed.

On the other hand, Zara, UNIQLO, H&M and other fast fashion brands are developing rapidly through rapid opening up.

In the wave of ups and downs, Muji was also on the way and reached its apex in 2015.

According to the company's earnings, by February 2016, Muji could rise 20.4% in sales in China, far higher than the 14.5% in fiscal 2015 and 14.3% in fiscal 2014.

The strong same store growth and new store expansion led to a 45.7% rise in China's revenue in RMB in fiscal year 2016.

However, this growth then began to slow down.

According to the January 2017 earnings report, in the 2017 fiscal year (March 2016 -2017 March), the Muji China market recorded a 0.8% increase in sales in the three quarter, compared with 4.7% and 5.4% in the previous two quarters.

In response, Tang Xiaotang, founder of NoAgency, a consultancy, believes that the overall weakness of the clothing market in 2016 is accelerating the slowdown of the electricity supplier channel, while Muji has slowed down faster than expected.

He believes that the main reason is that Muji has narrowed the scope of the middle class customers.

Although China has a middle class population of hundreds of millions of people, it has a wide range of consumption, and only 10% of Muji is possible, and this part of consumer spending is more affected by the economy and stock market.

The latest quarterly report shows that the weakness of Muji has been running for two years, and the situation is becoming more and more optimistic. Muji has a 4.1% decline in sales in the third quarter of fiscal 2019, which is deteriorating again compared with 2.2% in the two quarter.

No longer "middle class".

Price reduction is not a good way for Muji, an important reason is brand positioning.

In the 80s of last century, when the Japanese economy stagnated, consumers expected cheaper products.

MUJI has come into being. Its name is literally plated into "quality goods without trademarks".

Kinouchi Masao, the founder of the company, put forward the concept of "anti brand (also known as no brand"), emphasizing the value of the product itself, and adopting the anti brand concept of weakening the brand LOGO. By reducing the various redundant links from production to circulation, including improving the process and adopting simple packaging, it provides consumers with good quality and cheap products.

This strategy was successful at that time.

It should be noted that in Japan, Muji is a medium and low end brand, mostly found in supermarkets, and is located in grocery stores.

After entering the Chinese market, Muji improved its strategy and positioned itself as a high-end brand.

In order to relocate, Muji is not only far away from supermarkets but also popular locations in shopping malls, and its pricing is higher than that of Japan.

In terms of products, Muji's concise design has brightened up many consumers, and after many layers of packaging, Muji has become a popular brand among young artists and middle class consumers.

Until the beginning of 2018, Muji was still one of the most popular home brands in the new middle class.

According to the "2017 home / life service brand list TOP50" released by win win big data center, in the eyes of the new middle class, Muji is still the number one home life brand, followed by the hippocampal photography studio, Dai Sen, roseonly and other emerging niche brands, representing the consumption preference of the younger generation of consumers.

In the face of such a strong brand image recognition, it is easy to understand that continuous price cuts are not helpful to save performance.

In August 2017, Muji announced the new pricing of autumn and winter, which is the seventh pricing of brand in the Chinese market.

Among them, the household price cut was 67%, electronic category and health beauty category reduced by 21% and 24% respectively, and was called "the biggest price cut in history".

However, according to the fiscal year 2017 results, the same store sales increased by only 4.6% in the same year, lower than the 4.7% growth in the same store sales in 2016, which is far from the 20% increase in the same store sales in 2015.

There is a view that after Muji has molded the high-end image of the quality, the price reduction is not consistent with its positioning, so its core audience, the middle class, is not willing to pay.

Quality is the key issue.

In fact, the adjustment of product price and brand positioning is only one. Another important factor affecting the performance of Muji is product quality.

The creation of Muji brand image is related to a person -- Yamamoto Naomiyuki.

Yamamoto Naomiyuki joined the company's good plan in 1991 and was appointed Director General of Muji (Shanghai) Commercial Co., Ltd. in 2011.

But the elders who opened up the Chinese market have changed recently.

At the end of December 2018, Muji Japan headquarters announced that Yamamoto Naomiyuki's position was changed to consumer relations CEO, replacing him with Qingshui Cong.

MUJI related person in charge told reporters that Yamamoto Naomiyuki's pfer was normal personnel pfer.

However, it is widely believed that his change is related to the quality problems of Muji in recent two years.

In 2017, "3. 15" evening, Muji was exposed by CCTV. Some Japanese food packages in the shop were labeled with Chinese labels, but after revealing the Chinese labels, they revealed the true origin of these products, which were suspected to be from Japan's nuclear radiation area.

A Muji statement later said it was a misunderstanding.

In September 2018, the commodity branch of the Haidian branch of Beijing commerce and Industry Bureau carried out the commodity inspection work for MUJI products (BA Gou Hua Lian Dian), but did not get the cooperation of the Muji staff. Subsequently, the local industry and Commerce Bureau informed the official website of the quality inspection results of Muji clothing, and the 10 batch of garments failed.

When the quality of products was questioned, Muji was also burst out of food containing carcinogenic risk.

In January 15th this year, the Consumer Council of Hongkong released a report that it had discovered 58 kinds of biscuits from Hongkong from August 2018 to October. It found genotoxicity and carcinogenicity of epoxy propanol and acrylamide. One of the MUJI products was hazelnut oatmeal biscuits from Malaysia. The content of propylene oxide and acrylamide in the pre packaged samples that were not pre packaged or exempt from nutritional labels were the highest.

MUJI products later said to the outside world that the carcinogens mentioned in the above reports are not food additives, and there is no problem of illegal additions or overdoses.

The current "poisonous biscuit" storm has not followed yet, but it is certain that frequent quality disturbances have cast a shadow over the brand of aura brand.

Competition from the Chinese market

Inside the crisis, Muji is also facing competition with Chinese "students".

After entering the Chinese market, MUJI products with "minimalist and high quality" products and business style have been widely used by Chinese local enterprises. Apart from the fast start shops, the fast rising brands in the Internet age are also competing with their predecessors. The original blank market is quickly filled up.

NetEase Yan Xuan, Taobao heart election, MI Jia products, Jingdong made in Beijing......

These life brands, which rely on the birth of the Internet platform, also pursue simple style in the design and packaging of products, but the average price is lower than Muji.

At the same time, this kind of brand carries on the more precise assurance to the user demand through the big data, uses the flow to open the market, has obtained a batch of loyal consumers.

At present, these online brands have been gradually landing and will compete directly with Muji.

Yang Dayun, CEO, believes that Muji has attached great importance to the Chinese market. From price cuts to opening stores, it can see that the company is trying to expand its Chinese market.

However, as NetEase and millet and other Chinese enterprises learn the price and quality of MUJI products, the cost and price of the local market will be more powerful, and the Internet channel will be more aggressive than Muji, and will have a great impact on MUJI products.

Nowadays, the cost performance of Chinese goods is not simply achieved by reducing prices and reducing manufacturing costs. Internet companies are changing the supply chain by reducing the cost by using electricity providers to achieve high performance price ratio. At this point, Chinese enterprises are more capable of coping with consumer demand and have more room for improving service quality.

In the face of fierce competition, Muji produced another card -- developing extended business.

In June 2017, MUJI Diner, the world's first Muji restaurant, opened in the flagship store in Huaihailu Road, Shanghai.

In 2018, Muji set up two hotels in Shenzhen and Beijing, MUJI Hotel, and Shenzhen's hotel was the first Muji world hotel.

Meanwhile, the flagship store of Muji has also been increasing.

Previously, Muji produced first, Second World flagship stores in China and Chengdu in 2014 and 2015 respectively in Shanghai and China.

Recently, Muji has opened a flagship store in Nanjing and Hangzhou in December 2018 and January 2019 respectively.

Stores are larger than ordinary stores, and join MUJI books, cafes and other services, and integrate into local characteristics.

There are indications that Muji is trying to catch up with the pace of domestic consumers. The success of these new varieties remains to be verified. There are many contradictions between product quality and brand image, price reduction and high-end positioning, and Muji is also needed to further balance.