Japanese retail chain Muji recently opened its first Canadian location in downtown Toronto.Matthew Sherwood/The Globe and Mail
Japanese retailer Muji has won a wide following for its unorthodox no-brand philosophy and unwavering focus on well-designed, practical housewares, apparel, stationery and myriad other products with no frills. But when it comes to global expansion, its ambitions are far bolder than anything on its shelves.
The company intends to nearly double the number of its stores abroad over the next few years, to 444 from 255 today, matching its projected Japanese total and accounting for an increasing share of sales and profit, company president Masaaki Kanai said as he surveyed Muji's first modest beachhead in Canada – a 370-square-metre former camera store across from the Eaton Centre in downtown Toronto.
Like most other global retailers, Muji expects a large chunk of that growth to come from China and other faster-growing Asian markets. Over the next three years, it plans to add another 100 stores in China to the 108 it already operates there. But it also has big expansion plans for the U.S., where it currently has nine emporiums, four of them in the heart of Manhattan. Its U.S. target is 100 stores by 2020 and 500 longer term.
The goal for all its stores is to increase average sales per square metre by 10 per cent annually after the first three years. "The company as a whole has surpassed this growth rate. But for existing stores in Japan, it's quite a challenge to grow sales," Mr. Kanai, 57, said through an interpreter. He flew in from Tokyo for the opening last weekend and departed for home the next day as a crowd of curious shoppers lined up outside the store.
Sales in Japan rose 5.4 per cent in the first half of this year, as consumer spending took a heavy hit from a sharp increase in the consumption tax last April to 8 per cent from 5 per cent. In the meantime, real wages have continued falling and the economy is shrinking again.
Still, Muji is expanding even in its tough home market. But foreign sales are growing faster. They accounted for just more than 21 per cent of total operating revenue of $2.35-billion in fiscal 2013, and the company is aiming for 30 per cent by 2016.
By contrast, average sales growth at existing stores in China is running at an annual clip of 10 to 20 per cent per square metre.
In Canada, the company is proceeding gingerly, with plans to add two more Toronto stores by the end of next year, before spreading to other large urban markets.
Muji operates much larger stores in Japan, offering more than twice as many products, including furniture, appliances and a wide range of food items, many of which will not appear in its stores in North America or Europe. In fact, it began life in 1980 as the private-label brand of a major supermarket chain, which is reflected in its full name, Mujirushi Ryohin (no-brand quality goods).
So why not build bigger stores here, like, say, IKEA? One reason is that Muji prefers starting out in city centres, rather than the suburbs where leasing costs for big spaces tend to be lower. Plus, most of its goods are manufactured in Asia (many still retained their Japanese price stickers at the Toronto opening), which makes for high shipping costs.
"We are working very hard on what we are calling our global supply-chain management reform initiative, which will help us overcome those distances," Mr. Kanai said.
The next stage of its international development would involve local sourcing of some products and materials.
"It is our goal to build a structure that allows us to take advantage of local materials and production [and] to integrate that with our stores in each region," he said. "But right now, when we are still shipping from Asia, the issue is how to ship the correct amounts efficiently to each of the regions. That's the problem right in front of us."
Japanese retailer Muji has won a wide following for its unorthodox no-brand philosophy and unwavering focus on well-designed, practical housewares, apparel, stationery and myriad other products with no frills.