Muji Sells the Same "Simple Life" in Japan and China. So Why Are There Two Mujis?

One is a symbol of cheap mass-market goods; the other, of refined middle-class taste. Where does the difference come from?

Xue He started buying a lot more Muji after she went to Japan to study. "It's more down-to-earth in Japan. Back home, because the taxes and everything are baked into the price, you can still buy it, but it feels a bit pricey."

After she arrived in Japan she switched to a full set of Muji stationery. "It feels about the same as other brands, other stationery shops." Xue He has bought stationery, food, skincare and clothes from Muji, and every time she goes home she brings Muji products back for family and friends.

If you have been into Muji stores in both China and Japan, you may have noticed that one brand sits in two very different places in the two markets. In Japan it is a cheap mass-market brand; in China it stands for an upgraded, upper-middle-class lifestyle. One turns up on street corners, in convenience stores and in subway stations; the other is standard furniture in mid- to high-end shopping malls. In Japan it is a national brand that housewives and office workers alike buy; in China its customers are the young middle class.

One set of DNA has become two different things in two countries. Why are there two Mujis?

1

The reason starts with pricing.

Clement, who once worked in sales at a Muji store in China, explained it to QDaily this way: "At first everybody had this completely irrational reverence for MUJI, and it was all about its brand designers... Everyone felt MUJI was a bit more upscale than Uniqlo, and the reason was simply that it cost a bit more." While studying in the UK she often shopped at Muji stores in London, and after that she stopped thinking Muji was more upscale than Uniqlo.

If Muji's pricing in Japan is cost-driven — built on things like "simplified packaging" and "no wasted raw materials" — its pricing in China is clearly more complicated, with a lot more brand positioning mixed in. Until its first "New Pricing" round in October 2014, most of its products were priced off the exchange rate from the year it entered the market (1 yuan to 12-13 yen): the yen price divided by 10.

The real exchange rate looked like this: from 2013 on, 1 yuan was already worth more than 15 yen, and from 2015 the yuan traded at roughly 1:20. Today, ignoring taxes and going purely by the exchange rate, its Chinese prices ought to be the Japanese price divided by 16.

That pricing method once pushed Muji's Chinese prices to twice its Japanese prices.

Muji had its own costs to think about. At the time it had no warehousing center in China, so goods made in China had to be shipped back to Japan before being sent on to China. China's value-added tax is also relatively high: 17%, against Japan's 8% consumption tax.

But there is a hidden gap too — what consumers in the two countries can actually afford.

According to World Bank figures, Japan's purchasing power parity (GDP PPP) in 2008 was 4.4 times that of Chinese consumers; by 2015 the gap had narrowed, but Japanese consumers still had 2.5 times the buying power of Chinese ones. Keep that in mind and you can see that Muji's pricing in China could not help but create an illusion of scarcity and luxury.

The clearest example is the wooden stool that sells for 1,000 yuan in China and 10,000 yen in Japan. On Zhihu, "why is this stool priced at 1,000 yuan" is the most fiercely debated of all Muji topics. By the reckoning of Su Haijun, a Zhihu user who lives and works in Osaka, 1,000 yuan is about a fifth of an ordinary Chinese consumer's monthly income, while 10,000 yen is about a twenty-fifth of a Japanese consumer's.

The "yen price divided by 10" method got talked about so much that Muji eventually just stopped printing the Japanese price on its products.

It is worth pointing out that Muji's prices are also tied to where its stores are and what form they take.

In China, Muji is usually bundled with mid- to high-end commercial property. The first batch of malls and shopping centers it moved into included Joy City, Wanda and Swire — mostly in a city's top-tier retail districts, and only in the past few years in second-tier ones. That kind of address, and the rent that comes with it, means higher costs.

In Japan the formats are more varied. Besides mall stores, there are roadside shops in standalone street-front buildings; there are kiosks inside subway stations, said to be designed for commuters and students who need to pick up something they have run out of on the way to work or school (Muji recently closed this format); and inside FamilyMart convenience stores Muji has its own counters (it has a similar arrangement with 7-Eleven in Taiwan). Judging by the subway kiosks and the convenience-store counters alone, the image it projects is thrift and practicality.

2

Whenever Muji's philosophy comes up, Yasuo Tanaka's novel Somehow, Crystal (なんとなく、クリスタル) gets cited as its opposite. It follows a heroine who is part student, part model, and spends page after page — even its footnotes — on designer labels, high-end shopping and high-end living. Behind it is the showy consumption of Japan's bubble years.

In 2008, when Muji opened its second store in China and began to expand, China's middle-class shopping boom was heating up. People talked about being "petit bourgeois," and luxury buying was spreading too, most of it for show. Tiny Times came out that year, and behind the runaway sales of that brand-name-stuffed novel was a hunger for the consumer life.

Somehow, Crystal or Tiny Times — the "No Brand" image Muji stands for is the opposite of both. From the 1980s to now, Muji's brand image has barely changed, and the two markets' moments do resemble each other. The difference is that Japan was already a developed country then, while China was still developing, only beginning its consumption upgrade.

It was an era when foreign labels were working their way further into what Chinese consumers wore and used at home. By 2008 the big fast-fashion chains were finding their footing in first-tier cities: Zara had been in China for two years; H&M had arrived in 2007; and Uniqlo, six years in, had moved beyond the Yangtze River Delta into the north China market centered on Beijing.

In the course of China's consumption upgrade, Muji became one of the tutors of Chinese consumers' lifestyles. It brought beanbag sofas, ultrasonic aroma diffusers, micro-bead neck pillows and wall-mounted CD players — the sort of things shopping bloggers call "things that raise your quality of life." Muji showed how attentively daily needs could be taken care of, and much of that was done through excellent industrial design.

Its products have another feature: the range is so wide that consumers can upgrade their spending in steps. At first the entry-level product for a young consumer is stationery, priced at ten-odd yuan. As they finish school, start working, get promoted and get raises, what they buy widens from stationery to cosmetics and daily goods, then to clothes. Once they have their own space and a family, they may go on to housewares — cleaning tools, storage, bedding — and even furniture.

That is how Muji has set it up: among the entry-level buyers who start out with nothing but a pen, some will one day become big spenders.

Its philosophy also has a selling point in China that it does not have at home, and that is why it dares to charge 1.2 to 2 times as much. "Quality goods without a name," and the Made in Japan stamp on many of its products, feel special to a lot of Chinese consumers. That distance creates a sense of scarcity and class, and people may be more willing to pay for it.

Nina, 25, who works at an internet company, says her first visit to Muji left "a very good impression." She said: "The main color is natural wood, the logo is a warm red — these are details domestic brands rarely bother to design." "Refined" and "attentive to detail" were the words she used for how Muji makes her feel.

Japan, by contrast, has plenty of homegrown housewares and furniture brands, and the average standard is high, so choice in this category is highly fragmented. Even if you specifically want something in the Muji style, there are lots of lookalikes, from independent designers to chain discounters. The book Muji's Reform (《无印良品的改革》) notes that Daiei's "Savings" line went after a "no brand" position much like Muji's — and launched two years earlier.

Still, for all that Muji preaches simple living and the idea that "just enough is enough," in the end it is one form of consumption among many.

3

Whether Muji is "expensive" and whether it is "worth it" are still the things consumers bring up first. In 2014 Muji launched its "New Pricing" campaign, and after five rounds of cuts plus a stronger yen, its prices in China are still 10% to 30% above Japan's.

Beyond logistics and rent, this may have to do with Muji's own strategy.

"Keeping overseas prices at 1.2 to 2 times the Japanese price" — that is how a 2013 paper from Waseda University's business school, on Muji's flagship-store openings, describes what has long been one of the company's pricing strategies.

Or at least we can put it this way: Muji has not pandered to Chinese consumers' "misunderstanding" of it, but it has not tried to clear it up either.

It rarely promotes its Japanese slogans in China, for instance — "Reasonable, therefore cheap" and "There is a reason it is cheap."

Its profile page on Weibo reads: "Muji originally means 'quality goods without a label.' Born in 1980, Muji interprets the spirit of the age through a philosophy of no labels, a focus on value, and no embellishment." The word "cheap" does not appear.

In China it will not readily say it wants to be a cheap brand. The rounds of price cuts from 2014 through the end of 2016 were given the name "New Pricing."

Satoru Matsuzaki, president of Ryohin Keikaku, once said in an interview: "I believe it is precisely because we protected the brand image that we have had sustained profits."

It is precisely because two Mujis exist that Muji in China can spend its brand premium on new formats — the just-announced MUJI Hotel, for one.

On December 26 it said it would build the world's first "hotel + dining + retail" project with Shum Yip Group, at Shum Yip UpperHills in Futian, Shenzhen.

The hotel will have 79 rooms that are neither extravagant nor shabby, priced "not very expensive, but not especially cheap either," in Matsuzaki's words. Muji will supply all the spatial design and the furnishings; the owner, Shum Yip UpperHills, will run the hotel itself.

The announcement came just after Muji hit 200 stores in mainland China on December 12. Shortly before that, the Café MUJI it had been preparing for a while opened in Shanghai.

New formats are a search for new growth. In that tight run of announcements you can read both Muji's ambition and a little of the anxiety behind it.

In China, Muji's store count keeps rising, but the numbers are not what the company would like: same-store sales have been slowing since the first quarter of 2015. Back then same-store sales growth reached its highest level ever in the Chinese market, 38.6%. It has fallen ever since, dropping back to single digits by the third quarter of 2015. In the most recently reported third quarter of fiscal 2016 (September to November 2016), same-store sales grew just 0.8%. Total sales growth for the first three quarters also slowed, to 3.6% — which means Muji is now driving results almost entirely by opening stores.

Meanwhile Muji's website keeps announcing openings: Haikou, Nanchang, Yinchuan, Zhuzhou, Lanzhou. All are second-, third- and fourth-tier cities Muji is entering for the first time.

Young people in those cities are not new to Muji. Zhong Yan lives in Nanchang; before Muji opened there last November, she had already bought from it through personal shoppers, browsed its stores on trips to Shanghai, and even eaten at a Café & Meal MUJI. Chai Ting is from Guiyang, and she told QDaily that the city's two Muji stores are "packed — you have to queue." She, too, had been buying through personal shoppers before Muji arrived.

In second- and third-tier cities, Muji still stands for a more "elevated" way of living, and it usually opens next to "affordable luxury" labels or at least mid-range ones. In Nanchang, its neighbors include Y-3, Pandora and Michael Kors. Near the CITIC Yuefang store in Changsha there is a Costa and a Mango. The consumption upgrade in these cities is only starting, especially in housewares, everyday goods and furniture. That is Muji's opening.

At the same time, with growth in first-tier cities possibly slowing, Muji has brought out new formats to stimulate spending.

To support them, on September 1, 2016 it set up a department called the New Business Division, responsible mainly for Café & Meal MUJI and MUJI HOTEL — proof enough of how much the new formats matter.

On the surface the new formats sell services; really they still display goods and image. The restaurants are there to sell tableware and food, and the hotel is probably meant to stir up demand for home goods. If you know that Naoyuki Yamamoto, Muji's general manager for China, has said future sales will focus on furniture and food, its rush to open restaurants and prepare a hotel is no surprise.

Muji knows perfectly well how complicated and layered the Chinese market is: first-tier cities and the coast do not have the same spending power or habits as second- and third-tier cities. In an interview with Nikkei, Matsuzaki said the plan is to open large stores in China's "major cities" and small ones in the cities around them. That is different from Uniqlo, which runs 1,000- to 2,000-square-meter, two-story stores even in second- and third-tier cities.

Muji wants the higher-spending places to lead the rest. Its customers in second- and third-tier cities are probably the people who travel to first-tier cities on business, go out of their way to try a Muji restaurant, follow trends and brands, know what life is like in a first-tier city or abroad, and sigh that it is a shame their own city has no IKEA.

4

Ryohin Keikaku, once named the world's best mid-sized company by Forbes, does not seem content to stay mid-sized. As it globalizes and grows, going deeper into China is the engine of its international expansion.

But a crisis is closing in on the ambitious Muji: the brand premium that came from its philosophy, its tone and the scarcity of its products is wearing off.

There are three main reasons. First, Muji's own expansion has diluted that scarcity — though as long as the market is big enough, this hardly matters. Second, Muji's product lines turn over slowly; hemmed in by its philosophy and its tone, its clothing always feels vaguely familiar, and its home range rarely adds new SKUs. Third and most important, Chinese consumers' choices and knowledge are growing fast, and as in Japan, there are more and more things that can replace Muji.

"I used to be unable to drag myself away whenever I saw MUJI's tableware. Maybe it's because minimalist natural-wood style is popular now and this kind of thing is sold everywhere — I feel MUJI isn't as good value for these items anymore, and from now on I won't insist on buying from one store," one user wrote on Dianping.

Nina, who works in Beijing, also feels Muji has "become a lot more ordinary" than when she first encountered it five or six years ago. Her explanation: "Compared with other brands, ones like MUJI have come up — it doesn't mean MUJI itself has gotten worse."

What is interesting is that the two Mujis have run into similar problems as they grew.

Around 2000 Muji fell into losses in Japan: same-store sales dropped for four straight quarters and the share price fell, and it was hurt by copycats from the Daiso 100-yen chain. It pulled through by closing weak stores, shortening the cycle for new products, and working with Yohji Yamamoto to improve what it sold.

How do you hold on to your brand premium while expanding? How do you compete with cheaper rivals? Muji in China has run into the same questions Muji in Japan faced years ago.

The biggest difference is that Muji in China today is not Muji in Japan. And Chinese consumers are not Japanese consumers.

(Xue He, Nina, Zhong Yan and Clement are pseudonyms, at the interviewees' request.)

Graphics: Feng Xiuxia

Cover image from: Muji