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Can Muji’s radical simplicity survive the pandemic?

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The design aesthetic of Muji, the Japanese home-goods retailer, is a riddle, wrapped in a mystery, inside a Zen koan.

Since the opening of its unassuming, almost austere first shop in Tokyo’s Aoyama district in 1983, Muji has maximized profits by extolling the virtues of minimalism, built a formidable brand by rejecting the idea of branding, and swelled into a complex global empire by urging consumers to simplify.

But the COVID-19 pandemic has disrupted Muji’s wa, at least in the United States.

On Thursday, Muji USA filed for bankruptcy under Chapter 11 citing debts of $64 million, joining a parade of other U.S.-based retail operations seeking such protection amid the pandemic.

Landlords top the list of Muji USA’s unsecured creditors, according to The Wall Street Journal. Before the virus hit, Muji operated 19 U.S. stores in high-profile locations like New York City’s 5th Avenue and L.A.’s Hollywood Boulevard. The company shuttered all stores in mid-March. It has reopened ten, but sales are running at 20% of pre-outbreak levels.

Muji’s parent, Ryohin Keikaku, now has six months to submit a restructuring plan. President Satoru Matsuzaki says Muji isn’t abandoning the U.S. market and vows he’ll personally lead the revival. “The U.S. is the cornerstone in building name recognition,” he told Japan’s Nihon Keizai Shimbun.

If Muji is to survive in the only major developed economy where the virus continues to rage out of control, Matsuzaki will have to make radical adjustments to the company’s U.S. business model.

The decision to go to the U.S. in 2006 was a curious one for Muji. The company was created by Saison Group billionaire Seiji Tsutsumi and graphic design guru Ikko Tanaka as a rebuke to the blingy excesses of American-style consumerism. Saison’s Seiyu supermarket chain launched Muji as a generic grocery brand in 1980. It sold 40 everyday staples in simple packaging at reasonable prices. The original name, Mujirushi Ryohin, means “no brand, high quality.”

When Tanaka died in 2002, he passed the mantle for setting Muji’s design philosophy to a committee of four men that included two of Japan’s most celebrated creatives, product designer Naoto Fukasawa and advertising and design prodigy Kenya Hara. The group broadened the product line to include clothing, office supplies, storage compartments, and furniture—but stayed true to the brand’s minimalist design ethos.

Muji’s first SoHo store was a relatively compact 3,200 square feet and offered 2,000 different products. But over the next decade, the company decided that, to compete in America, it would have to supersize itself. It began opening big-box stores of more than 7,500 square feet in prime locations, each stocking more than 3,500 products. The company dutifully expanded online offerings, but the focus of its U.S. strategy was in-store experience.

“We perceive the store to be the most important element in Muji’s sales,” Toru Tsunoda, then-president of Muji’s U.S. operations, told Fast Company in 2017. “A lot of companies are closing their retail locations…We’re trying to expand to more locations.”

Clearly, that strategy will have to be reconsidered.

Muji has proved more nimble in other markets. At home in Japan, which accounts 60% of Muji’s operating revenue, the company operates 477 stores. But Muji recently announced that it will launch a furniture subscription service with Idée, its design brand, aimed at customers who are setting up home offices. In May, the company announced plans to team with Amazon to sell about 250 products, the first time the company has ever worked with an outside e-commerce platform.

Muji also has expanded rapidly in mainland China, where it now operates more than 273 stores. The company closed about half of those during China’s coronavirus outbreak but reopened them quickly as China contained the disease. Muji is hugely popular here in Hong Kong—where it just opened a giant flagship store, its 21st outlet in this city, a few from Fortune‘s office—and Taiwan, where it has 41 stores.

Muji has also applied its anti-design approach to the hotel sector, opening new Muji properties in Shenzhen, Beijing, and Tokyo. When I interviewed Matsuzaki at Brainstorm Design in Singapore in March of last year, he outlined ambitious plans for expanding Muji’s vision of radical simplicity into the global markets for travel and mobility. For now, though, that vision has been complicated by the virus.

More design news below.

Clay Chandler
clay.chandler@fortune.com

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