Muji bets its minimalist retail will work for homes, hotels

MUJI is bringing its minimalist aesthetic to habitation.

Known for simple, monotone stationery, apparel and home goods, the Japanese retailer is betting that there is just as much demand for no-frills homes and hotels, with plans to ramp up the number of Muji-style accommodations, both domestically and abroad.

“The concept is to build a huge accommodation service,” Hidetomo Nagata, executive officer and head of the social goods and space design divisions at Ryohin Keikaku, the brand’s parent company, said. “Muji products are still strong, but we also want to expand to this new lifestyle area.”

Earlier this month, Ryohin Keikaku announced a new business called Muji Stay, which brings under one umbrella the retailer’s existing hotels, homes and camps. More projects will also be added in the future, such as a “Muji room”, a renovated space filled with amenities such as bed linens and pyjamas, designed to be placed in existing inns and hotels that may be outdated or not have enough funds for a full remodel.

Ryohin Keikaku, which reported annual results on Friday (Apr 12), has seen strong growth in Japan, East Asia and the Asean region, and its second-quarter operating income results beat the average analyst estimate. At the same time, sales in China still remain below expectations and less than levels two years ago. The brand also recently filed for administration of Muji Europe Holdings in the UK, citing underperformance.

The European business slumped because of the Covid pandemic and debt from loans and product fees to the parent company, Kenta Horiguchi, executive officer in charge of corporate planning, said during an earnings briefing. “We will improve profitability and strengthen our financial base by implementing structural reforms, including closing unprofitable stores and reviewing our cost structure.”

In addition to its accommodation business, the company said it wants to strengthen products such as clothing, skincare and other necessities in Japan. Globally, it aims for an annual net increase of about 50 stores in South-east Asia and plans for bigger flagship stores in New York and Paris. In China, the company will continue to open new stores to expand its customer base, Horiguchi said.

By leveraging its minimalist-chic philosophy, Muji may also be looking to tap into new sources of income. Boutique hotels, or small-capacity accommodations with local flair, have been on the rise, with the market projected to grow to US$155.7 billion in 2030 from US$99.5 billion last year.

“We have a lot of different facilities, and we think this will become a source of revenue for the business,” Nagata said.

Muji currently has three hotels – one in Ginza, Tokyo’s upscale shopping district, and in China’s Beijing and Shenzhen. Rooms are often fully booked months in advance, pointing to the potential for new ones not just in Asia, but also in the US and Europe, according to Nagata.

The minimalist brand has also helped breathe new life into danchi, public or semi-public housing that was built to support Japan’s postwar economic recovery. By updating kitchens and modernising outdated features, Muji sought to attract residents seeking affordable housing. The project was likely the starting point in Muji’s plan to focus on homes and hotels, according to Iwai Cosmo Securities’s Daisuke Aiba.

“The renewal of the danchi was pretty successful,” Aiba said. “Their thought process is that if they continue to expand on that model, they will be able to increase sales.”

A key part of the company’s strategy centres around Airbnb rentals called Muji Base in culturally rich regions of Japan. Operating in more remote areas than Muji’s city-oriented hotels, the rentals showcase locales that visitors otherwise may not visit. One in Kamogawa, about 90 minutes by car from Tokyo, is a century-old renovated traditional wooden Japanese house near picturesque mountains and rice fields.

“They are aiming for far away places or old houses instead of famous locations, so they are trying to create a model where there’s not much competition,” said Aiba.

Muji plans to open about five more rentals and rooms this year, including one in Teshima island later this month, and another this fall in Otaki, located in Tokyo’s neighbouring prefecture. Muji said it is received inquiries from local governments who want to bring such accommodation to their towns.

The broader goal is to encourage people to stay longer and visit a destination multiple times, according to Nagata, who cited the company’s 2030 vision of not only selling quality, affordable products, but also seeking to make a positive impact on regions and their residents.

“In the future, we hope that fans of Muji products will become fans of the regions as well,” Nagata said. BLOOMBERG