Case Study: Why MUJI has struggled in China

A MUJI store in Shanghai. Image: MUJI News

A decade or two ago, the name MUJI would conjure an image of sophistication and refinement for homeware and clothing in the eyes of Chinese consumers. A quality, premium product that wasn’t too out of reach. It was the sought-after lifestyle brand, not just in China, but around the world. But over the last five years, trade has been difficult for the company in China, and it seems to have lost its way in many areas.

This is a decline that cannot be attributed to the recent slowdown in Chinese consumption, or even to the Covid-19 pandemic, MUJI’s decline began before that, from around 2018 to 2019. Starting in that year, the good days in the Chinese market were numbered, and sales in each store dropped by 2%. By 2022, the fall in sales in stores went to 6.6%.

The biggest pinch about MUJI these days is the pricing, especially at a time when China is relatively price-sensitive. These are sentiments echoed by consumers on Chinese social media, where many feel that MUJI’s products are too overpriced. 

Chinese consumers tend to share the sentiment that MUJI’s products are overpriced.

MUJI’s current pricing model in the international market is benchmarked against the original price in Japanese yen. As a result of their conversion and the sinking yen, it has led to a bizarre situation where for the same product, the store in China sells it at twice that of the store in Japan. Considering that MUJI often sells the exact same product internationally with no variation, it isn’t a good look, particularly given Japan’s proximity to China.

Recognising this problem, MUJI has been cutting prices for its products. But even then, they are still about 20% to 30% higher than their equivalent domestic competitors in China and doesn’t provide any emotional reasons for the higher price. As such, MUJI products are often uncompetitive, especially with the rise of local Chinese competitors like Yanxuan and MINISO. It does not help that MUJI’s own reputation for quality was harmed when it was fined in 2024, for selling children’s t-shirts that did not meet quality standards.

Netease Yanxuan, a competitor to MUJI. Image: China Internet Watch

MUJI’s international debacles are not limited to China. In 2020, the American arm of the company filed for bankruptcy, with debts of $64 million. This indicates that there could be issues with its business model. One reason could be that MUJI is perceived as using the same product lineup internationally, basing it off what works in Japan. Indeed, MUJI remains extremely successful and competitive in Japan, where according to a social survey, 46.5% of people patronise their shops once a month, and 10% go once a week. MUJI has a perception of not doing enough to localise of its product offering internationally. But specific to China, there is another fundamental issue: positioning.

In Japan, MUJI’s positioning is straightforward. It is a store that sells simple, affordable, quality goods without the premium costs associated with branding. In China, however, it is priced higher, hence its positioning would appear more high-end. That worked from 2005 to 2018, since Chinese consumers then held an admiration for foreign brands. MUJI was not alone in this positioning. Western brands like Starbucks and Haagen-Dazs also positioned themselves more high-end in China than back home.

It is not uncommon for foreign brands to adopt a higher-end positioning in China than in their home country. Image: Barrett Ishida

However, China, and Chinese brands have changed. Many local competitors have sprung up that can provide as good or even better products and services than foreign brands, who do not hold the same prestige as in the past. In order to remain competitive, MUJI has to offer something even more, and in a meaningful way.

One of MUJI’s core advantages is in product design, that is minimalist and close to the needs of users and their experience. For example, their ultrasonic aroma diffuser is multipurpose. It can be used as a bedside lamp, a humidifier, or bring fragrance to a bedroom. But this strength in product design is less of an advantage in China where product design is easy to imitate, which is exactly what the rivals like Yanxuan and MINISO are doing.

Despite the challenges, MUJI is making efforts to further tap into the China opportunity, doubling its expansion plans from 20-25 new stores a year to 40-50 over the next three years, building on its existing 401 outlets. Muji will diversify its product range, launching mobile-phone-related items, as well as goods for pets and camping. It also plans to try new business models, such as opening specialty stores combining clothing and cosmetics and small stores stocked with everyday essentials to broaden the consumer experience.

It will continue making products in China for China, with about half of its goods designed in China, and about 70% of the groceries and food products developed locally. Yet to make its current high-end positioning workable, MUJI’s has to bring deeper emotional value to consumers that is focused on experience, community and fostering loyalty. Until then, consumers may continue to question they are asking now - why pay so much for a product that isn’t even special?