Muji gears up to take on U.S. retail titans

by Nanae Kenmochi

NEW YORK (Kyodo) Can a Japanese retailer selling furniture, household items and stationery compete in the $4.2 trillion U.S. retail industry against the likes of corporate giants like Target and Ikea?

The president of Muji U.S.A. Ltd., which will open its U.S. flagship store in Manhattan’s Times Square next month, believes the company can.

“I want Muji products to become part of the lives of Americans of all backgrounds,” said Hiroyoshi Azami, president of Muji U.S.A.

The company, owned by Ryohin Keikaku Co., is committed to opening 30 to 40 stores across the United States in the next five years.

Most Americans are unlikely to have heard of Muji, but the brand is quickly finding a niche in New York, where the retailer opened its first U.S. store in Soho last November.

New Yorkers have already encountered Muji at the MoMa Design Store, a store for the Museum of Modern Art, which began carrying its products in 2004.

“I love Muji,” said Craig Broxton, an account executive for Design Within Reach, a modern furniture retailer. The 29-year-old recently bought a black bag and two food containers at the Soho store. Having first seen the products at the MoMa store, Broxton was drawn to the company’s innovative use of plastics.

Muji, which translates as “no-brand quality products,” is an established retailer in Japan for basic everyday items at reasonable prices. None of Muji’s 7,000 products, including beds, dishes, jackets, underwear and notebooks, have a logo or are wrapped in fancy, distinctive packaging. In fact, it is the lack of a name brand that many find enticing.

Muji’s philosophy is to offer “good products at low prices” by eliminating extra packaging costs that do not impact the quality of the product itself. The concept is to use inexpensive materials overlooked by other manufacturers, avoid overprocessing materials and minimize packaging. “As a result, our products are simple,” Azami said.

The concept has driven the popularity of Muji products not only in Japan, but also in other Asian countries and Europe since the company’s inception in 1981. Now Muji is aspiring to become the preferred brand for U.S. buyers.

So far in New York, Muji has enjoyed a good start. The MoMa Design Store has lent prestige to Muji’s name by carrying its products alongside those of world-class artists and designers, such as Charles Eames and Isamu Noguchi. Thanks to the design-conscious consumers of New York, Muji’s Soho store has quickly become profitable.

If Muji’s goal is to become a niche brand targeting trendy urbanites, it is well on its way.

Azami, however, emphasized that was not the company’s aim. “I don’t want to just be accepted by design-conscious people or people who like Asian tastes . . . I want (Muji to be) accepted as a generic brand,” he said.

While most brands target a certain segment of consumers, the purpose of being “a no brand” is to appeal to all people by “simply providing products that are comfortable and convenient,” Azami explained.

Going beyond an appeal to trend-conscious New Yorkers and moving into the households of average American consumers will pose challenges for Muji as it competes with other big names, such as Crate and Barrel, and Ikea, which offer diverse products at low prices. Target is another formidable rival because it sells products made by popular designers at much lower prices than Muji.

“If all they were doing is bringing in other products that are available at Target or Ikea or whoever, it would probably be a tough entry,” Doug Fleener, president of retail consulting company Dynamic Experience Group, explained. But he also said: “There’s always room in the U.S. for innovative retailers with fresh products.”

Often hidden in the seemingly simple designs are functions that make Muji’s products stand out. Its toilet brush, for example, has a small cover to protect water from splashing while cleaning. Their summer sheets are made of special linen that absorbs moisture better than cotton.

Azami expects the flagship store near the densely populated Times Square area to draw professionals who work in the area and tourists as well. Located in the lobby of The New York Times Building, the store is more than two times the size of the Soho store — and will carry about 2,500 products.

In addition to that new store, Azami is planning to open small outlets in New York airports beginning this year. He hopes to raise brand recognition nationally by exposing the brand to travelers from across the country.

The biggest challenge that lies ahead for Muji is lowering its prices — which is particularly crucial amid the recent economic downturn that has hit the U.S. The prices at the Soho store are about 30 percent higher than in Japan, which is not consistent with the company’s aim to “offer good things at low prices.”

The higher Soho store prices are due to the extra cost of custom duties as well as the added price of importing products from China to Japanese warehouses and then sending them to the U.S.

As the operation expands, Azami said, the company is considering outsourcing some of its manufacturing to plants in Latin America.

Even with low prices, some questions remain as to whether Muji will be accepted widely by Americans from all segments of society.

“I think they are better off staying in major metro-markets,” said Vivian Ma, a retail analyst at Oppenheimer & Co. Inc., an investment firm in New York. Although Ma counts Muji as her favorite brand, she does not think an average “55-year-old traditional taste person” from small-town America would shift his or her brand preference.

The difficulty of expanding into American suburbs can be learned by the experience of Uniqlo. The Japanese clothing retailer opened a store in the New Jersey suburbs in 2005 and two more later on. Eventually all three closed down.

Muji may do well in “New York, Chicago, San Francisco,” said Fleener of Dynamic Experience Group. “But as you get into the mid-level cities, is there enough of a population base who will be wanting that design? I’m sure that’s something they’re out to learn.”