MINISO (名创优品), a Chinese low-cost retailer and variety store chain that specializes in household and consumer goods, is planning for an initial public offering (IPO) in Hong Kong or in the United States, expecting to raise CNY 1 billion (USD 145 million) from the public listing, Bloomberg reported, citing people with knowledge of the matter.
Founded in 2013, MINISO has been expanding dramatically. Without spending a penny on advertisements, the store chain has grown its business across borders with 3,500 outlets in more than 80 different countries and regions. Its revenue in 2018 rose to USD 2.5 billion.
"Good products, good stores, good brands and good teams are the reason behind MINISO's success," Ye Guofu (叶国富), co-founder and CEO of MINISO, said at its Global Agent Summit held in Mexico on June 12. " In every country, our company sticks to the core principle of high quality and low price, actively expands in the core business district, and carefully cultivates the brand as well as team members."
MINISO is also jokingly christened "Shiyuandian" by some of its competitors, meaning you can buy anything in the store for CNY 10 and less, but sneer and jeer aside, how does a “Shinyuandian” grow from its humble origins and acquire revenue in excess of billions in a space of only six years?
According to Ye, the secret is surprisingly simple: The company has adhered to a principle of offering things of good quality with low price. This strategy, however, has worked spectacularly well in addressing the pain points confronting China’s retail market. From 2012 to 2013, Ye had frequently researched market conditions in the U.S., Japan and South Korea to find the reason behind the Chinese tendency to go on a shopping spree overseas. He found that domestic consumers’ purchasing power is amplified by the idea that products in Japan or South Korea are of better quality.
Therefore, Ye decided that consumers are willing to pay for good quality. It is also widely known that many quality goods (not only daily necessities but also smartphones and high-end gadgets) are actually made in China. Nonetheless, they are shipped globally and mainly sold outside of China, as a result of unpleasant business experiences caused by dishonest Chinese business practices, such as absconding with the money but not complying the contract. Premium manufacturers are thus more likely to close a deal with foreign buyers.
Aware of how “the country of origin” effect can hold back business, Ye registered MINISO in Tokyo, Japan with Junya Miyake, a Japanese designer and co-founder of the company.
Compared with brick-and-mortar stores that sell clothing, bedding, beauty products, whose gross profit ranges between 45% to 50%, the so-called “Shinyaundian” operated by the likes of MINISO offers a broader array of merchandise at a leaner margin of 25% or higher.
The 20% to 25% gap can only be compensated for by drawing in more shopper traffic. MINISO thus chooses to open chain stores mostly near residential communities, subways, shopping centers, tourist attractions and other venues. In addition, they set three criteria for enriching its 3,000-plus categories – FMCGs that target women and meet consumers’ rigid demand.
With a mature single-store franchise profit model, MINISO's expansion has entered a fast track. Take Beijing for example. There were 77 MINISO stores in this city in 2016, of which only four were self-owned, six were ventures with other partners, and the remaining 67 were all franchisers.
Despite its commercial success, MINISO has long been accused of stealing designs from competitors and producing cheaper knockoffs that edge out authentic ones in the market. Not only is its logo similar to Uniqlo, the Japanese fast fashion and casual wear giant, but its product design bears an unmistakably striking resemblance to that of MUJI, another Japanese retailer of apparel, furniture and other minimalist household items.
With rumors of the IPO widely swirling, Ye might do well to sit back for a while and take those risks into consideration.