Japan's Muji aims to open up to eight Canadian stores in five years

TORONTO (REUTERS) - Japanese retailer Muji aims to build a network of seven or eight stores across Canada over the next five years, part of a broader plan to generate more revenue outside its home market, a senior executive told Reuters.

Muji, which expects to open its first Canadian store in November in Toronto, wants to have more stores overseas than in Japan within the next two years.

At the end of February, the unit of Ryohin Keikaku Co Ltd 7453.T operated 255 stores outside of its home country, including 100 in China, according to its website. This compared with 385 stores in Japan.

The retailer would like to see that proportion of domestic to international stores reverse, Toru Tsunoda, president of Muji Canada, said in a Japanese-language interview.

“I hope to open seven to eight (Canadian) stores in the next five years,” he said. “But opening one store a year may be a realistic goal because we want to open (each) new location carefully.”

“When it reaches the certain level, we could accelerate,” he added.

Muji, short for Mujirushi Ryohin, literally means “no-brand quality products.” The chain offers a wide variety of household items, from kitchen appliances to sofas, as well as consumer products and basic apparel.

The retailer has been looking abroad as Japan’s aging population weighs on sales. It has also had to contend with a sales tax increase there in April.

North America now contributes a little more than 1 percent of group revenue, versus 4.5 percent in Europe and 15.6 percent in Asia outside Japan.

Tsunoda said he wanted to see North America’s contribution surpassing Europe’s by 2020.

The company plans to open a second Toronto store before pushing into Vancouver and other Canadian markets. Building a solid foundation in Toronto will help hold down distribution costs, Tsunoda said.

The retailer will offer about 2,800 items in Canada, versus 3,500 in the United States and more than 7,000 in Japan.

Pricing will likely pose a big challenge, he warned, as consumers often compare Canadian and U.S. prices, and operating costs can be higher in Canada.

To keep prices low “we may have to squeeze profit margin,” Tsunoda said, though he noted a lower margin could slow the pace of expansion.

After opening its first international location in London in 1991, Muji waited more than 15 years before breaking into the United States. It now has nine stores in New York and California.

“There is still a lot of room to expand,” Asako Shimazaki, president of Muji USA, said in an interview.

While building brand awareness in North America could be a challenge, the executives noted the company believes in a strategy of spending less on advertising and marketing to keep prices reasonable.

“Stores are the place to advertise and promote,” Shimazaki said. “Experiencing Muji at store is the best way to know about the company.”