MUJI Has Drastically Reduced China'S Production Costs Due To Cost Pressures.

A garment industry analyst pointed out that the pressure on raw materials and manpower costs has increased dramatically.

Transformation from made in China to China market

Public information shows that, in order to effectively reduce manufacturing costs, Muji's bestselling knitted fabric 100% is produced in China, 70% of clothing products are produced in China and 20% are produced in Japan, and the remaining 10% are produced by Asia and other countries.

Among them, clothing production in China adopts OEM mode.

The analysts pointed out that this year, the increase in raw material and manpower costs has intensified, which has been a great pressure on the garment manufacturing industry. "At present, clothing manufacturers still have to face the problem of energy prices."

Data indicate that Muji's net income in the first quarter of 2010 was $321 thousand, down 26%.

In a research report, Limited by Share Ltd analysts from Macquarie Securities said that Japanese companies initially regarded China as a low-cost production base, but now, Japanese companies are increasingly turning their attention to China and taking China as their base.

Wang Rong, an analyst with Huatai Securities, pointed out that in 2009, the total retail sales of clothing (above Designated Size Enterprises) amounted to 326 billion 430 million yuan, accounting for about 70% of the total retail sales of textile and clothing commodities, and the growth rate in the past 5 years was over 20%.

From the perspective of per capita income and per capita clothing consumption expenditure (ratio of total income), the total capacity of the clothing market in 2010 is about about 630000000000 yuan, with a conservative estimate that the volume of the entire garment market will expand by about 10.5% in 2015.

Research by Japanese advertising companies shows that Chinese consumers, aged more than 20, tend to be more optimistic about the future, more socially active and more willing to spend money than their peers in Japan.

They say an important group attracting Japanese marketers is about 200 million of China's post-80s generation.

This group is about 13 times larger than Japan's peers.

Low priced products turn into high priced goods in China

After Japan entered the country with cheap strategy, it became a high priced consumer goods, and a pair of right angle socks could be priced up to 50 yuan.

The high price includes shipping costs, import duties and store rentals.

Public information shows that the price of MUJI Shanghai store is even higher than Japan's 25 to 30%.

The above analysts pointed out that "the fact that foreign brands have changed from mass consumer goods to luxury goods after entering into China is quite common."

But this situation can only last for a time.

As a mass consumer goods, we have to consider that China's per capita GDP is low, and there is a certain difficulty for Chinese consumers to accept the price.

Matsuzaki Kyo, chairman of Muji's shop responsible for shops in Singapore, Thailand and Mainland China and Hongkong, said: "my job now is to strengthen logistics and try to make more people buy cheaper."

Public information shows that the Muji's parent company, Xi You department store, has been in a difficult position for a long time. In 2007, it was fully bought by WAL-MART in the year of losses and then withdrew from the stock market.

The pace of expansion of MUJI products with the parent company is difficult.

In 1991, Muji opened its first overseas store in London, and opened 4 stores in France in 1999. By 2001, Muji's overseas operations were all in deficit.

MUJI road in China is not smooth sailing.

It once pulled out of the mainland market with its parent company Xi You supermarket and reentered the mainland market in 2008.

The above analysts remind us that how to avoid cost pressures is a key to solve the problem of high prices. "Now there is a trend of foreign garment enterprises, not to shift garment factories from coastal areas to the mainland, that is, to pfer garment manufacturing from mainland China to other parts of Asia."