Miniso opened its first flagship store in New York City’s SoHo in February 2022.
Miniso
BEIJING – Several Chinese consumer brands are looking for growth overseas, in markets like the US and Southeast Asia.
Take it Miniso, a seller of toys and household products based in Guangdong. Sometimes referred to as China’s Muji, Miniso opened a flagship store in New York City’s SoHo in February.
The store’s total merchandise value — a measure of sales over time — is approaching $500,000 a month, with a likely $1 million a month in December, founder and CEO Jack Ye told CNBC. at the end of June.
More importantly, he said that for stores operated directly in the United States, Miniso’s gross margin is more than 50%.
“If we can get a foothold here and create a good business, we won’t have a problem in the US overall,” Ye said in Mandarin, according to a translation. by CNBC. His goal is to become the world’s first “$10 or less” retailer.
Miniso stores started popping up in mainland China nearly 10 years ago, with overseas expansion starting in 2015 in Singapore. As of March, the company said 37% of its 5,113 stores are overseas.
Faster growth outside of China
Like many other businesses, Miniso saw sales decline during the pandemic. More than two-thirds of its revenue still comes from China. But over the past few months, data shows a relatively rapid increase internationally compared to domestically, due to the varying effects of the pandemic.
In the nine months ended March 31, the company said, its China revenue grew 11% year-on-year to 5.91 billion yuan, compared with a 48% increase overseas to 5.91 billion yuan. 1.86 billion yuan.
China’s retail sales have been lagging since the pandemic began in 2020. The housing market slump hasn’t helped. Local people tend to save instead of spending or investing, climb to the highest level in 20 yearsaccording to the survey of the People’s Bank of China.
Charlie Chen, head of consumer research at China Renaissance, said: “Chinese companies expanding into overseas markets will be a big trend in the future. “China has actually entered a period of relative wealth with a relatively high GDP per capita.”
He points out that for products like air conditioners, the penetration rate of rural households is 73.8% in 2020 – and even higher at 149.6% in the region. urban area. China Renaissance expects that penetration rate to increase steadily over the next few years.
“There is very little incremental volume or increased demand that can be generated in China in a short period of time,” Chen said. “For those companies that make air conditioners, home appliances, where they can earn more revenue, it’s overseas.”
In Southeast Asia, a single household air conditioner penetration rate of 15%, according to the International Energy Agency.
Household appliance company Midea, Hisense and Haier smart home has squeezed into markets outside of China over the past few years. Haier even bought it back General Electric’s equipment unit for $5.4 billion in 2016. Hisense’s goal is that by 2025, The foreign market will generate half of its total revenue.
These companies are seeing growth overseas, if not faster than in China.
“Definitely if [Chinese companies] want to enter foreign markets, [they] need to build its brand, need to fight with existing competitors,” Chen said. The cost will not be low. Initially they will not be profitable. But they are investing. “
If Chinese businesses can build brands overseas, they can compete with lower prices because they own or work directly with factories in China. That has helped companies like Shein become an international e-commerce giant.
Similarly, Miniso’s Ye says his strategy in the US is to combine the company’s supply chain network in China with the work of designers in New York – so products can go from design to shelf. goods in about three months.
That process can take six months or even a year if the design firm needs to find its own factory, Ye claims.
“Overseas, what we lack right now are design ideas that are suitable for local people,” he said. He said Miniso plans to open a North American product development center later this year and is looking for office space in New York.
June expansion
Other Chinese companies have pushed for overseas expansion despite Covid travel restrictions.
Ant Group, Alibaba’s fintech arm, announced in June launched a digital wholesale bank in Singapore after receiving approval from the Monetary Authority of Singapore.
Also in June, the toy company listed in Hong Kong Pop Mart tested U.S. waters by opening its first temporary site near Los Angeles. The company sells collectible toy character sets – packaged in unmarked boxes. That means a customer can either get a new toy to add to a collection or the same toy the customer bought.
Like Miniso, Pop Mart stores have become popular in Chinese malls. There is even a Pop Mart at Universal Beijing Resort.
Localization challenges
It remains to be seen whether the recent overseas growth lasts for those Chinese companies.
For business or geopolitical reasons, many Chinese businesses have not found success abroad. Consider ZTE’s failure to expand its smartphone business in the US after US sanctions.
Hugely successful companies like the short video company TikTok, owned by Beijing-based ByteDance, have established Pressure from the US government over data security concerns.
Not to mention the inherent challenge of being an effective international organization. A CNBC report on Chinese tech companies found that the business culture at home – which involves heavy use of Mandarin and long hours – frequently emerges abroad and discourages local employees from staying.
But whether it’s electric cars or home appliances, conversations with many Chinese businesses reveal a deep-seated but vague ambition that hasn’t been affected by the pandemic: to become a global company.
Disclosure: NBCUniversal is the parent company of Universal Studios and CNBC.
