MUJI significantly reduced Chinese production sites due to cost pressure
Shaoxing Silver Coast Import and Export Co Ltd , https://www.silvercoastfabric.com
In a strategic move to cut costs, Ryohin Keikaku, the parent company of MUJI, has announced plans to significantly reduce its manufacturing footprint in China. The company aims to cut the number of contracted production sites—currently at 240—by half within two years, primarily to lower labor expenses. This decision comes amid growing concerns over rising operational costs in the Chinese market.
Industry experts have noted that the "Made in China" label for apparel is no longer as appealing as it once was. The sharp rise in both raw material and labor costs has made China less attractive for manufacturers seeking cost-effective production. According to public data, nearly all of MUJI’s best-selling knitted fabrics are still produced in China, with 70% of its garments manufactured there, while 20% come from Japan and the remaining 10% from other Asian countries. Most of these garments are produced through an OEM (Original Equipment Manufacturer) model.
Analysts highlight that the current economic climate presents challenges for the garment industry, particularly due to increased energy prices and inflationary pressures. In the first quarter of 2010, MUJI reported a net income of $321,000, a 26% drop compared to the previous year. This decline reflects broader struggles faced by Japanese companies operating in China.
Macquarie Securities analysts suggest that while Japanese firms initially saw China as a low-cost production hub, they are now shifting focus toward the Chinese consumer market itself. Meanwhile, Hua Rong Securities analyst Wang Rong notes that China's clothing retail market has been growing rapidly, with total sales reaching 326.43 billion yuan in 2009, representing about 70% of the overall textile and clothing market. With a consistent growth rate of over 20% in recent years, the market is expected to reach approximately 630 billion yuan in 2010, expanding at around 10.5% annually by 2015.
Research from Japanese advertising firms also highlights the appeal of Chinese consumers, especially those born after the 1980s. This group, numbering around 200 million, is seen as highly influential, being 13 times larger than their Japanese counterparts. These young consumers are more optimistic, socially active, and willing to spend, making them a key target for international brands.
However, MUJI's approach in China has led to higher pricing. While the brand traditionally emphasized affordability in Japan, its products in China often carry premium prices. A simple pair of right-angle socks can cost up to 50 yuan, including shipping, import duties, and store rent. Prices in Shanghai stores are even 25–30% higher than in Japan.
Experts point out that this shift from mass-market to luxury pricing is common among foreign brands in China. However, such a strategy may not be sustainable long-term, given China’s relatively low per capita GDP and consumer price sensitivity. MUJI’s regional director, Matsuki Mujizaki, has stated that his goal is to improve logistics and make products more affordable for Chinese consumers.
MUJI’s expansion abroad has not always been smooth. Its parent company, which previously operated under the name Niujitsu, faced financial difficulties and was acquired by Walmart in 2007. MUJI’s overseas ventures, such as its London and French stores, struggled financially, with all international operations turning a loss by 2001.
The brand's journey in China has also been challenging. It briefly exited the mainland market alongside its parent company, Xiyou Supermarket, before re-entering in 2008. To address high costs and maintain competitiveness, analysts suggest that many foreign apparel companies are moving production away from coastal regions or relocating manufacturing to other parts of Asia.
Ultimately, how MUJI and similar brands navigate these challenges will determine their long-term success in one of the world’s most dynamic markets.