MINISO: how China’s 10-Yuan shop became a global sensation
MINISO's global expansion strategies; Q3 online sales in China, and consumer reactions
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MINISO (NYSE: MNSO), a Chinese low-cost retailer and variety store chain, is gaining global attention. As of June 30, 2023, MINISO operates 5,791 stores worldwide. Its annual revenue for the period ending June 30, 2023, increased by 13.8% to 11.47 billion yuan. Revenue from China reached 7.651 billion yuan, with a year-on-year growth of 2.8%, while revenue from overseas markets reached 3.822 billion yuan, with a year-on-year growth of 44.6%. MINISO's rapid overseas revenue growth has made it one of the most successful Chinese companies to go global. (For the year ended June 30, revenue from overseas markets accounted for over 33% of MINISO's total revenue.)
“一切面向海外，一切面向商品” ("Everything is oriented towards overseas, everything is oriented towards products.”) —— Guofu Ye, CEO and founder of the MINISO [source]
Expanding into global markets has always been a key part of MINISO's strategy. As of 2023, MINISO had already established stores in 107 countries and regions, including North Korea, with over 2,100 stores overseas. Notably, in May 2023, MINISO achieved a significant milestone by opening a store in Times Square, New York, becoming the first Chinese brand to have a presence in that iconic location.
As of year-to-date 2023, MINISO (NYSE: MNSO) has gained over 150%, despite the pessimistic sentiments towards Chinese equities.
In today's post, we will share some winning strategies of MINISO to help you understand how the company managed to succeed domestically and internationally, and whether these strategies will be sustainable. We will also provide an update on MINISO's domestic online sales and consumer reactions ahead of MINISO's upcoming earnings report in November.
*This post is not sponsored by MINISO
Understanding the psychology of overseas consumers
MINISO adopts unique sales methods in various countries to connect with the psychology of local consumers. To scale this strategy, MINISO has chosen the "agency model" by partnering with local leaders.
For instance, in Vietnam, MINISO initially thought that inexpensive small umbrellas would be popular, but they ended up having an excessive amount of umbrellas in stock. This was due to MINISO underestimating the actual preferences of local consumers. Vietnam, being a "motorbike country," is the fourth-largest motorcycle market globally, with over 45 million motorcycles in circulation. As a result, people in Vietnam use raincoats while riding motorcycles.
MINISO later collaborated with Le Bao Minh Group and specially developed arm sleeves and masks for the Vietnamese market, which immediately became popular locally.
Le Bao Minh is the exclusive distributor of Canon in Vietnam and has over 200 sub-agents in 64 provinces. With such a leading enterprise leading the way, MINISO avoided many pitfalls and reduced a significant amount of trial and error costs. [Source]
The low-cost advantage has given MINISO a boost amid a slow economic recovery
As we have previously observed, Chinese consumers are increasingly prioritizing practical purchases. The combination of Miniso's low-cost advantage and its creative and personalized products has given them a boost both in China and globally in 2023.
Similar trends are observed among other low-cost retailers. For example, Pinduoduo is estimated to reach its target of $10 billion USD GMV for 2023, and SHEIN recorded a revenue of up to $23 billion USD in 2022. In China, there is also a growing trend among e-commerce players to adopt the low-cost strategy to remain competitive in 2023.
To create a feeling of consumers "getting a bargain," MINISO focuses on the "golden price point of 10 yuan" in its stores.
Ye Guofu, the CEO of MINISO, explained: "To make customers buy when they want to buy and use when they want to use, that's the best thing. We must achieve this situation, so 10 yuan is the golden price point, allowing customers to have no pressure.” [source]
However, despite the growing importance of value for money to consumers, the demand for personalized and stylish products from MINISO's main customer base of young consumers remains strong. As a result, MINISO has made significant investments in "大牌平替” or “substituting big brands with generics" products, which are self-made products that imitate the popular themes and styles of well-known brands:
For example, from the same supplier, a water cup is priced at 379 yuan in MUJI, while MINISO is priced at 49 yuan; the same goes for socks, with MUJI priced at 158 yuan and MINISO priced at 29 yuan.
The management of MINISO stated, "The perfumes in our store are made by perfumers from Dior and Chanel, using their fragrance ingredients. The luxury brand perfumes are priced at $200 per bottle, but I only sell them for $20 per bottle.” [source]
Leading the fashion curve: swift product launches and iconic IP creations
In addition to that, we should become IP powerhouse such as [Disney] and make lifestyle products more fashioned by featuring IPs. — MINISO Q4 2023 earning call
To keep up with the latest lifestyle trends, MINISO has also implemented a strategy to create intellectual property (IP) products. Currently, MINISO has collaborations with 80 IP licenses worldwide, compared to 17 licenses three years ago when MINISO went public. One recent successful IP product launch by MINISO is the Barbie series, which saw half of the Barbie items sold out within the first five days of the launch, creating a significant buzz on social media platforms like Xiaohongshu.
The strategy is likely to sustain long-term effectiveness, as we observe that MINISO's customer base already has a significant interest in IP products. According to data from Xiaohongshu, the largest lifestyle social media platform in China, the top co-mentioned brands for consumers interested in MINISO are Disney, Dior, Sanrio, and Popmart.
Disney and Sanrio IP products have become some of the best-received IP products launched by MINISO. Popmart (HK.9992), known for its collectible blind box toys and lifestyle products, has become extremely popular due to its innovative IP product launches and limited-edition collectibles.
Powered by China's supply chain and manufacturing, MINISO also launches new SKUs at an incredibly rapid pace. During MINISO's Q3 earnings call, management mentioned that "In the first half of 2023, 4,000 new SKUs were launched in Mexico and became a major driver of its local sales." 4,000 new SKUs launched in half a year — the incredibly rapid launch of new items has given MINISO the capability to quickly match emerging trends in the market and test out products to find the next big hits.
The controversies in China
However, MINISO's reputation in China's domestic market is not immune to criticism.
In 2013, when MINISO was founded, the company initially advertised itself as "The company's headquarters and product development are in Japan" in order to present itself as a Japanese company. In the early stages, MINISO even registered a Japanese website with the domain miniso.jp. (this website has been discontinued). In terms of international promotion, MINISO directly claims to be a "brand from Japan".
The Japanese-style designed products and the branding message of MINISO have caused considerable dissatisfaction among Chinese consumers, who believe that MINISO is a "伪日系 pseudo-Japanese" brand.
In August 2022, MINISO sparked a major controversy due to a product design issue. The company's Spanish Instagram account posted a photo with a caption that said, "Here it is! Your favorite Disney princesses wearing Geisha attire." However, the dolls were actually dressed in Chinese Qipao instead of Geisha attire. This incident caused tremendous anger and distress among Chinese consumers. After the incident, MINISO issued an apology statement regarding their past marketing practice of using the term "Japanese designer brand". They also promised to complete the “de-Japanization” of overseas stores by March 31, 2023.
MINISO's latest online sales trends in China and consumer reactions
In the paid section, we will provide updates on the latest online sales growth and average selling price of MINISO across Douyin, Taobao, JD, and Tmall up to Q3 2023. We will also cover social media exposure and consumer reactions on major social media platforms.
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