MINISO’s “Western-style” business model

In the retail sector, there are countless domestic convenience stores that imitate FamilyMart, but there has never been a local brand that can surpass its existence. However, in the home furnishing category, MINISO, which bears the image of “pseudo Japanese goods”, has achieved such a “reverse”. It not only crushes Muji with its global store openings, but also its net profit.

MINISO has been labelled as “cottage Japanese goods” since its inception, and public opinion on its brand image has been mixed.

Looking deeper, in fact, the business logic of MINISO is still dominated by the thinking of ordinary Chinese companies.

Why can’t MINISO tell domestic consumers openly: This is our own original brand! ?

We hope to see that MINISO can land on the New York Stock Exchange generously and integrate into the global market competition, but we also hope that, in addition to its commercial value, MINISO can gain the respect that matches it and truly represent ” Chinese power”.

On October 15, 2020 Beijing time, MINISO officially landed on the New York Stock Exchange under the stock code “MNSO”, with a market value of US$6.992 billion. This retail brand, which is called “cottage Japanese goods” by the people, has achieved a “blockbuster” effect.

But why after the listing of MINISO still can’t get rid of the label of “pseudo Japanese goods”? And behind this so-called “victory”, what deeper thinking topics are hidden? Perhaps it should start with the founder and his first entrepreneurial experience.

Three highs and three lows “Successful Learning”

Generally speaking, every company has a strong founder style before going public, and MINISO is no exception. To understand its business logic, start with its predecessor, oops.

Public information shows that Ye Guofu, the founder of MINISO, officially started his business in October 2003, and registered the company for the first time, Guofu Fashion Beauty Jewelry Trading Co., Ltd. (currently cancelled), focusing on the ten-yuan jewelry business. The address is in Foshan, which is where he went to work in Guangdong at the age of 21 in 1988.

Three years later, Ye Guofu expanded the store to Guangzhou and named it “Oh!” According to his explanation, the name comes from the exclamation of consumers when they arrive at the store, because the items in the store are exquisite and cheap. Oops, the unit price of the product is in the range of 10-30 yuan, and the targeted consumer group is 14-26-year-old women, of which 18-22-year-old women are the core consumers, and the customer unit price is about 20 yuan.

As a brand that focuses on women’s accessories, alas, taking advantage of young women’s rush to Korean culture and other foreign cultures, packaging small accessories, and quickly occupying first-tier cities and fourth- and fifth-tier markets in remote towns during 2010-2014. Its rapid development was once dubbed “China’s No. 1 Jewelry Brand”. At that time, Ye Guofu was like a celebrity, and the media reported that he made a small female jewelry business flourishing.

Ye Guofu once summed up the business model of oops to the outside world in 18 words: high-value, high-quality, high-efficiency, low cost, low gross profit, and low price, that is, “three highs and three lows”. Why can the jewelry be so exquisite and cheap? Ye Guofu revealed that they have hired nearly a hundred fashion buyers who have been lingering in Japan, South Korea, Europe and the United States all year round, searching for the most popular accessories in the world, and sending them back to China as soon as they have been screened. Oops, after receiving the product style, we will contact the partner factory for redesign and reprocessing.

From this point of view, oops’s approach is exactly the same as that of fast-moving apparel brand H&M “being a fashion follower, not a creator”. Ye Guofu once revealed to the media that he is preparing to go public and plans to list A shares in 2013. There is a piece of public news that can be confirmed: On May 28, 2012, alas, it received a 100 million yuan investment from Fortune Venture Capital, with 10% of the shares.

In the end, oops did not achieve the dream of listing. Although he did not disclose the reason, Ye Guofu did not give up the business of listing and offline retail.

Later, in the lifestyle and home furnishing category, Ye Guofu once again discovered the potential of China’s sinking market.

Transition to the era of MINISO

In 2013, when Ye Guofu was traveling in Japan, he found that there are a lot of lifestyle and home furnishing franchise stores in the area. They are small and beautiful. The products are not only of good quality, beautiful design, but also affordable. The point is that many products are “Made in China”. Ye Guofu was deeply inspired and decided to replicate this “specialized store” model to China.

MINISO’s official biographies-“MINISO has no secrets” tells the public the story of Ye Guofu’s encounter with Japanese designer Sanshunzhai and joint ventures. “At the turn of the spring and summer of 2013, on a rainy evening, at a restaurant in Tokyo, Jun Miyake was recommended by a friend and had dinner with Ye Guofu from Guangzhou.”

One is an entrepreneur from China who admires Japanese brands such as MUJI and Uniqlo; the other is a business planner from Japan who advocates pursuing pragmatism. “Provide consumers with simple, easy-to-use and genuine quality products at a reasonable price” has become the unanimous cooperation concept of the two.

According to the prospectus of MINISO, the company began operations in Guangzhou in 2013. After verification, its brand agent Guangdong Baoyang Investment Management Co., Ltd. (hereinafter referred to as “Baoyang Investment”) was registered and established on April 27, 2013.

To clarify the complex business model of MINISO requires a basic “triangular relationship”: Guangdong Saiman Investment Co., Ltd. (hereinafter referred to as “Saiman Investment”) is the registrant of the “Miniso” trademark and “MINISO” The trademark applicant, Baoyang Investment is authorized by Saiman Company, and is the actual manager of the trademark brand.

However, the domestic entity operating company MINISO (Guangzhou) Co., Ltd. disclosed in the prospectus was registered and established by Ye Guofu on October 18, 2017. On March 13, 2017, it had been renamed three times, and it was renamed: MINISO Premium Co., Ltd., and the legal representative was replaced by Ye Guofu to Lin Zongyou. Ye Guofu and Lin Zongyou are stakeholders, and both parties also jointly funded the establishment of Saiman Investment. The former is the actual controller of the company, accounting for 98%.

Under these operations, what can be determined is: MINISO is inseparable from the bloodline! Regardless of the top managers and business models, they all carry the gene of oops. This has become a criterion for understanding the many commercial behaviors of MINISO in the future!

“Class oops” gene

Whether it’s the “three highs and three lows” business model, or relying on the buyer’s “innovative design”, or the concept of building a fast-fashion brand, alas, the “wealth” in management has also been reproduced by this group of executives. MINISO. For example, in terms of brand promotion, former MINISO brand director Cheng Jinlan is one of them.

Cheng Jinlan has been working under Ye Guofu from the age of oh yeah. Although she left MINISO in 2018, her tenure was a period for MINISO to develop and grow. Moreover, after resignation, she and MINISO are still “disconnected”. One is that she herself is still a minority shareholder of Guangzhou Saiman Technology Co., Ltd. (the actual controller is Ye Guofu) accounting for 1.6667%, and the company has a direct relationship with MINISO series products and suppliers; the second is the establishment of Ms. Mulan (Guangzhou) ) From Brand Management Co., Ltd., the brand success of MINISO’s external marketing is her main external work in the early stage of entrepreneurship. From oh yeah to MINISO, what did Cheng Jinlan do?

Oops, this small boutique shop took the lead in creating a wave of “big stars” endorsements. During the period of vigorous development, on April 28, 2010, he signed the “Asia’s No. 1 Women’s Day Group”-S·H·E and the new singer Lin Youjia at the time. Although the media did not specifically disclose it at the time, the endorsement fee for S·H·E alone cost more than 10 million yuan.

During the period of MINISO, cooperation with big stars was also the habit of MINISO. After accumulating a certain reputation in 2015, MINISO began to exert its efforts in entertainment marketing in 2017. At first glance, the co-artists Lu Han, TFBOY, Wang Yibo, and Zhang Zifeng are all stars with high traffic or high attention every year.

In addition, Cheng Jinlan also single-handedly led the cooperation between MINISO, Wu Xiaobo and Lang Xianping, famous financial professionals, and organized the completion of the company’s official biography… Behind the series of brand marketing, a set of strict propaganda scripts-modern brand methodology has been formed. In short, this methodology is the product promotion work method that Cheng Jinlan led the team in MINISO to explore. It advocates that companies need the support of a large number of users to achieve extremely cost-effective products, and the method of word-of-mouth marketing can quickly attract consumers, and the accumulation of time can form consumers’ recognition and identity of the brand.

However, after 12 years of MINISO cultivating, Cheng Jinlan withdrew before the company went public, which has to be fascinating. After all, after going public, executives like Cheng Jinlan can enjoy this wave of dividends. At the 2020 (Nineteenth) Annual Meeting of Chinese Business Leaders, Ye Guofu revealed: “In less than two months, we have inspired more than 400 people in the process of listing… and created more than a dozen billionaires. .”

In the end, Cheng Jinlan chose the tortuous path of entrepreneurship. Whether this is the way she finds personal value or has some connection with the internal development of MINISO is still unknown.

Three sins of primitive accumulation

In the eyes of consumers, MINISO’s image has been mixed. The main points of praise are: Firstly, it changes the image of the traditional “ten yuan shop” with low style, poor quality and poor decoration, and transforms it into a high-end “ten yuan shop” with exquisite decoration and good quality and low price, providing consumers with better quality Services and goods.

On the other hand, MINISO is entangled in negative aspects, mainly branded with “three sins”:

One is plagiarism innovation. That is, original products such as well-known brands are designed into new products through partial “improvements” such as adjusting colors, shapes, and arrangements. There is a popular piece on the Internet that sums it up concisely: LOGO plagiarized Uniqlo, business model plagiarized Japan Daiso, display plagiarism MUJI products, and products and appearance are also highly suspected of paying tribute to major brands.

Although it was a joke from netizens, it also proved that MINISO had plagiarism in its production and operation. For example, MINISO has been sued for infringement by well-known companies such as Watsons, Mentholatum, LOCK&LOCK, and many original brand companies in subdivided products such as skin care, cosmetics, and cups.

The verdict on the dispute between Watsons suing Baoyang Investment, announced on April 16, 2016, has the following description: “In early 2014, Baoyang Company, in order to increase product sales and promote sales performance, according to Guangzhou Qu’s collagen series products The outer packaging of MINISO’s collagen series products is designed by itself… From the appearance of the overall color, font and graphic layout, the two are highly similar, which is easy to confuse and mislead consumers.” And “The Copyright Office believes that The above behavior of Baoyang Company constitutes an act of counterfeiting the packaging of well-known products.” In 2018, Baoyang Investment was listed as a dishonest person by the People’s Court of Beijing Haidian District because of the “Laolai” hat. Subsequently, on November 26 of that year, the company was cancelled.

In fact, in the past, the ugly record of losing the lawsuit through trademark registration, design collusion lawsuits, malicious infringement, etc., went to the court many times. In 2014, in a trademark infringement dispute with 7magic’s main company and related parties, which was also an accessory brand at the time, it was determined to be “using the registered trademark design infringement litigation to claim huge compensation and fight against competitors.” The behavior is an abuse of trademark rights, which violates the principle of good faith and the principle of no abuse of rights” (see the Supreme People’s Court [2014] Min San Zhong Zi No. 5 Civil Judgment for details).

The second is deep in infringement litigation. Due to space limitations, the three companies that have the closest relationship with the “MINISO” brand are mainly selected as examples. There are 89 risk categories for Baoyang Investment to fall into lawsuits. The risk analysis given by the company is: the company has 107 records of judgment documents, the total amount of the case is 1.2241 million yuan, and the company as the defendant accounts for 63.55%, and the most involved cases are disputes involving infringement of design patent rights.

From its establishment in October 2017 to December 1, 2020, MINISO (Guangzhou) Co., Ltd. had a total of 53 judicial cases, of which 38 involved commercial disputes, such as copyright disputes and infringement of design patents. Disputes, patent ownership, infringement disputes, network infringement liability disputes, reputation disputes, etc. In these 38 commercial disputes, 16 MINISO were listed as defendants.

From the establishment of the company to December 1, 2020, MINISO Co., Ltd. has been involved in 42 judicial cases, and 28 cases related to copyright, reputation, patent rights, design, intellectual property, unfair competition, etc. Among them, 22 of the cases involved were defendants (or defendants in the original trial). The risk assessment made by the company is: the company has 31 records of judgment documents, the total amount of the case is 1.5591 million yuan, and the company as the defendant accounts for 54.84%, and the most involved cases are disputes involving infringement of utility model patent rights.

The third is suspected of violating regulations and self-financing. MINISO’s rapid global fission relies on the franchise model. In terms of investment costs, Cheng Jinlan once disclosed that the license fee for the use of trademarks is 80,000 yuan per year, which requires a one-time payment of 3 years and a one-time deposit of 750,000 yuan for the goods. In addition, franchisees also need to pay 2,800 yuan/square for the decoration prepayment according to the selected shop area, and bear the shop rent, shop staff wages, and goods transportation, warehouse costs, anti-theft facilities and other expenses. Based on a 200 square meter store, the franchise budget totals about 2 million (see Chart 1 for details).

According to Frost & Sullivan’s survey, MINISO’s retail partners usually recover their store opening investment within 12 to 15 months after opening a store. However, if franchisees are short of funds or want to open a few more stores beyond the planned funds, MINISO has created a P2P platform-Fenlibao, to share the worries for franchisees.

Fenlibao is divided into wealth management end and asset end. The wealth management end connects to individual investors, with an annualized rate of return of 8%-15%; the asset end projects cover store financing, car loans, mortgages, accounts receivable financing, etc. Among them, most of the store financing projects are invested in MINISO franchisees, and the project name is generally “Sunac XX Store Financing”. The franchisee’s borrowing cost on the platform is 18% per annum, which is lower than the cost of other types of borrowers. And the funds borrowed by the franchisees, of which 750,000 yuan is used as a “goods deposit” and at least 150,000 yuan of franchise fees are returned to MINISO. Of the daily turnover generated by MINISO stores, 38% is the franchisee’s income (33% for food), which is transferred to the account the next day; 62% is the profit earned by MINISO.

Since the legal person and chairman of Fenlibao previously was Ye Guofu, the above-mentioned behavior of helping franchisees to raise funds from their own online loan platform was questioned as self-financing and self-insurance. Although Ye Guofu himself has resigned from all corresponding positions in Fenlibao, the trademark registration right of Fenlibao still belongs to Saiman Investment, which he controls.

“Rough” business model urgently needs to be changed

So, how should MINISO be treated?

There is no doubt about MINISO’s “usage doctrine”, but from the perspective of market play, MINISO’s core business model is actually dominated by Chinese thinking.

Focus on expansion speed and scale. “Bigger and stronger” is the consistent way of operation of Chinese enterprises. On September 30, 2018, at the first external financing meeting, MINISO proposed the medium-term development goal of “100 countries and hundreds of billions of stores” (see Figure 2 for details). At present, in just 7 years, MINISO has expanded its stores to 4,200 stores worldwide, with an average annual expansion of 600 stores.

Muji’s parent company, Muji plans to announce its financial report in May 2020. It plans to expand its global network to 1,138 stores based on the current 970 stores by August 2021. In the 40 years since the birth of MUJI, the total number of stores opened is still less than a thousand. Whether it is today or tomorrow, it is completely different from the development model of MINISO’s “crazy” store opening to reduce manufacturing costs.

Of course, this is not to criticize MINISO’s “bigger and stronger” business model, but a question must be raised here: behind the rapid expansion and expansion, what is the quality of MINISO’s development?

First of all, while rapidly expanding, MINISO is also closing stores. In the prospectus, as of June 30, 2020, more than 20% of MINISO stores in overseas markets have been closed. According to the calculation of MINISO’s 1,800 overseas stores, a total of 900 stores have been closed. At the same time, the country was also affected by the new crown epidemic in the first quarter, and most offline physical stores were closed. The data shows that the sales volume of its Chinese stores in the first half of 2020 has dropped by 32.6% year-on-year. At the same time, mainstream media reported in 2019 that from real data provided by MINISO’s internal employees, MINISO has closed more than 850 stores (as of March 2019) (excluding overseas).

Second, loss-making listings. As shown in Table 3 and Table 4, MINISO recorded a loss of 294 million yuan in 2019 and 260 million yuan in 2020. In addition, the amount of inventory has been increasing year by year from 2018 to 2020, and the total amount of current liabilities has also increased slightly year-on-year. How does MINISO relieve these pressures under the fast store opening mode?

The shop decoration style tends to be exquisite. In fact, consumers who often visit MINISO and MUJI will definitely not confuse the two! Comparing the pictures of the two stores, it can be found that MINISO still focuses on the boutique style like oops, which is more high-end, atmospheric and fashionable than before. The biggest details are reflected in the lighting settings. The “exquisite” atmosphere of the boutiques is created by bright lighting, and MINISO’s offline stores are all decorated in bright colors.

The entire shop of MUJI uses wooden showcases, and the lighting in the shop is mainly soft and warm. Only some products are displayed with bright lights. In addition, the disorderly arrangement of shoes, chairs, cups, etc. is also very artistic, which is not seen in MINISO. The details constitute the difference between the two! MINISO leaves consumers with the impression of a “high-end ten-yuan store”, while MUJI has subtly exported a “simple” lifestyle and aesthetic taste to consumers from the store image.

Low-cost marketing. This is not only Ye Guofu’s business experience, but also the fundamental reason why MINISO can quickly win the favor of consumers under the “foreign packaging” coat.

As of June 30, 2020, MINISO has provided consumers with a wide selection of approximately 8,000 core SKUs, and its products cover 11 main categories, including home decoration, small electronics, textiles, procurement of product accessories, and beauty tools , Toys, cosmetics, personal care, snacks, perfume, stationery and gifts. In this fiscal year, they launched an average of more than 600 sku per month.

MINISO disclosed that the retail price of more than 95% of its products in China is below RMB 50 (US$7.08). On April 15, 2020, Ye Guofu revealed a more specific price strategy in an anti-epidemic lecture: “The performance of most MINISO stores has returned to 70% to 80% of the pre-epidemic level, and a substantial price reduction will be implemented next. -The price of more than 95% of the products will be controlled within 29 yuan, and the price of newly developed products will be lowered by 20% to 30%.” And he believes that under the expected economic downturn, the opportunity for super cheap brands has arrived. This recognition is in line with current market trends. E-commerce giants such as Alibaba,, and Suning have all launched “1 yuan purchase” activities, which shows the market potential and influence of low-price marketing.

In contrast, MUJI is completely at a disadvantage. According to incomplete statistics, from October 2014 to August 2018, MUJI cut prices nine times in China, and it is still difficult to recover its decline. MINISO gathers the resources of domestic manufacturers to benefit consumers and break the blind superstition of Chinese consumers on pure Japanese MUJI products. In this zero-sum game, MINISO, which better understands the needs of China’s sinking market, is obviously better.

However, the “Made in Japan” advertised on the product label and the Japanese product manuals have to ask consumers to question MINISO: Why can’t they say that they are “Made in China” openly What about original brands?

Regrettably, models similar to MUJI, Daiso, and even MINISO actually took shape at the beginning of this century in my country, but because of the lack of brand awareness, it was only temporarily frozen in the dust of history.

Around 2009, ten-yuan stores began to appear in my country’s first- and second-tier cities, and all kinds of small commodities in Yiwu market were delivered to all parts of the country through such physical retail stores. This kind of local flavor marketing of “ten yuan per piece” and “cannot be bought at a loss, can’t be fooled” spread rapidly and spread to counties and towns such as third- and fourth-tier cities. As the operators do not have the brand management awareness of long-term operation and do not pay attention to the quality of goods, the ten-yuan store seems to have come to an end in just one or two years.

It was not until the emergence of MINISO that it reshaped consumers’ perception of the brand image of the ten-yuan store. However, due to the fact that the brand is weak, coupled with all the negatives before the listing, MINISO is also trying to dispel public suspicion by co-branding products with popular IP such as Marvel, Disney, and Hello Kitty, but it must get rid of the original sin of capital accumulation. , The origin of MINISO’s “bad roots and no red seedlings” is obviously a big burden.