Ryohin Keikaku about to slash Muji prices

Ryohin Keikaku’s Muji stores in Japan plan their biggest-ever price markdown, in January.

The company will be offering reductions on about 2400 items of furniture, clothing, food and household goods.

Mattresses, for example, will fall from ¥35,000 (US$300) to ¥29,900, as the company saves on production costs by such moves as standardising legs for mattresses and sofas. Laptop computer bags will sell for ¥2990, a ¥1000 reduction, while three-pair sock packs will be lowered by ¥100 to ¥890. Curry and tea products will also be discounted simply though rounding the final digit down to zero.

Ryohin Keikaku has been opening 50 to 60 Muji stores a year, mainly abroad, and has about 850 in total. Expanded sales volume has helped reduce procurement costs, allowing it to pass on savings to customers through lower prices. The brand has also overhauled logistics and simplified packaging to lower overheads.

Despite its strategy, Ryohin Keikaku same-store sales at directly run locations grew 7 per cent for the March-August half after prices were lowered on about 300 products. Customer traffic also rose 6 per cent while average customer spend edged up 1 per cent. The company says reductions lead to more new and repeat customers.

Many other retailers in Japan are also cutting prices, mainly to compete with companies like Amazon.com, reports Nikkei Asian Review. Aoyama Trading has marked down about 40 per cent of clothing items at its American Eagle Outfitters locations, while Ikea Japan has reduced about 890 products by an average of 22 per cent.

Brexit effect

Meanwhile, Ikea UK has been feeling the financial effects of Brexit with a 13.7 per cent jump in costs in the year through to August. Heavily reliant on imports, the company says the increase was driven by the drop in sterling after last year’s vote to leave the European Union.

“To keep our range accessible and affordable for the many, we absorbed most of these costs, increasing prices by just 3.6 per cent,” says Ikea UK and Ireland head Gillian Drakeford.

British retailers such as J Sainsbury and Tesco have been cutting thousands of jobs in response to rising costs, and fashion retailer Next says the British pound was worth 14 per cent less when it was sourcing garments for this year’s autumn/winter collection.

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