A new type of discount retail emerging from eastern markets is converging on Australia, targeting established players. By Matthew Elmas

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In 2011, just as amazon was beginning its meteoric rise to become one of the highest valued stocks in America, two business partners shook hands on a variety store concept that would take southeast Asia by storm.

Japanese designer Junya Miyake and Chinese entrepreneur Ye Guofu became the visionaries behind Miniso, a retail business that has opened more than 1,800 stores in Asia, Europe, the Americas and now Australia in less than seven years.

The company hopes to open more than 6,000 stores globally, having identified Aussie retail as a natural extension of its fast-paced roll-out through the Philippines, Indonesia, Malaysia and Vietnam.

So bullish is its parent that local property consultant Lawrence Brown, who serves as the company’s head of property Down Under, has been given a mandate to open stores at breakneck pace.

While the market has been fixated on a prospective threat from America, Brown has opened seven stores in Sydney and Melbourne in less than five months.

He’s got a message for retailers holding anti-Amazon strategy meeting: Miniso is coming and it won’t be long before the Chinese owned, Japanese designed brand is a household name.

“I have already done deals with all of Australia’s major landlords except for Mirvac,” Brown tell IRW, revealing that he’s on track to have 25~30 stores open before and end of the calendar year.

“That’s still too slow,” Brown quips, “I’m going down to Melbourne next week and if I can get five shops in one day, I have got no problem signing five leases.”

Globally, Miniso says it is opening between 80-100 stores per month, having just begun its expansion into western markets live North America after cementing itself in the east.

Brown, who maintains that his expansion is comparatively tepid, is targeting at least 60 stores by the end of 2018 and 200 by 2021, with an eventual goal of 300 Australian locations nationwide.

“Nothing live a dollar store’

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Miniso is banking on an ever-expanding range of small electronics to cement its position is the Australian market, backed by a lean model of 150-300sqm tenancies.

It’s preparing to launch the next phase of its Aussie expansion next month, a marketing campaign that will see its model pitted against Australia’s two largest retails groups.

Brown believes Miniso is on average 150-200 percent cheaper than Wesfarmers’ Kmart and Target, as well as Woolies’Big W on a range of consumer goods and small electronics.

But he rejects the notion that Miniso is a dollar store in direct competition with The Reject Shop, explaining that the company is backing its products with a one year guarantee on all purchases.

“[Kmart and Target] go to one factory and order 100,000 units, we go in and order 10-20 million,” Brown says. “if you are a factory getting an order for 20 million units a year and you provide a bad product, you’re going to lose a lot of business. “

Quality has been an important pillar of Miniso’s marketing strategy from the outset and according to Hong Kong-based retail analyst Pascal Martin, it’s a “great wave” the company has sured, alongside other fast-growing Chinese brands throughout southeast Asia.

“They’ve turned what we see as a traditional value store on its head…tem years ago, some of the bargain basement stores we used to experience were pretty bad.

Martin believes Miniso has leveraged Japanese branding to instill a perception of high Japanese quality and simple design into their products, in a similar vein to UK-based apparel retailer Superdry.

Japanese brands, such as variety player Daiso and fast fashion giant Uniqlo, have assisted the company in defining its identity with customers, says Martin, who is a partner at OC&C Strategy Consultants.

“Miniso has leveraged [ Japanese product reputation] very smartly in the execution of its branding , product offer and store look, ‘ he explains.

Deloitte Australia’s retail lead David White agrees, noting that discount retailers have been growth drivers in major international markets post-GFC.

“People have been driven to places where price is sharper, but those shifting to these4 sorts of stores have actually been pleasantly surprised by the experience.” White explains, contending that Daiso (which is set for further expansion)is capitalizing on similar sentiment.

“They ‘ve turned what we see as a traditional value store on its head…ten years ago, some of the bargain basement stores we used to experience were pretty bad. These new players coming along offer the sort of experience we expect from that middle range retailer, but with much more competitive prices. “

White believes the pace of Miniso’s expansion is broadly justified, but that the giant needs to be careful not to over extend into a market with a much higher cost base than Southeast Asian countries.

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A DIFFERNET TYPE OF CONVERSATION

Colliers International’s national head of retail Michael Bate doesn’t think Miniso will be the only Chinese retail giant to make a splash Down Under in the coming years, basing his optimism on the success that Miniso has had expanding into other markets, as well as the “shrewd” nature of its strategy.

“They‘ve got a behemoth behind them in Asia. Bolting on new stores at the rate of one or two a week isn’t an issue because their logistics and infrastructure can handle that, “Bate explains, noting that he and major landlords were cautious at first , before observing consumers’ reactions to Miniso’s Australian flagship sites.

“we were cautious about a new player at the value side of the market, but you’ve only got to walk into the stores to see customers buying,” he says. “Miniso is taking the sites they like on their terms, and believe it or not, Brown is the king of the market because they’ve become a very good draw.”

Unlike many local retailers in Miniso’s section of the market, Brown is primarily interested in ground floor tenancies in major shopping centres, which will place the brand near players like Uniqlo and H&M. “

“The hardest part is getting landlords who haven’t seen Miniso onboards with where we ‘ve got to be, “ Brown explains, “If you look in China or Indonesia, we don’t sit far from Uniqlo or H&M.”

“I don’t want a level four or a basement, I want ground floor, I want people walking past my door. “

Bate says Miniso’s insistence on tier one location is representative of a different type of conversation Chinese retailers are incr4easingly having with Australian landlords.

“it’s their terms or nothing, full stop. If landlords don’t tick all the boxes, they move on and go elsewhere,” Bate explains, “They hold the power at the moment, they are new and innovative, and customers love them because of the value and also the quality.

(source:www.insideretail.com.au )