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A Chinese businessman who started a chain of stores selling fancy home goods at bargain prices has just become a billionaire, profiting from the global trend of consumers turning to cheap products as the coronavirus pandemic eats into budgets. of expenses.
Miniso Group Holding Ltd., based in Guangdong, China, amassed $ 608 million from an initial public offering in New York on Thursday, bringing founder and CEO Ye Guofu’s stake to around 65%, which he had with his wife was worth more than $ 4 billion. according to the Bloomberg Billionaires Index.
Miniso, which sells everything from lamps to bathroom slippers with clean, colorful designs, says that more than 95% of its products in China are priced below 50 yuan ($ 7.44), which attracts them. bargain hunters who have powered chains such as Primark in the UK, Don Quixote in Japan and Dollar General in the US.
Low-priced retailers are thriving as the global recession triggered by the pandemic has fueled more online shopping. It has also accelerated the generational shift toward frugality and discounting that began during the financial crisis more than a decade ago. Miniso has a market share of almost 60% in China’s general merchandise outlets excluding grocery stores, according to research firm Euromonitor International.
Mid-tier chains are paying the price. Retailers from Brooks Brothers and J. Crew to the US arm of Japanese cult brand Muji have filed for bankruptcy protection.
“As the pandemic causes a drop in purchasing power globally, consumers are focusing more on high-value brands,” Ye said in a Zoom interview with Bloomberg on Thursday. “This is a great opportunity for Miniso. The more we find ourselves in an economic downturn, the greater the opportunities and the better the development for economic brands.”
On its first day of trading, Miniso shares rose as much as 25% in New York before cutting earnings to 4.4% and closing at $ 20.88.
Humble background
Chinese tech giant Tencent Holdings Ltd. and hedge fund Hillhouse Capital jointly invested 1 billion yuan in the company in 2018, each holding a 4.8% stake now, according to the company’s prospectus. That stake is worth a combined $ 614 million, a return on investment four times greater in two years.
A representative for Miniso declined to comment on Ye’s wealth.
While the last character in Ye’s name means “rich” in Mandarin, the native of Hubei Province had humble beginnings, like many other entrepreneurs of his generation. He started working in a steel tube factory, and as demand for consumer goods from a newly opened China skyrocketed, Ye entered the commercial business, trying to sell products from ceramics to cosmetics to fashion accessories.
On a business trip to Japan in 2013, he was inspired by budget stores in that country and brought the concept to China, enlisting the help of Japanese designer Miyake Junya. Miniso now has more than 4,200 stores, 60% in China and the rest in 80 countries.
Miniso has often been accused of drawing inspiration from the minimalist aesthetic popularized by Muji, the Ryohin Keikaku Co.-owned retailer that offers no-brand, no-logo home and lifestyle items. The Chinese company’s success has in turn spawned a cottage industry of lifestyle brands selling Scandinavian- or Japanese-inspired designs at very cheap prices, such as OCE and Nome.
In 2016, Miniso and a connected company were ordered to compensate LVMH for their economic losses in a design infringement lawsuit in Shenzhen, according to a court document. The Chinese company is also involved in several copyright disputes in which it accused other national retailers of copying its brand and committing fraud during marketing campaigns.
You rejected the accusations of cheating. “Maybe people have some misunderstanding towards us,” he said. “Miniso is a very pro original design. The core of our products is attractive design. “
However, for profit
Miniso’s rapid expansion was made possible by a franchise model that cuts its profit margin: only 3% of its stores are directly operated. Over the next decade, the company plans to open hundreds of stores a year, both in China and abroad, Ye said.
The company has not yet made a profit. Losses for the year ended June were reduced by 12% to $ 37 million compared to the prior year. And Covid-19 has not been completely spared: Annual revenue through June fell 4.4% to $ 1.3 billion.
Miniso is also facing increasing competition in the area of budget pricing from Chinese e-commerce giants such as Pinduoduo Inc. and Alibaba Group Holding Ltd. Taobao Deals, Alibaba’s bargain shopping platform, this month launched a campaign that sells items for just one yuan.
“With Pinduoduo and Alibaba doubling down on the retail and direct-to-manufacturer models, it will squeeze out brands like Miniso, whose core proposition is based on low prices,” said Mark Tanner, founder of research and marketing agency China Skinny, based in Shanghai.
Miniso said it is trying to maintain its price advantage through sourcing abroad, diversifying its main Chinese supplier base.
When asked about becoming a billionaire, Ye paused for seven seconds.
“I haven’t thought about this at all,” he said. “I’m too busy doing my normal job.” – Bloomberg
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