A Chinese businessman who started a chain of stores selling smooth household goods at basgain-basement prices has become a billionaire, benefiting from the global trend of consumers turning to cheap products while eating the coronavirus pandemic spending budgets.
Guangdong, based in China Miniso Group Holding Ltd. is raising $ 608 million from its initial public offering in New York Thursday, making 65% of founder and Chief Executive Officer Ye Guofu held by his wife ̵1; worth more than $ 4 billion, according to Bloomberg Billionaires Index.
Miniso, which sells everything from lamps to bathroom slippers with colorful and clean designs, says that more than 95% of its products in China cost less than 50 yuan ($ 7.44 ), attracting the same bargain hunters who pushed chains such as UK Primark, Japan’s Don Quijote and US Dollar General
Retailers with low prices progressing as the global downturn triggered by the pandemic prompted more online purchases. It also accelerated the transition of the generation towards savings and discounts that began during the financial crisis more than a decade ago. Using brightly lit stores and modern but inexpensive merchandise, Miniso secured nearly 60% of the market share in general Chinese goods excluding grocery stores, according to research firm Euromonitor International.
Middle-tier chains pay the price. Retailers from Brooks Brothers and J. Crew to Japanese cult arm Muji have filed for bankruptcy protection.
“As the pandemic causes of global spending collapse, consumers are more focused on brands that have high value for money,” Ye said in an interview with Zoom with Bloomberg on Thursday. “It is a great opportunity for Miniso. The more we are in the economic downturn, the greater the chances and better growth is for budget brands. “
On its first day of trading, Miniso shares rose as much as 25% in New York before gaining 4.4% and closing at $ 20.88.
Chinese tech giant Tencent Holdings Ltd. and hedge funds Hillhouse Capital invested together 1 billion yuan in the company in 2018, and each holds a 4.8% stake today, according to the company’s prospectus. That stake is worth $ 614 million combined, a four-fold return on investment over 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 Hubei provincial has a humble start, like many other businessmen of his generation. He started working in a steel pipe factory and, as demand for consumer goods from a newly opened China balloon, you went into the trading business, trying to sell goods from ceramics to cosmetics and fashion accessories.
On a business trip to Japan in 2013, he was inspired by the budget shops there and brought the concept to China, asking for help from Japanese designer Miyake Junya. Miniso now has more than 4,200 stores, 60% in China and the rest is scattered in 80 countries.
Miniso is often accused of drawing from the minimalist Aesthetic popularized by Muji, the retailer owned by Ryohin Keikaku Co. offering no-brand, no living logo and household items. The success of the Chinese company has provided a cottage industry of lifestyle brands selling Scandinavian designs or Japanese inspiration for cheap dirt prices, such as OCE and Nome.
In 2016, the Minister and a connected company were ordered to pay LVMH for its economic losses in a design violation lawsuit, according to a court document. The Chinese company is also involved in many copyright disputes where it accuses other home retailers of copying its brand and committing fraud during marketing campaigns.
Ye, 42, denied the allegations of copying. “Maybe people have some misunderstanding with us,” he said. “Miniso is very pro-original design. The core of our products is good design. “
But to Turn You
The rapid expansion of Miniso was made possible by a franchise model that reduced profit margins – 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 yet to open a profit. Losses for the year ended in June narrowed 12% to $ 37 million compared to a year ago. And Covid-19 has not yet fully saved it – its annual revenue as of June has fallen 4.4% to $ 1.3 billion.
Miniso also faces growing competition in the field of budget pricing from the likes of Chinese e-commerce giants Pinduoduo Inc. at Alibaba Group Holding Ltd. Taobao Deal, Alibaba’s bargain shopping platform, this month launched a campaign selling items for just one yuan.
“Through Pinduoduo and Alibaba doubling the bargain retail and direct-to-manufacturer models, it will squeeze brands like Miniso whose main proposal is based on low prices,” said Mark Tanner, founder of the agency at Shanghai-based marketing and research China Skinny.
Miniso said it is trying to maintain the price advantage by sourcing abroad, which differs from the main base of Chinese suppliers.
When asked about being a billionaire, Ye paused for a seven-second pause.
“I have never thought of this,” he said. “I’m too busy doing my normal job.”