President Chain joins with Muji

President Chain Store Corp (統一超商), Taiwan's largest convenience store operator, announced yesterday it was forming a joint venture with Japan-based retail giant Ryohin Keikaku Co, owner of the "Muji" brand, in a bid to make inroads into the home furnishings market.

The two companies set up the Muji (Taiwan) Co (台灣無印良品) last week with an initial capital outlay of NT$100 million, a President Chain executive said yesterday at a press conference.

President Chain and its parent company, Uni-President Enterprise Group (統一企業), own 41 percent and 10 percent of the venture's shares respectively, while Ryohin Keikaku holds 39 percent and Mitsubishi Group holds the remaining 10 percent, said Hsu Chung-jen (徐重仁), president of President Chain and chairman of Muji Taiwan.

Mitsubishi is also a minority stake shareholder of Ryohin Kei-kaku, controlling 4 percent of the retailer's shares.

Muji Taiwan is expected to compete head-to-head with home-furnishings seller Working House (生活工場). Working House has 126 stores in Taiwan and hopes to increase that number to 141 by the end of the year, Working House president Dennis Hsu (許宏榮) said in May.

But Hsu Chung-jen said the alliance with Ryohin Keikaku will bring a number of advantages to President Chain as it branches out into a new area of business.

The Muji venture could cause a major shift in the so-called "lifestyle-concept shop" market, Hsu said, comparing the effect with the introduction of US-based Starbucks to Taiwan five years ago.

President Chain now oversees 30 Starbucks shops in Shanghai and 109 in Taiwan.

But Hsu has even higher expectations for the new venture.

"It took us at least four years to start turning profits at Starbucks Taiwan, but we expect it won't take longer than three years for Muji to make money in the local market," he said.

Muji, a 23-year old retailer specializing in home furnishings, kitchenware and stationary with "simple, natural and quality" designs, has average annual sales of ?115 billion (NT$33.85 billion). Muji owns 121 stores throughout Japan.

Apart from its expansion to Taiwan, Muji is also opening shops in the UK, Ireland, France, Hong Kong, Singapore and Korea. The company opened its first overseas store in the UK about 10 years ago.

The venture plans to set up its first store in Taipei sometime in the first half of next year, general manager of Muji Taiwan Tony Tsai (蔡篤昌) said yesterday. He refused to elaborate, but said that the company hopes to achieve NT$30 billion in annual sales by 2007.

One market watcher applauded the alliance, saying President Chain is on the right track by focusing on retailing.

"The core value of President Chain is its experience and know-how in running retail businesses, and this is what interests investors about the company," said Raymond Yang (楊晴華), a researcher at KGI Securities Corp (中信證券). "President Chain's decision to expand its business horizons within this sector is a smart tactic."

"President Chain has strong know-how and can boost efficiency so long as all units under the umbrella share information and operating costs," Yang added.