Miniso aims to double its domestic revenue from overseas markets within five years.

On August 31st, Miniso (09896.HK) opened its flagship store in Central Park mall, Jakarta, Indonesia.

The store, spanning an area of 3,000 square meters, is Miniso's largest global outlet.

The store was packed with customers, with 30 cash registers operating simultaneously, yet checkout lines still stretched for three hours, prompting many consumers to sit on the floor.

According to Miniso, the store's first-day sales exceeded 11.8 million yuan, setting a new single-day sales record for the brand.

The scale of the Jakarta flagship store demonstrates Miniso's determination and strength in expanding overseas.

According to its 2024 semi-annual report, as of the end of June, Miniso has a total of 6,868 stores worldwide, with over 2,700 in overseas markets, accounting for nearly 40% of its total, which is the result of nine years of overseas expansion.

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"Domestic market is the foundation, but in the next five years, the overseas direct market, overseas agency market, and domestic market may form a tripartite balance.

In other words, overseas could replicate the scale of two domestic Miniso markets," said Liu Xiaobin, Vice President and Chief Marketing Officer of Miniso Group.

Consumers first got to know Miniso from its "10-yuan stores," which mainly sold daily necessities with high cost-performance ratio.

Starting from 2023, Miniso established the positioning of "Global IP Co-branding Collection Store" and has been increasingly focusing on brand image display.

In overseas markets, the company often showcases its strength through super large stores, having previously opened flagship stores in New York Times Square and Paris's Champs-Elysees.

The scale of the Jakarta flagship store has been further upgraded, and it has created a joyful and enthusiastic atmosphere similar to Disneyland from visual design and decoration, creating an "atmosphere" beyond products.

It can be seen that Miniso wants to operate not a "supermarket," but an IP (Intellectual Property) paradise.

This flagship store has more than 10,000 SKUs (stock keeping units), of which 30% are IP products, such as popular IPs like Sanrio, Disney, Loopy, One Piece, Chiikawa, etc.

The shopping enthusiasm of Indonesian consumers is largely attributed to these IP products.

In overseas markets, consumers are more willing to pay for IP products.

In Miniso's semi-annual report, the sales revenue of IP products doubled, accounting for nearly 50% of the total overseas revenue, while in mainland China, the sales of IP products increased by nearly 40% year-on-year, accounting for less than 30% of the total revenue in mainland China, both figures are lower than overseas.

As of September 5th, Miniso's total market value of Hong Kong stocks was 40.452 billion Hong Kong dollars.

183 million yuan IP authorization, IP sales support half of the overseas market.

Currently, Indonesia is the overseas market with the most Miniso stores.

Miniso first entered the Indonesian market in 2017 and has since opened more than 300 stores in more than 130 cities in Indonesia.

"Indonesian consumers have never disappointed us," said Tu Baoyan, Vice President and General Manager of Miniso Group's Overseas Business Department II.

Many Chinese consumer brands, including Miniso, have high hopes for Indonesia.

In 2023, Indonesia has a population of nearly 278 million, ranking fourth in the world, only behind India, China, and the United States; the annual new population is nearly 5 million, more than half of China's new population; GDP (Gross Domestic Product) is 137 trillion yuan, with a growth rate of 5%, and per capita GDP is close to 50,000 yuan.

Liu Xiaobin said that considering the demographic dividend of this market, "300 stores are far from enough, and we can strive for four digits (1,000 stores)."

He said.

Miniso's pricing in Indonesia is similar or slightly higher than in the mainland China market.

We observed in the Jakarta flagship store that socks printed with the Korean IP Loopy are about more than 20 yuan per pair, and the price of blind boxes ranges from tens of yuan to hundreds of yuan.

In recent years, Miniso has gradually emphasized the importance of IP products, and the newly opened flagship store in Indonesia has set up special areas for top IPs such as Sanrio and Disney.

The group's trendy toy brand TOP TOY has 195 stores all in mainland China, and there are no independent stores overseas, but it appears in the form of a store-in-store in the Jakarta flagship store.

CHIALYANTI GO, Deputy General Manager of Miniso's Indonesian subsidiary, said in an interview with us that Indonesian customers understand the high price of IP products and understand that they have to pay copyright fees.

"Compared with other IP peripheral products, our products are already very cost-effective," she said.

Miniso has also invested a huge amount of resources in the authorization and use of IP copyrights.

According to the 2024 semi-annual report, the authorization fee increased by 24.2% year-on-year to 183 million yuan during the reporting period.

CHIALYANTI GO said that Miniso has more than 100 IPs of various products in China, and Indonesia does not have so many yet, but it will follow the pace of China and gradually introduce them.

She explained that some IPs will encounter special circumstances when entering Indonesia.

"For example, Sanrio, Miniso has indeed bought the copyright of this IP globally and can market Sanrio products, but there was already someone in Indonesia who also had the copyright of Sanrio, so Miniso, Sanrio, and another copyright user had to coordinate together."

In the end, in 2023, Miniso's first Sanrio IP theme store opened in Margo City shopping center in Jakarta.

However, CHIALYANTI GO did not disclose how the three parties coordinated.

This local Indonesian manager has worked at Miniso for nearly eight years and is responsible for the development of new stores.

At the beginning, she needed to explain "who is MINISO" to the entire Indonesian market.

As the market developed, commercial real estate gradually recognized and accepted this brand.

In 2023, Miniso proposed the "super store" strategy, so CHIALYANTI GO needed to find larger-scale properties.

Ye Guofu, Chairman of the Board of Directors of Miniso Group, said that only super flagship stores can establish a strong brand impression in the minds of consumers, hoping to create great performance with large stores.

"If the performance of a large store is similar to that of a small store, then the cost-effectiveness of a small store must be higher.

But we started with the Sanrio theme store, expanding the store from the usual 200 square meters to 460 square meters, doubling the area.

The cost doubled, but the performance increased by six times."

CHIALYANTI GO said.

Therefore, Miniso is confident in the performance of large stores.

Ye Guofu said in the performance telephone meeting that the vision of Miniso is to become the world's first IP design retail group.

To achieve this vision, the four directions that Miniso needs to adhere to are cost-effectiveness, globalization, product innovation, and IP design.

Ye Guofu said that the goal set for Miniso is: from 2024 to 2028, the net increase of 900 to 1,100 stores per year, maintaining a compound revenue growth rate of not less than 20% and a slightly faster earnings per share growth rate, and the sales proportion of IP products exceeding 50% by 2028.

Overseas markets contribute more than 30% to Miniso.

Miniso's overseas expansion began in 2015, with the first step in Southeast Asia.

According to the financial report, the brand has a total of more than 2,700 stores overseas, accounting for 39.3% of the total store count.

Ye Guofu said in the performance telephone meeting that the net increase of overseas stores in the first half of the year was 266, which is also the fastest half-year of store opening in nine years of Miniso's overseas expansion.

The annual target is to add 550 to 650 stores.

The group's total revenue in the first half of 2024 increased by 25% year-on-year to 7.76 billion yuan.

Among them, overseas business revenue was 2.732 billion yuan, a year-on-year increase of 42.6%, outperforming the market, accounting for 35.2% of the total revenue.

In the Chinese market, whether it is Miniso or TOP TOY, most stores are "partner stores," that is, franchised stores.

At the end of the report period, Miniso had a total of 1,070 franchisees, and the stores opened by the top 50 franchisees accounted for half of the total.

It can be seen that the core contribution comes from "big franchisees."

The situation in overseas markets is different.

According to the financial report, most of the existing Miniso stores are opened by agents.

In the first stage of going overseas, the headquarters needs the rich local resources and retail experience of agents.

However, the number of direct stores and revenue is increasing rapidly.

Ye Guofu said that among the net increase of overseas stores, direct stores reached an "unprecedented" 105, more than half of which are in the U.S. market.

According to the financial report, the contribution of the direct market to overseas revenue in the first half of the year was 56%, exceeding the agency market; the revenue of the direct market increased by 70% year-on-year.

In addition, the number of Miniso's overseas franchisees also increased significantly in the first half of the year.

As of the end of June 2024, Miniso's overseas franchisees increased nearly double compared to the same period last year, to 101 franchisees.

According to the financial report, it is mainly the increase in the number of Miniso franchisees in Indonesia.

According to Tu Baoyan, two-thirds of the stores in Indonesia are franchised stores, and one-third are direct stores; while in the U.S. market, 90% of the stores are direct stores, and only 10% are franchised stores.

"In order to expand rapidly in the United States, we are also exploring the franchise model.

Because the laws and regulations of various countries are different, we are still studying," she said.

Miniso is the vanguard of Chinese consumer chain brands going overseas, but it also faces new challenges.

From the perspective of the average customer price, Miniso's average customer price in mainland stores in the first half of the year increased from 37.6 yuan in the same period last year to 38.5 yuan, and the average customer price in overseas markets has not been disclosed.

TOP TOY's average customer price in the first half of 2024 was 111.2 yuan, lower than the same period last year's 124.7 yuan.

TOP TOY appears in the form of a store-in-store in Miniso's Jakarta flagship store, perhaps to try the water temperature of going overseas.Additionally, Tu Baoyan candidly stated that with an increasing number of brands venturing into Indonesia, Miniso faces more intense competition.

"Eight years ago when Miniso came to Indonesia, we were the only ones in this category, but now there are N many companies, some specialized and some comprehensive, making the competitive landscape very fierce.

This is the biggest challenge," she said.

In Jakarta alone, the Chinese trendy retail brand KKV has opened several stores (recently renamed to "Oh!Some").

KK Group, to which KKV belongs, disclosed in its prospectus updated in January that its stores have covered 34 cities in Indonesia.

In July, Pop Mart, which started with blind box products (09992.HK), also opened its first store in Indonesia in Jakarta.

For a retail company like Miniso, which deals in daily necessities and has up to 10,000 SKUs in a single store, how to manage the overseas supply chain is not only about efficiency but also about risk.

Recently, according to media reports, Indonesia is planning to impose up to 200% safeguard duties on imported textiles to protect its domestic industries.

Liu Xiaobin said that although the textile category currently accounts for a low single-digit percentage of business in Indonesia, it is indeed necessary to address the potential risks of tariff policies.

"Our current approach is to comprehensively consider different categories and products, in terms of the certification thresholds, tariff policies, and logistics efficiency in overseas local markets, to adopt the optimal resource allocation solution," he said.

According to him, 80% of the entire supply chain still relies on the support of China.

In Miniso's supply chain, there are 1,100 Chinese suppliers and over 300 overseas suppliers.

Liu Xiaobin said that Miniso is also considering going overseas with its suppliers.

"For example, the plush supplier, we are currently exploring the possibility of building a factory together in Mexico to address potential changes in North American tariffs."

Ye Guofu mentioned at the performance meeting that the vast majority of products sold to the US market can be fully replaced by the supply chains in Southeast Asia, Japan and Korea, and locally in the United States.