TORONTO — Japanese dollar store Miniso is expanding across Canada and has been described as Dollarama’s biggest potential threat, but its diverse product range hews more closely to that of Muji or Loblaw’s Joe Fresh brand.
After debuting its first six stores in Vancouver in the spring, the retailer, which prices the majority of its items at $2.99, opened its first two Ontario locations last month and a third is opening this coming weekend in Newmarket.
It’s part of a plan to open 30 to 50 Miniso stores in B.C., Alberta, Ontario and Quebec by the end of 2018 and as many as 500 in total across the country over the next few years, says Yi Ma, vice-president of business development for Miniso in Canada.
“We’re in a growth phase right now and looking to open as many Miniso stores in Canada as we can while staying profitable, and securing locations that we deem to be strategic,” Ma said.
“Miniso has taken this accelerated expansion approach around the globe that has been successful in many other markets.”
Miniso, based in Guangzhou, China and co-founded in Tokyo in 2013 by Japanese designer Miyake Junya and Chinese entrepreneur Ye Guofu, operates more than 1,800 stores around the world and had annual revenue of about $1.9 billion in 2016.
What differentiates it from Muji and Joe Fresh is that the majority of Miniso’s products, including household goods, electronics, beauty items, apparel and gifts, are priced at $2.99.
And while some of the retailer’s merchandise overlaps with that of Dollarama, Miniso merchandise has a highly uniform Japanese-style design sensibility — many items are in primary or pastel colours or feature graphic designs of animals, from $1.99 face masks to $3.99 insulated water bottles and $24.99 bluetooth speakers.
Japanese design is also a focus for Tokyo-based Muji, which opened in Canada in 2014 and has five locations in Ontario and B.C., with a sixth store opening this weekend in Vancouver.
It does not carry electronics or toys, sells at a higher price point than Miniso, and offers a larger assortment of clothing and soft goods.
Miniso’s expansion across the country comes amid renewed concerns about Dollarama’s valuation.
Though rival Dollar Tree expanded into Canada in 2010, Montreal-based Dollarama, with 1,125 locations across the country, has about five times the number of outlets as the Virginia-based retailer and few analysts have yet considered it to be a serious threat to the Canadian chain’s dominance in the sector.
But Miniso, with a broader assortment of low-priced basic apparel and a clear aesthetic point of view, just might be, says retail analyst Bruce Winder, partner in Toronto-based Retail Advisors Network.
“Nobody is offering low-priced basics like this,” said Winder, pointing to Miniso’s $4.99 sports bras and $7.99 t-shirts.
“This will take some share from Dollarama in certain categories.
Millennials in particular want great value and they want great design. Given the choice of style and value, they will pick something with style nine times out of ten.”
On Wednesday, analyst Peter Sklar downgraded Dollarama’s shares, which have surged about 69 per cent over the last year, to market perform from outperform.
“The stock has appreciated significantly in the last several weeks for no apparent fundamental reason, resulting in the current inflated valuation,” Sklar said in a note to clients on Wednesday.
“Part of the recent appreciation could be attributable to investors’ desire to insulate the consumer portion of their portfolios from the much-discussed ‘Amazon effect’.”
With Dollarama set to release third-quarter earnings next week on Dec.
6, its shares are trading at close to 23 times BMO’s forward estimate for operating earnings. Dollarama’s prior peak valuation was 20.5 times forward operating earnings in September 2015.