Friday, July 22, 2005

More tail.

Trends towards either ultra-luxury or super-cheap segmentation also occurring in Japan.


Small-Box Is Beautiful; With the rest of the world swamped by Wal-Marts, the humble 100 Yen shop is all the rage in Japan.

By Hideko Takayama
892 words
25 July 2005
Newsweek International
Atlantic Edition
Copyright (C) 2005 Newsweek Inc. All Rights Reserved.

Sure, Wal-Mart may rule the retail universe in America, and big-box stores like Tesco and Carrefour are the rising powers in Europe. But Japan, as usual, is a little different. One of the hottest retail trends in Japan has nothing to do with the high-volume, ultralow-price model that is killing off rival categories from Arkansas to Alsace. The big thing in Japan is the 100 Yen shop, an echo of the dollar stores that are approaching extinction in the American shopping scene.

Convenience-store chains are opening scores of small 100 Yen shops, and some supermarket chains are setting up 100 Yen counters within their stores. They are designed to appeal to a growing population of penny-pinching housewives and senior citizens in the world's most rapidly aging nation, yet they are not discount stores at all. They are cheap because they offer very small servings, not deep savings. Their hottest-selling item: the 100 Yen (about a dollar when tax is added) portion of fresh vegetables or fruit, perishable commodities that convenience stores have not offered in Japan before. Lawson, the nation's second largest convenience-store chain, has opened seven Store 100 shops in Tokyo since May, and plans to open a total of 1,000 nationwide by 2008. With other big convenience-market players like am/pm Japan and Three F joining the race, "a fierce competition is on," the Tokyo Shimbun commented recently.

The number of 100 Yen; shops began to rise when deflation hit Japan in the 1990s. But the latest wave of openings will add significantly to the current total of 4,600 such stores, in what can be read only as a discouraging sign; analysts had hoped that a revival in consumer demand would stabilize Japan's on-again, off-again recovery. The convenience stores had catered mainly to men in their 20s and early 30s, who consume a steady diet of soda and potato chips. When sales began to stagnate a few years ago, these chains began to look at the aging of the population--not just the fact that Japan has a higher share of citizens over 65 than any other industrialized nation, but that nearly 90 percent of Japanese under 60 say they worry about getting by in their old age. "These worries have led Japanese consumers to tighten their purse strings," says Charles Yuji Horioka, an economics professor at Osaka University.

So far this is an urban boom. In suburban and rural Japan, families tend to be larger and vegetables cheaper. Shops are scarce, so people drive to huge malls just as Americans do. It is older city residents, wedded to the tradition of buying fresh food daily, who most want a small shop close by. When Sakuko Shibuya found a brand-new Store 100 in her neighborhood in Tokyo recently, she thought it was a godsend. The 75-year-old Shibuya has to care for her 80-year-old bedridden husband, and her legs were getting too weak to walk far. "This is what I was waiting for," she says.

Most of the new 100 Yen shops are found in central cities, take up no more than 180 square meters and stay open 16 to 24 hours a day. Typically they carry about 3,000 items, from stationery to avocados, and increasingly cater to the elderly, housewives and singles with small and affordable daily rations; am/pm Japan's Food Style has introduced 100 premade dinner packages (at about 200 Yen to 300 Yen each).

They fall into the class of convenience stores, which now account for 7.1 trillion Yen out of total retail sales in Japan of 129 trillion Yen, leaving a lot of room to grow. A recent Nikkei Marketing Journal survey showed that in 2004, big-box retailers continued to face falling prices, rising competition and unsteady profits. Meanwhile local retailers, including electric-appliance discount shops, have enjoyed much healthier profits, the journal says. Of course, Japan is still one of the leading markets for global luxury brands, too. What's happening, says Horioka, is that status-conscious consumers are scrimping more on "everyday goods that are not visible to others," in order to splurge on luxe labels.

Ninety-nine Plus Inc. is a good barometer for the future. The company began opening its Shop 99 stores in 2001 with fresh vegetables and last year added 237 outlets, enjoying a 67.5 percent increase in sales. The chain now has 639 shops and, since listing on the Jasdaq last year, has seen its share price rise 400 percent. This growth comes at a time when, according to a recent survey by the Institute for Research on Household Economics, a private think tank, more than 50 percent of Japanese households have seen their incomes fall since 1998. "Japanese consumers are becoming a lot more conscious about values," says company spokesman Akio Okamura. "They know that their salaries aren't going up much." That's oddly good news for the 100 Yen shops, but a lot less encouraging for Japan.


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