Japanese Retailers Reach Out to Price-Conscious Consumers

The recent sharp increase in the value of the yen could damage Japan’s economic outlook even further as it may curb exports, which could eventually create unemployment. In these difficult times, Japanese retailers are looking to develop low-price strategies to encourage consumers to continue spending.

In August 2008, Seven & I launched a discount superstore called The Price in Nishi Arai (downtown Tokyo). The Price offers groceries 10 to 30 percent cheaper than conventional Ito-Yokado hypermarkets, and keeps its operating costs to a minimum by limiting product line-ups, marketing activities and employees.

The Price has a higher proportion of part-time workers and distributes flyers less frequently than its traditional formats; the first store has limited the number of SKUs to 16,000, with a focus on manufacturer brands (no private labels).

The new outlet has reportedly been performing well, and the company has announced plans to add two more stores by the end of this fiscal year and more than 10 outlets over the next few years via the conversion of underperforming Ito-Yokado stores.

Meanwhile, in a bid to generate higher foot traffic in its 2,000 stores across Japan, AEON has cut prices by an additional 10 to 30 percent on some 1,000 food, clothing and household items. AEON’s price-cutting promotion began in October 2008 and is planned to continue until the end of this month.

More fixed-price retailing
In addition to these latest developments, there has been a growing trend toward fixed-price retailing in Japan in recent years. Because of the country’s rapidly aging society and the changing retail landscape, there are growing demands on neighborhood stores to offer a wider range of food and household goods at economy prices, especially in urban residential areas. Convenience stores in such locations do not provide an extensive enough product range, particularly with regard to perishables.

LAWSON, Japan’s second-largest convenience store operator, launched a fixed-price concept in 2005. Called LAWSON STORE 100, the stores offer a range of grocery products, including perishables, for 100 yen (85 cents). In October, the company announced plans to increase the number of LAWSON STORE 100 outlets by 30 percent (to 1,200) by the end of fiscal 2010.

LAWSON also has begun selling the Value Line (VL) private label line originally developed for STORE 100 in its conventional stores nationwide; the majority of products come in single-size servings to cater to single-person households.

Private label trend
Other convenience store chains are starting to introduce value lines to their stores, as well. Seven-Eleven Japan introduced Seven & I’s group-wide economy private label, Seven Premium, to its 7-Eleven stores late last year.

Meanwhile, Ministop is also introducing AEON’s TopValu economy lines. Such moves suggest that Japan’s convenience store operators have begun to modify their policies — from quality-oriented to price-oriented — in accordance with the changing economic situation.

While the soaring yen is not good for exports, the strong value of Japan’s currency is good for import prices. As a result, some Japanese retailers are beginning to offer promotions focusing on imports in a bid to stimulate consumer spending. All of these low-price initiatives aim to tap into the growing number of Japanese consumers who are concerned about their future after getting used to years of deflation.