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  • 1. Current and future developments in Consumer markets: The Retail Response Roy Larke, PhD. Editor JapanConsuming.com Professor, University of Marketing & Distribution Sciences, Kobe, Japan
  • 2. The Build-up to Current Issues
    • The History
      • Three decades of minor change
    • The Death of Japanese Retailing
      • What happened to the 1990s?
    • Key Challenges to Japanese retailing
      • The Changing Consumer
      • Changing retail competition
    • The market in 2010
    Today’s agenda
  • 3. The Build-up to Current Issues
    • The History
      • Three decades of minor change
    • The Death of Japanese Retailing
      • What happened to the 1990s?
    • Key Challenges to Japanese retailing
      • The Changing Consumer
      • Changing retail competition
    • The market in 2010
    Today’s agenda
  • 4. Another retail revolution?
    • 1972: Daiei becomes Japan’s largest retailer
      • Department stores lose importance
    Landmarks in retailing The only way modern Daiei can win!
  • 5. 1982: Retail store numbers decline … Landmarks in retailing Source: Census of Commerce. Note: 1999 figures adjusted for survey differences.
  • 6. 1985: Wholesaling begins to stagnate Landmarks in retailing Source: Census of Commerce. Note: 1999 figures adjusted for survey differences.
  • 7. 1989: Pop! The Bubble Bursts
    • Consumers get suspicious of high price, low value retailing
    • Retailers do nothing -- or very little
    • Nothing new happens
    • Retailers spend the early 1990s repeating old mistakes
    Landmarks in retailing
  • 8. The Build-up to Current Issues
    • The History
      • Three decades of minor change
    • The Death of Japanese Retailing
      • What happened to the 1990s?
    • Key Challenges to Japanese retailing
      • The Changing Consumer
      • Changing retail competition
    • The market in 2010
    Today’s agenda
  • 9. 1990s: the lost decade Nothing Nineties Figures not adjusted for inflation
  • 10. What really happened in the 1990s?
    • Labour market changes rapidly
      • End of “life-time” employment
      • Job switching become accepted
      • Head hunting becomes accepted
      • Job security drops suddenly and significantly
    Nothing Nineties
  • 11. Consumer worry: High Prices
    • Japan is still the most expensive country in the world
      • Food prices 1.5–3 times West
      • New demand for discounting
      • No longer believe “high price = high quality”
      • Retail merchandising and store presentation begins to be seen as indication of price/quality relationship
    Nothing Nineties
  • 12. Income & Expenditure Flat in 1990s Nothing Nineties
  • 13. 1990–98: Monthly Savings increase 21%
  • 14. Money in the bank: Savings for Working Households Mode: ¥2.65 mn Median: ¥9.00 mn Mean: ¥13.56 mn Nothing Nineties
  • 15. Plenty to spend
    • Savings rates for all households
      • ¥13.03 million average
    • Savings for households with head over 60 yrs
      • ¥26.36 million average
    Nothing Nineties
  • 16. Retail response: more of the same
    • Manufacturer dominated supply chains
      • Retailers unable to set retail prices
      • Profit from space rental and easy buying terms
    • Belief in size over efficiency
      • Rapid expansion of floor space
      • Poorly considered group diversification
    • Lack imagination and strategic direction
    • High debt, unsophisticated retailing
    Nothing Nineties
  • 17. Higher than some countries…
    • Daiei’s debt larger than GDP of Ecuador (66th)
    • Many recovering, but slowly
    • Other worries
      • Aeon
      • Department stores
  • 18. Get bigger now, improve later Sales space & sales density Daiei Aeon (Jusco) “ Bigger is always better”
  • 19. Steady growth but still down Ito-Yokado Mitsukoshi “ Bigger is always better”
  • 20. NCR: No consumer response
    • Retailers fail to adapt to consumer trends
      • Don’t understand and reluctant to implement their own marketing initiatives
      • High cost, low margin operations leave little room for experimentation
      • No incentive to improve shareholder value
      • Too much reliance on the ‘old ways’
        • Quote: “It wouldn’t work in Japan [so we won’t try it]”
    The retail problem
  • 21. Consumers are also bored…
    • Consumer confidence hasn’t hurt some retailers at all!
    • Japanese firms (2000-01):
      • Fast Retailing (Uniqlo) Sales up 106.1%
      • Five Foxes (Comme Ca) Sales up 17.1%
    • Overseas firms:
      • Louis Vuitton, adidas, Chanel, Hermes etc..
      • Gap, Starbucks, Carrefour(?)
    The retail problem
  • 22. What do consumers want?
    • Imagination and something different
    • Lower prices
    • Well supported and brands backed by solid marketing
    • Genuine, friendly, outgoing service
    • Value for money (even if the price is high)
    • … and more imagination
    New consumer demand
  • 23. The Build-up to Current Issues
    • The History
      • Three decades of minor change
    • The Death of Japanese Retailing
      • What happened to the 1990s?
    • Key Challenges to Japanese retailing
      • The Changing Consumer
      • Changing retail competition
    • The market in 2010
    Today’s agenda
  • 24. Keys to Japan’s new retailing
    • Brand marketing
    • Retail internationalization
    • Consumer first service
    • Retail management of supply chain
    Lessons for retailers
  • 25. Aoyama Shoji’s Question
  • 26. Japan discovers brand marketing
    • Branding is different in Japan
      • Emphasis on naming over branding
      • Brands have short life span
      • Company name supercedes brand name
      • Retail branding still at ‘generic’ level only
    • New brand marketing leaders appear
      • Uniqlo, Comme Ca, Mujirushi etc.
      • Others will catch on, but many don’t understand
    Lessons: Branding
  • 27. The day my life changed…
    • Dec., 2000: Carrefour opens first non-Japanese superstore
      • Opened 3 stores (total 45,000sqm) in 1 month
      • Very strong industry and press opposition
      • Equally strong consumer interest and surprise
      • Followed by consumer disappointment
        • Merchandise seen as too local
        • Prices unbelievably [literally] low, not ‘French’
    Lessons: Internationalization
  • 28. Internationalization of Japanese retailing
    • Pre-1970:
      • Early exploration: mainly introduced by Japanese firms
    • 1970-1990
      • Rapid expansion of high price brands: mainly European
    • 1990–present
      • Independent operations, break away from poorer Japanese “partners”
        • adidas, YSL, Fendi, Armani etc..
      • Entry of globally capable firms
      • Entry of increasing number of US retailers
    Lessons: Internationalization
  • 29. Retail Entry: 1967-2000 Number of new firms Lessons: Internationalization
  • 30. Overseas retailers in Japan, 2000 Lessons: Internationalization
  • 31. Americans arrive late: Overseas retail entry by period Lessons: Internationalization
  • 32. A long way to go…
    • Internationalization is a good thing
      • Great opportunities for overseas retailers
      • Land prices low, demand high
      • Great pool of workers looking for new, exciting jobs
      • Big consumer demand for imagination and originality
      • Ikea by 2005, Wal-Mart by 2005, Tesco sooner (?)
    • The time has come to be in Japan and stay long-term
    Lessons: Internationalization
  • 33. Too much too soon? Carrefour got it right!
  • 34. Carrefour got it right, but…
    • Carrefour rejects RPM, aggressive stance with suppliers
      • Still a major problem, very anti-competitive supply chain
      • Bad publicity for Carrefour, good for industry
        • Japanese retailers will, slowly & quietly adopt same practices
    • Attractive stores, new (to Japan) ideas
      • Not all ideas worked, but some were unique
        • Pricing by weight, bag packing, low price guarantee
    • Strategy: Act global, think local was inappropriate?
      • Not what the consumer expected, and rejected by industry
    What Carrefour taught Japan
  • 35. Keys to Japan’s new retailing
    • Brand marketing
    • Retail internationalization
    • Consumer first service
    • Retail management of supply chain
    Lessons for retailers
  • 36. Friendly face of customer service
    • Traditional Japanese service is
      • Polite
      • Efficient
      • “Japanese consumers expect it”
      • “There is only one way to serve”
    Lessons: Customer service
  • 37. Friendly face of consumer service
    • Traditional service is also boring
      • Young consumer more confident and friendly
      • Breakdown of robotic respect for customer
      • Increase in friendly, natural service
      • Begin to listen and talk to consumers
      • Major influence of overseas chains
        • Subway, Gap, Disney, Starbucks
        • Copied by Japanese chains
        • Sofmap, Uniqlo, Seibu Department Store, Mujirushi, Comme Ca
    Lessons: Customer service
  • 38. Japanese retailers want to control supply chains too
    • Retailers recognise need to control supply and their own pricing
      • Even department stores now take title to merchandise, reducing consignment sales
      • Slotting fees and more aggressive buying techniques still rare, but increasing
      • Less reliance on manufacturer marketing support
      • Increase in retail branding, and brand marketing
    Lessons: Customer service
  • 39. The Build-up to Current Issues
    • The History
      • Three decades of minor change
    • The Death of Japanese Retailing
      • What happened to the 1990s?
    • Key Challenges to Japanese retailing
      • The Changing Consumer
      • Changing retail competition
    • The market in 2010
    Today’s agenda
  • 40. Conclusions: the challenges
    • Consumers
      • Changing attitudes and expectations
    • Retailing
      • Improvement and consolidation
    The future
  • 41. Japanese market, 2010
    • Consumers
      • Japan still too expensive
      • Increasingly value conscious and service sensitive
      • Major differences between young consumers’ attitudes up to mid-20s and those older
      • Increasing international awareness
      • Increasing awareness of ‘good’ Japanese products and companies
    Future: Consumers
  • 42. Still too expensive by far: World’s most expensive cities Economist, July 2001 Future: Consumers
  • 43. Japanese retailing, 2010: 1
    • Differences between the old and the new
      • Many older retailers will not survive
      • Concentration may fall as large firms decline, but will rise later
      • Some older retailers will succeed in re-inventing themselves, but they will be in the minority
        • Mitsukoshi is the key example, Isetan may be better example
    Future: Retailers
  • 44. Japanese retailing, 2010: 2
    • Re-evaluation of retail strategy
      • Some companies continue to pursue floor space and market share, but at great risk
      • Newly successful companies will increasingly consider retail efficiency within operations
      • Better retailers will:
        • discover sophisticated merchandising, branding, and store design
        • become consumer orientated not supplier orientated
    Future: Retailers
  • 45. Japanese retailing, 2010: 3
    • Continued internationalization
      • Steady increase in overseas retailers coming to Japan
      • Still great opportunity, many who should be here are not
    • The best Japanese retailers moving overseas
      • Uniqlo
      • Tabio (Dan Socks)
      • GMS & CVS chains into Asia
    Future: Retailers
  • 46. Thank you For more information: http://www.japanconsuming.com/ [email_address]
  • 47. IGD Global Retail Index GRI Weighting: Turnover (20%), No Countries (10%), % Overseas turnover (10%), Presence in key regions (15%), Home market dominance (10%), Clarity of Global Strategy (15%), Global culture (10%), Level of int’l learning (10%) 54 59 10 Tesco 60 60 5 Metro 72 72 1 Wal-Mart 78 80 3 Ahold 83 83 2 Carrefour GRI 2000 GRI 2001 Global Sales Rank
  • 48. Classement des groupes selon le tr é sor de guerre Million Euro Cost of 6% of Seiyu = 52 million euro (approx). = 0.3% of Wal-Mart’s bugdet Source: Prof Marc Dupuis, ESCP-EAP -2,487 -2,710 Carrefour 87 714 Rinascente 1,401 2,167 Auchan 4,433 4,584 Tesco 4,113 6,133 J. Sainsbury 10,589 14,606 Wal-Mart 1998 1999
  • 49. Challenges facing Wal-Mart
    • Break down traditional distribution structure
      • Particularly wholesaling constraints
      • Working with or against trading houses
    • Introduce world class logistics and IT
    • Capitalize on global buying scale
    • Target for high market share (2-3%?) 2010
  • 50. Japanese opposition to Wal-Mart
    • Primarily in supply chain
    • Also in retailing: Aeon’s comment on acquiring Inageya (Asahi Shinbun):
      • “ There is nothing in this stake that can directly benefit our business, but if we didn’t take the shares, a foreign company or trading house would have.”
    • Biggest problem:
      • Will Wal-Mart make life difficult or easier for other overseas grocery retailers in Japan (Carrefour, Metro, Tesco)
  • 51. Thank you For more information: http://www.japanconsuming.com/ [email_address]