ETP Test

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ETP Test

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

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