Japan’s Pain Is Wal-Mart’s Gain

Falling incomes have Japanese consumers looking for bargains | “Their everyday low-price operation is taking root after about 10 years”

Yuki Yamaguchi, with Keiko Ujikane and Toru Fujioka

Wal-Mart is opening more Seiyu stores as Japanese shoppers start looking for bargains

ANDY RAIN/BLOOMBERG

Keikichi Miyakawa says he earned about $50,000 a month selling pricey golf club memberships during Japan’s bubble economy in the 1980s. Now on a pension, the 65-year-old Tokyo resident shops at Seiyu, the discount chain owned by Wal-Mart Stores. He recently bought packs of bean sprouts for 29 yen (36¢), and croquettes for 49 yen (60¢) as part of the store’s Mainichi Kakaku Yasuku promotion. That’s the Japanese translation of Wal-Mart’s “every day low prices” slogan.

With Japan’s economy on the cusp of a third recession since 2008, and household incomes falling for the last three years, the country’s famously picky and brand-enamored shoppers are in a bargain-hunting mood. Discount stores are gaining and Wal-Mart, after years of mixed results and a 20.9 billion-yen loss for Seiyu in 2007, is expanding for the first time since November 2008. Wal-Mart’s Japan business saw net sales rise 2 percent during the second quarter. Its Seiyu unit, which it’s owned outright since 2008, will open seven new stores this year and three more in 2013. Wal-Mart’s head of international business, Doug McMillon, has said the company will even consider acquisitions to increase its presence in Japan.

Wal-Mart faces hurdles in other parts of Asia: In China it’s adding fewer stores than previously planned, and its strategy in India has been stymied by regulations that until September banned foreign companies from investing in supermarkets. Wal-Mart is far more enthusiastic about Japan even as European rivals give up. In June, Britain’s Tesco agreed to sell its business to Japanese retailer Aeon. France’s Carrefour left in 2005.

With Japanese family budgets under stress, Wal-Mart’s “every day low-price operation is taking root,” says Takayuki Kito, a consultant in Tokyo with Munich-based Roland Berger Strategy Consultants. By spending less on promotional fliers, Seiyu cut the chain’s advertising expenses by 45 percent from 2008 to 2011, according to Ryo Kanayama, an executive at Wal-Mart Japan. “They have gotten rid of a lot of the middlemen and managed to go more direct to consumers,” says David Strasser, an analyst for Janney Montgomery Scott.

Other foreign retailers such as H&M and Ikea are also expanding in Japan. And local retailers are catching the discounting wave, too. Supermarket chain Aeon said in June that it will lower the price of 1,000 items, while rival Daiei will reduce prices for 2,000 items beginning Nov. 17.

Seiyu has pledged to cut the price of 2,300 items by the end of December. All this is great news for Japanese consumers. “Our monthly budget is now 70,000 yen for the expense for food and eating out. It was about 100,000 yen a couple of years ago,” says Aki Yamada, a 29-year-old housewife shopping at a Seiyu store in southern Tokyo. “The cheaper, the better.”

The bottom line Wal-Mart and other discounters are expanding as a Japanese recession looms and after household incomes have fallen three straight years.

Welcome!

Magazines Review offers you a broad range of popular American magazines online. Browse an extensive directory of magazines, covering most important aspects of your life. Find the most recent issues of your favourite magazine, or check out the oldest ones.

About content

All the articles are taken from the official magazine websites and other open web resources.

Please send your complains and suggestions through our feedback form. Thank you.