With today's difficult economic environment, a lot of Japanese consumers have been pinching pennies more than ever before (well, pinching yen anyway). As a result, major Japanese supermarket chains have been slashing prices, and this has put a lot of pressure on smaller operators who lack the same economies of scale and bargaining power with suppliers.
But a couple of smaller chains have stopped wringing their hands, and have been fighting back with a clever approach: subsidized price cuts.
Product size is often one of the first things international food brands have to adjust when entering the Japanese market. Not only is the average Japanese home too small to store western-sized jumbo packages, Japanese eating habits are typically different from their overseas counterparts.
But it's not just foreign firms that learn optimizing package size can lead to more sales.
A couple of months ago Japanese condiments giant Kewpie reduced the volume of its salad dressings from 200 to 170 milliliters--and was surprised to see a 5% increase in order volume versus the same period last year.
According to a Nikkei article, the company attributes the bounce to the fact that the package better suits current Japanese demographics. With household sizes shrinking, too many people were consistently throwing out bottles whose "best by" date arrived before the product could be entirely consumed. Plus, many more kinds dressings are available at supermarkets these days so consumers have a larger variety at home, resulting in extended usage cycles for each bottle.
However, Kewpie cut the price to reflect the 15% reduction in size, so it could be that stores are ordering more to satisfy consumer demand for cheaper products of all types--something Kewpie apparently adamantly denies.
I love the playfulness of this online catalog for Jeanasis. Interestingly, the catalog also incorporates ads from other manufacturers (you're shown an ad for another brand, product or service when you first open the catalog).
Baskin Robbins Japan, which is known by Japanese consumers as "31" (in reference to the brand's offering of 31 flavors), is planning to open 101 new locations in Japan in 2009, bringing their shop total here to over 1,000. The company is even planning a new format that's twice as big as the average existing store, with the first of these slated for the new Ami Premium Outlet Mall that's opening in Ibaraki this summer.
Given the state of world and domestic economies, you might be forgiven for assuming that expansion news like this means that B.R.'s ice cream biz is screaming forward while the overall Japanese market screams in pain.
In reality the company may be, in a sense, running in place.
According to a Nikkei article I read last week, B.R.'s sales were up 5% in 2008, but a good deal of this had to do with price hikes and marginal contributions from last year's net increase of 40+ new locations. Actual footfall dropped by 8% at existing stores, and average customer spend went down by 9%.
In recent years B.R. has in part secured new locations in Japan relatively easily thanks to the appearance of so many new shopping centers. But due to revived restrictions on allowable square footage in new commercial facilities, shopping center construction has been falling off quickly.
As a result, Japanese consumers may find more Baskin Robbins' openings in locations abandonded by failed convenience stores and other businesses. And there will be no shortage of those this year.
For eight years in a row, revenues have been dropping for Japan's convenience store industry. The country is nearing saturation with something like 45,000 locations nationwide, and people in the industry have seen the writing on the wall for some time. Eventually there would have to be some consolidation because smaller chains (those with only a one or two thousand locations) are susceptible to the majors who can fund multiple shop openings in key areas to drain sales from weaker rivals.
So it was no surprise last week when Japan's second-largest operator, Lawson, announced that it had come to terms with am/pm to purchase and then merge with the smaller company. Lawson will take am/pm on as a subsidiary at the end of this month, and the full scale merger is expected sometime during the summer of 2010.
While this is noteworthy in an of itself, the real M&A drama is probably just beginning.
While a lot of people (including me) were out of town at this time last month, Levis Japan threw open the doors of a new high-end boutique in the posh Aoyama district of Tokyo.
Showcasing premium Levi's products sourced from their operations worldwide, Cinch offers three collections in the 150 M2 store.
The first line is Levi's Vintage Clothing, which, leveraging Japanese interest in rare and vintage products, gives cash-rich shoppers the chance to buy—amongst other things—$1,500 revival versions of historic jeans models, including a design first sold in 1917 (a Nikkei article says that most items in the Vintage line retail in the $300-400 range).
Lawson, Japan's second largest convenience store chain, recently announced that it will introduce a voluntary carbon offset program in April of 2009. Carbon offsetting involves companies or individuals mitigating their own carbon emissions by purchasing the market value of actual reductions made by others who've implemented pollution-cutting measures.
In the case of Lawson, the company has agreed to partner locally with Tokyo University, which is diminishing carbon emissions on its campuses by replacing equipment and lighting with energy efficient alternatives. Internationally Lawson will be purchasing offsets from an Argentine wind farm.
Apparently, Lawson will also make it possible for consumers to counter their own polluting through programs implemented at company stores. For instancethe chain plans to introduce carbon offset products as well as a system that lets customers buy back carbon emissions through accumulated loyalty program points.