Magazines Archives - 2007 July

Japan leads in Asia-Pacific retailing
Cover Story

THE rate of retail development varies widely across the Asia-Pacific, with Japan taking the lead in the highest number of modern trade stores relative to the size of its population. There are nearly 700 such stores per million people in Japan, placing the country way ahead of India, for example, which has three per million.

Modern trade, particularly of the convenience-store (c-store) format, has undergone rapid development in the Asia-Pacific in the past few years. Of the more than 93,000 newly-opened selfservice stores here, nearly half are convenience outlets, with Japan leading by sheer numbers, Taiwan by density and China by dramatic growth rate.

According to ShopperTrends, a study by The Nielsen Company, c-stores are the fastest-growing grocery-store format in the more developed markets of South Korea, Hong Kong, Singapore and Taiwan, not counting Japan. The high consumer acceptance of the format reported shows 80% of urban shoppers in Taiwan, Japan, Thailand and Hong Kong patronising such outlets each month.

It is interesting to note that the Japanese visit convenience stores as often as they shop at supermarkets — three times a week — with two-thirds tending to shop for groceries on their own (see chart below, left). The frequency is among the highest in the region, after the rate in Vietnam and on par with that in the Philippines. This high frequency is accompanied by multiple-format shopping behaviour.

Latest trends
Meanwhile, the number of chain drugstores and large supermarkets in Japan is the region’s fastest-growing. In 2006, the number of chain drugstores in the nation almost doubled that in 2000.

The two formats have also experienced significant expansion in the country. The most significant sales growth over the past six years has also come from these two channels. In the 2000-06 period, the combined sales at drugstore chains and large independents went up by 100%, while large supermarkets registered a 30% revenue spike.

The growth in these two retail channels stands in stark contrast to the relatively flat overall sales performance of FMCGs (fast-moving consumer goods) in the Japanese market for the past three years. C-stores account for 15% of grocery sales in Japan while drugstores’ share has increased by only 4% in the past five years, a sign that the convenience format is fast becoming a major sales channel for FMCGs in Japan.

While supermarkets remain the main grocery-store format for 40% of Japanese shoppers, 12% now claim to spend most in drugstores and about two-thirds buy online regularly.

The Japanese are not particularly brand-loyal. They find it easier to switch to other brands when their desired products are out of stock, and follow closely behind Malaysians as among the most responsive to promotions, with about half claiming they often switch stores Japan leads in Asia-Pacific retailing to take advantage of these (see chart below, right).

So, how can a brand drive shopper loyalty in Japan? While ‘convenience’ is most important, offers such as range and variety, in-stock availability and high quality are also key considerations. Despite its high level of development, the nation’s retail market remains very fragmented, compared with other Asian markets. Its retailers have also faced a prolonged economic gloom, fuelled by relatively weak consumer sentiments, and an ageing and declining population.

To cope with the challenges, innovation has played a major role in a competitive retail market, as seen in the following developments:
- Launch of Seven Bank by Seven & I Holdings where Internet banking, ATM services, and e-money are offered
- New store formats introduced by Lawson to offer natural and organic foods; Lawson Store 100’s promotional discount on fresh food; and, more recently, Lawson Plus’ targeting the more mature segment with small fresh-food items
- Family Mart’s set-up of a ‘fresh’ sales area along with an ATM (automated teller machine), ticketing and online retailing
- Circle K’s new store format. All these have all made their mark on the retail industry in Japan.