Archive for the ‘Retail’ Category

Foreign tourists expected to take up (some of) the slack in consumption

Monday, October 6th, 2014

Everyday low prices: Duty Free store at Narita Airport

Everyday low prices: Duty Free store at Narita Airport

According to a survey of 12,000 tourists in 2013 carried out by the Tokyo Metropolitan Government, the Chinese spend more than any other group, which isn’t surprising. What is surprising is by how much they outspend other nationalities.

On average, a Chinese visitor spends ¥191,741 in Tokyo. The average spent by all foreign tourists in Tokyo is only ¥46,546, which means Chinese spend about three times as much.

After China, the most spent is by Singaporeans (¥135,377), and then Spaniards (¥129,558). Another notable aspect of Chinese spending is that the bulk is not spend on accommodations or dining, but rather on souvenirs, about ¥122,000. The most popular area for Chinese shoppers is Ginza, because that’s where all the luxury brand stores are.

The government wants them to spend even more, and is thus expanding the list of items that foreign tourists can buy without having to pay consumption tax. Previously, consumables like food, liquor and cosmetics were not exempt from CT when bought by foreign tourists at stores in Japan, but since Oct. 1 they are.

The main beneficiary of this new regulation is department stores, which have been doing badly since the consumption tax went up in April. One of the reasons consumables weren’t exempt before was that there was no way to check if the items were consumed in Japan or overseas, and anything consumed in Japan should be subject to tax. But many Chinese buy food and liquor in Japan as souvenirs for relatives and friends.

The discount is given at the point of purchase, which means the store has to be registered to waive the consumption tax. They check the buyers passport to make sure he or she is not a Japanese national. Technically, the item can be checked at the airport to make sure it wasn’t consumed before leaving the country, but that sounds almost impossible to do.

At present foreign tourism is one of the only bright spots in terms of revenues. In August, spending by foreign tourists was 40 percent more than it was last August, and ¥4.7 billion of it was spent in department stores alone. These numbers will probably go up more now that the yen is dropping.

The Ministry of Economy, Trade and Industry estimates that the new duty-free rule will mean a loss of ¥9 billion in CT revenues for the year, but it will also mean a boost in sales of about ¥78 billion, which means it will make up for at least some of the domestic consumption that was lost after the tax increase was implemented.

The duty free system was established in the early 1950s, when less than 40,000 foreign tourists visited Japan in a year. Department stores have always been lobbying the government to expand the list of exempt items, even though administering the system is bothersome for retailers, as well as for tourists, who have to fill out forms. METI is thus thinking of streamlining the system even more by 2020, when the Olympics will be held. At present 5,777 stores belong to the duty-free system.

Mail order scofflaws are the exception that proves the rule

Monday, September 15th, 2014

The gods know if you're honest: An unmanned farm stand in Inzai

The gods know if you’re honest: An unmanned farm stand in Inzai

A recent article in the Asahi Shimbun described a small cross section of consumers who take advantage of a peculiar aspect of mail-order sales in Japan. Some small- and medium-sized sales agents who do their business over the Internet have problems with customers who don’t pay. In most cases, Internet and mail order sales are done on a prepaid basis: The buyer either provides credit/debit card information or makes a bank/post office money transfer prior to the item being shipped. But a few work on what can best be described as the honor system. They send the item to the buyer with a bill that the buyer pays after receiving the item. Sometimes the bill has a handling fee attached and sometimes it doesn’t.

According to the Asahi article, some people don’t pay up, and perhaps never intended to. A non-profit organization called the Mail Order Unpaid Protection Network (MOUPN), which monitors such scofflaws, estimates that mail-order sales companies lose about ¥20 billion a year to such people.

Asahi, in fact, found one, though he seems reluctant to admit it. In the article, a reporter visits an unnamed man “in his 50s living in an apartment in Tokyo.” The man receives an order of green tea by courier, but the reporter notes that the name on the package is that of a woman. “I made the order on behalf of a friend,” the man explains. When asked why he didn’t use his real name, the man doesn’t answer. Other packages arrive addressed to different women. When asked what’s in one of them the man shrugs and says, “Maybe food?” He insists that he will pay for it but usually “just forgets.”

CONTINUE READING about abuse of Japan's honor system

Inflation Watch: Food manufacturers offering less

Saturday, August 2nd, 2014

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Use your noodle: ¥198 regular price 5-pack of Aeon instant ramen vs. ¥198 sale price 3-pack of Sapporo Ichiban instant chanpon

Economists in Japan have been carefully scrutinizing buying trends since the consumption tax was raised in April. Everyone has noted that buying has dipped by at least 4 percent since the 3 percent tax hike went into effect, but many think that it will rebound later in the year since so many consumers bought a lot of stuff just before the hike. And it is also true that some prices of goods and services have gone up, as well, especially food, but for the most part makers have tried to keep them the same, despite the fact that the lower yen has resulted in higher prices for imported ingredients, not to mention increased demand for all food products in developing countries. In addition, the higher price of oil has boosted the cost for packaging.

There’s, of course, one tried-and-true solution to the problem of stabilizing resale prices when costs go up: reducing volume. Rather than raise prices, especially at a time when consumers are specially sensitive to any change, manufacturers trim the amount being sold, according to Asahi Shimbun. Nippon Ham, for instance, did not change prices on 82 items in its product line but did reduce the amount being sold by an average of 10 percent. The company’s European sausage used to come in bags of 7 weighing 140 grams. For the same price, it’s now 6 sausages, or 120 grams. The company’s main competitor, Ito Ham, however, has decided to take a chance and increased the price of its pork products, saying that it was inevitable because worldwide demand for pork has risen recently.

The confection industry has been affected as well. Lotte cut the volume and weight of 6 products. Meiji shrunk 10 of its chocolate items, citing a 20 percent increase in cocoa prices from two years ago: Its best-selling Almond Chocolate treat went from 23 pieces to 21.

Chain restaurants are also dealing with the environment. Ringer Hut has increased prices on a number of its chanpon dishes by 3 to 5 percent, mainly due to higher prices for shrimp grown in Thailand, as well as higher transportation costs.

CONTINUE READING about cost-cutting measures →

Japanese franchises cut loose by overseas brands after serving their purpose

Sunday, July 20th, 2014

Burberry outlet run by Sanyo Shokai in Matsuzakaya department store in Okachimachi.

Burberry outlet run by Sanyo Shokai in Matsuzakaya department store in Okachimachi.

According to Asahi Shimbun’s online magazine Webronza, the U.K. apparel maker Burberry has decided to end its long-standing licensing agreement with Japan’s Sanyo Shokai in order to develop its own retail outlets in Japan. Sanyo first signed the agreement in 1965, and since then has made Burberry one of the most consistently successful foreign brands in Japan by tailoring the company’s line to Japanese bodies and tastes. Though Burberry’s famous tartan check pattern is at the heart of Japan’s love for the brand — owning a Burberry scarf was, for a time, a rite of passage for Japanese high school girls— Sanyo’s main achievement was making the Burberry trench coat a timeless fashion favorite.

In 2006, an American, Angela Ahrendts, became the CEO of Burberry and worked to return the company to its roots as a high-end brand. She downplayed the tartan check pattern, reducing its use to only 10 percent of the product line, and concentrated more on new, original designs. From 2006 to 2013, when Ahrendts left to become senior vice president of retail and online at Apple, the company doubled its sales revenues and tripled its stock price. One of Ahrendts’ main concerns was doing away with all the licensing agreements the company had with regional companies. She bought out the Spanish franchise and opened directly owned stores in Spain that have become just as successful if not more so than the franchise business.

As it stands, of Burberry’s ¥349 billion annual sales, only ¥18.5 billion comes from franchises, or 3 percent, but after Spain was cut loose, Japan accounts for 60 percent of all franchise business. Burberry obviously thinks it can make more money dealing directly with Japanese consumers, specifically high-end Japanese consumers, since an imported Burberry trench coat costs as much as ¥230,000, while the trench coats that Sanyo makes under its Black (men) and Blue (women) Burberry labels only cost half as much.

Sanyo isn’t the first Japanese company that has worked hard and long to successfully popularize a foreign brand among domestic consumers only to be let go by the foreign licensor. Adidas did the same thing with Descente in 1998, and Mercedes Benz eventually took over Japanese sales of its cars from Yanase, who no longer has the import license for Mercedes, only a sales license. However, in Yanase’s case the situation was the opposite of Sanyo’s. Yanase cultivated Mercedes as a brand only for the well-to-do (leading to the old joke about the cars being the exclusive property of doctors and yakuza), but Mercedes wanted to cater more to middle class buyers and started opening their own showrooms in Japan.

The luxury Belgian chocolatier Godiva, now owned by a Turkish company, is also discontinuing its long-standing licensing arrangement with a Japanese company, the tea importer Kataoka Bussan. Starting in 2015, Godiva will start selling its chocolates at directly owned stores in Japan.

Some franchises suffer more than others. At least half of Sanyo’s ¥106 billion annual sales comes from Burberry products, which it sells in 300 dedicated department store outlets, so the loss of that business is a serious setback. The advantage of this model to the overseas brand is incalculable in that, for years, Sanyo took care of all promotion, building the brand to where it is now. For what it’s worth, Burberry by far sells more trench coats in Japan than any other apparel maker, domestic or foreign.

The reason these franchises can do this is Japanese consumers’ distinct identification with brands, which accounts for some unusual distribution deals, especially for brands that are considered exclusive. The problem for Japanese makers who also count on brand identification is that it seems to be a one-way street.

Japanese brands don’t have the traction overseas that they once did. Sanrio has made Hello Kitty famous worldwide, but mainly by giving the trademark to anyone who pays for it. If you buy the rights to Hello Kitty, you can do anything you want with the name and the image. That’s good for licensing, but now the company wants to make money from sales, and the transition has proved to be more difficult than Sanrio thought.

Will rice cookers save the Japanese home electronics industry?

Monday, July 14th, 2014

Pricey rice: High function rice cookers on display at a discount electronics store

Pricey rice: High function rice cookers on display at a discount electronics store

It’s been well documented that the Chinese are considered the saviors of the Japanese tourist trade, but there’s more to the story than just tour numbers and hotel bookings. An article in the July 10 Asahi Shimbun described an odd and recurring dilemma at Kansai International Airport. Chinese tourists are buying Japanese-made rice cookers at the airport’s souvenir shops in large numbers. Since the purchases are made after the travelers have gone through immigration processing, they don’t have to pay duty, but at that point they’ve already checked their luggage, and the rice cookers in their boxes won’t fit into overhead bins in airplane cabins.

Some of the rice cookers will fit if they’re removed from the boxes, but people on these flights are buying more and more of the home appliances so in some cases there is no room for any of them, which means flight attendants have to assist in having these patrons check the items so that they can put them in the cargo hold, and as a result more and more flights back to China are being delayed.

Rice cookers became a very popular item among Chinese tourists in 2010, when visa rules were relaxed to allow travelers who weren’t members of organized tours to come to Japan freely. One of the clerks in the Osaka airport souvenir store told Asahi that he once saw a Chinese tourist buy six of the devices at one time. One Chinese businessman who comes to Japan on a regular basis says he’s always getting requests from acquaintances to buy rice cookers for them. This souvenir store, in fact, sells an average of 10 cookers a day, most of them high-end models, which can cost as much as ¥90,000.

Last April, during cherry blossom viewing season, the store sold an average of 20 a day. A representative of Yodobashi Camera Multimedia Umeda in Osaka told the paper that whenever Chinese tour groups visit the discount electronics store they usually buy more rice cookers than they have members. Yodobashi has a duty-free system for tourists, but actually most Chinese prefer buying their rice cookers in the airport, since the price isn’t any different and they don’t have to lug the things around with them prior to departure. But there is the problem of carry-on.

Why rice cookers? There are few appliances that reflect Japan’s so-called Galapagos design mindset as thoroughly as rice cookers. They basically do one thing: Cook Japanese rice in a way that only Japanese people prefer. The rest of the world doesn’t eat much sticky, white, short-grained rice unless it’s combined with sauce or other prepared foods, and that includes the rest of Asia. Even China, from which Japan first imported rice-growing techniques, isn’t big on rice as a separate dish. It prefers long-grain rice, which is always prepared with something else in mind, and while it is considered a staple, at mealtime it isn’t as important as other dishes. In the northern part of China, many people don’t eat rice at all, since they grow more wheat there due to the colder climate.

But as more and more Chinese tourists have come to Japan, they have discovered the unique joys of sticky white rice.  As incomes rise in China, people are broadening their food choices, and one of those choices is short-grain rice. If it’s Japanese grown, it’s even better, despite the high price. And the best way to prepare it is with a Japanese-made rice cooker.

According to the Japan Electrical Manufacturers Association, more rice cookers are manufactured in China than in any other country in the world, but the vast majority are inexpensive models with few features. The first Japanese rice cooker was made by Toshiba in the mid-1950s, and since then they have become extremely sophisticated. Some even include porcelain containers and functions that allow the user to make rice that tasted as if it were made the old-fashioned way, in a kamado, the traditional, charcoal burning Japanese stove. Now, apparently, Japanese manufacturers are incorporating functions that will appeal to Chinese users, such as the ability to cook long-grain rice and different kinds of porridge.

In its own peculiar way, the Japanese rice cooker has done more to extend a specific Japanese sensibility than any electronic device since the Walkman. As any Japanese person over a certain age will tell you, the preparation of rice is the most important culinary consideration with regard to the Japanese menu. Cooking rice the proper way is difficult and time-consuming. You have to wash the rice throroughly until the runoff water is utterly transparent. Then the rice has to sit in that water for a certain length of time. The pot used for cooking rice, a kama, is only used for rice. First the rice in the water is boiled and the flame reduced — which, before gas stoves, meant removing pieces of charcoal from the kamado. And the person doing the cooking has to stay and monitor the flame for at least 15 minutes.

Consequently, the rice cooker was a huge boon for housewives. It not only freed up their time so that they could cook other dishes simultaneously, it freed up cooking space. Most Japanese kitchens with natural gas have only two burners. When makers added timing devices, rice cooking became exponentially easier because it cut the time needed for preparation, especially in the morning when housewives had to prepare breakfast and lunchboxes. Reheated cold rice is normally not acceptable. That’s why the next development was the “jar,” a special device for storing already made rice to keep it warm for later in the day without drying out. When the rice cookers themselves incorporated jar functions, the appliance had become perfect.

But only perfect to Japanese people. Most everyone else in the world didn’t eat rice this way, but apparently the Chinese are catching on. It’s too much to hope that their sudden affection for Japanese style rice will single-handedly save Japan’s home electronics industry — not to mention Japanese agriculture — but you never know. Look what the Walkman wrought.

Diamonds are suddenly everybody’s best friend

Saturday, May 31st, 2014

Several years ago the term “urban mining” took off. It referred to the discovery of precious metals that were “buried” in people’s homes in the form of personal possessions like jewelry and home electronics that they weren’t using. A lot of cell phones, for instance, use gold and other valuable materials in their circuits, and when the price of these substances was high, brokers would pay premium prices for them, no matter where they came from or what form they were in.

Komehyo outlet in Ginza, Tokyo

Komehyo outlet in Ginza, Tokyo

At the time, gems were not coveted so much, but that’s changed. Right now, the price of diamonds on the world market is about 30 percent higher than it was a year ago, according to a recent article in Chunichi Shimbun, thanks to a healthier world economy. Consequently, well-to-do people in Asia, North America and the Middle East are craving diamonds, and foreign buyers, particularly from the U.S., China, India and Dubai, are flocking to Japan because they think there are a lot of the rocks here “sleeping” in people’s closets and vanity cases.

The reason is simple. During the bubble period of the late ’80s, when the value of various assets was higher than it probably should have been, people with even a little money bought a lot of jewelry that they don’t wear any more. Many of these people probably have forgotten they even have diamonds.

Komehyo, the Nagoya-based retailer that specializes in recycling high-end merchandise such as designer accessories and expensive jewelry, is spearheading the drive to get Japanese people to dig into their tansu (wardrobes). As one of the company’s store managers told Chunichi, another reason foreign buyers are descending on Japan is that the diamonds are already cut, and used cut diamonds tend to be cheaper than new ones, though there really isn’t any difference in quality. Komehyo is hoping to sell used diamonds in bulk and is offering premium prices to anyone who wants to unload theirs. The chain has launched a Diamond Purchase Fair at all its 20 outlets throughout Japan.

In order to get a handle on the market, Komehyo conducted a survey among men and women over the age of 20. They found that, on average, respondents have each spent about ¥780,000 on “jewelry, watches, bags and brand goods” during their life so far.

Several years ago Tanaka Kikinzoku Kogyo, a dealer in gold and other precious metals, carried out its own survey and found that 80 percent of female respondents have jewelry they don’t wear any more, either because they no longer like the design, or lost one earring or just forgot about it. The company calculates that the average woman in this group has ¥40,000 worth of jewelry they never wear. Tanaka was interested in gold, however,

Based on its own findings, Komehyo estimates the average person possesses about ¥160,000 yen’s worth of jewelry and other valuables that they don’t use any more, which means there could be as much as ¥15 trillion worth of diamonds in people’s homes.

Japan home electronics makers plays dumb on smart TVs

Sunday, May 18th, 2014

Smart enough? The latest model LG net TV at Yamada Electronics

Smart enough? The latest model LG net TV at Yamada Electronics

Last year Panasonic ran up against a wall when it came out with its first dedicated “net TV set” for the domestic market. Though TVs had entered the Internet age years before, this new “smart” model in the home electronics giant’s Viera line was an all-in-one device. It hooked up to the Internet directly and basically acted as a computer monitor, so users could stream movies from on-demand services, watch YouTube videos, mirror their PCs and tablets, whatever, while also enjoying the usual offerings of terrestrial and satellite broadcasting.

Smart TVs were already available overseas, so in a sense Panasonic was playing catch-up, but it ran into opposition from the broadcast industry, which, perhaps justifiably, believed smart TVs bypassed advertisers, so at least one station refused to run commercials for the new Viera model, thinking the ads would make other advertisers uncomfortable. Eventually, the station changed its mind and started accepting the CMs, but the resistance is indicative of not only the media’s mindset, but that of the home electronics industry in general.

Some might call it a sympton of Galapagos syndrome, but the fact is Japanese manufacturers are in the smart TV race overseas. Panasonic and Sony both make smart TVs for the American and European markets, and they are available in Japan but are barely promoted. Given that Japan’s reputation as the world standard for television sets and home electronics in general has suffered in the last decade, it’s surprising that this sort of vanguard technology is being overlooked on the domestic front, but maybe it’s simply a matter of perception. According to an article published last summer in the New York Times, smart TVs are popular among younger consumers in Japan, but the TVs they are buying are not made by Panasonic or Sony. They’re made by LG, a South Korean company.

CONTINUE READING about smart TV's →

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