Innovation and Dynamics in Japanese Retailing

Innovation and Dynamics in Japanese Retailing

This page intentionally left blank

Innovation and Dynamics in Japanese Retailing From Techniques to Formats to Systems Hendrik Meyer-Ohle

Hendrik Meyer-Ohle 2003 Softcover reprint of the hardcover 1st edition 2003 978-1-4039-1128-5 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2003 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin s Press, LLC and of Palgrave Macmillan Ltd. Macmillan is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN 978-1-349-51062-7 ISBN 978-0-230-51065-4 (ebook) DOI 10.1057/9780230510654 This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Meyer-Ohle, Hendrik, 1965 Innovation and dynamics in Japanese retailing : from techniques to formats to systems / Hendrik Meyer-Ohle. p. cm. Includes bibliographical references and index. 1. Retail trade Japan. 2. Retail trade Technological innovations Japan. 3. Marketing channels Japan. I. Title. HF5429.6.J3M49 2003 381.1 0952 dc21 2003044165 10 9 8 7 6 5 4 3 2 1 12 11 10 09 08 07 06 05 04 03

Contents List of Tables List of Figures Preface and Acknowledgements vii ix x Part I Introduction 1 Innovation and Dynamics in Retailing 3 Half a century of innovation and dynamics in Japanese retailing 3 Approaches to innovation and dynamics in retailing 5 Structure and sources 13 Part II From Techniques to Formats (1950s 80s) 2 New Techniques and the Emergence of the General Superstore (1950s and 1960s) 17 Not starting from scratch: department stores and other earlier innovations 17 From new techniques to a dominating format 20 Entrepreneurs with a mission adopting new retail techniques 27 Formation of responsive consumer markets 32 Conflict and harmony in procurement markets 35 Retail competition in a period of growth 38 3 Retail Policy: A Law for Large Stores 41 The Large Store Law 42 The political economy of the Large Store Law 43 Implementation and functioning of the Large Store Law 48 4 Diversification of Retail Formats 56 General merchandisers: growth, diversification and denial 56 Food superstores: finally establishing the right format 69 Discount stores and home centres: developing new locations 75 Convenience stores: from uncertain beginnings to the flagship format of Japanese retailing 81 v

vi Contents Part III Development of Systems (1990s) 5 The 1990s: A Radically Different Environment 99 Consumer behaviour in a stagnating economy 101 Deregulation and liberalization 108 6 Changes in Retail Formats in a Deregulated Environment: A Case Study 115 Development of retail formats 115 Retail development in a suburban area of Tokyo 119 7 Newcomers in Japanese Retailing 145 Examples of retail success during the 1990s 146 Success factors and a different corporate environment 158 8 Failure and Reorganization of the Mass Merchandising Sector 165 Crumbling empires 166 Reorganization of mass merchandising 176 9 Building Supply Chains 188 Patterns of stability and change in Japanese distribution channels 188 Recognizing the need to change 195 Changing strategies by manufacturers and wholesalers 198 Strategies by the retail sector 205 10 Convenience Stores and the Organization of E-Commerce 211 Examples of e-commerce initiatives by convenience stores 212 Too good to resist: factors behind the drive into e-commerce 217 Different patterns and objectives of e-commerce initiatives 221 The difficult road to success 225 Part IV Conclusions 11 Half a Century of Dynamics in Japanese Retailing 229 References 240 Index 258

List of Tables 2.1 Retail prices for selected products, 1967 (general retail stores = 100) 23 2.2 Increase in number and market share of superstores by retail format, 1964 74 26 3.1 Results of regulation processes in 1975 50 4.1 Development of major retail formats, 1974 91 57 4.2 Change of sales of large-scale superstores, sales per stores and expenses of private households, 1973 91 62 4.3 Composition of consumption by the average Japanese household by product groups 1955 90 62 4.4 Stores operated by Daiei by size, 1994 64 4.5 Consumer expectations in regard to different store formats 65 4.6 Development of number of stores of selected companies, 1974 99 84 4.7 Services offered by Seven-Eleven 85 5.1 Living expenditure for selected product groups, 1975 2000 102 5.2 Savings and liabilities of Japanese households, 1975 99 (in million yen) 103 5.3 Comparison of the POS-Price Index (POS PI) and the official Consumer Price Index for Tokyo (Tokyo CPI), 1995 to 2000. 106 5.4 Frequency of the usage of large stores and stores in shopping districts 108 5.5 Projected and real development of market share of major retail formats, 1985 2000 (percentage market share) 109 5.6 Distribution of existing superstores by company and opening years (percentage share) 113 6.1 Market share of major retail formats, 1991 9 (per cent) 116 6.2 Development of retail formats, 1991 9 117 6.3 Change in store characteristics, 1991 9 118 6.4 Changes in store concepts and formats 119 6.5 Development of population, 1960 2000 120 6.6 Development of sales floor, sales and employees 1972 99 (change in per cent) 129 vii

viii List of Tables 6.7 Change in the number of specialty food stores, 1974 99 (per cent) 129 6.8 Sales and floor space of major stores 130 7.1 Fast-growing companies, 1995 2000 146 8.1 Major general retailers, 2000 166 8.2 Example of distribution of ownership and loans Sogo Denki, 1999 172 8.3 Example of distribution of ownership and loans Daiei, 1999 173 8.4 Sales of large five general trading companies, 1999 2001 185 9.1 Development of Japanese wholesaling and retailing, 1960 99 190 9.2 Margins and inventory turnover in Japanese and US retailing, 1992 194 9.3 Areas of change in supply chains 200 9.4 Major grocery wholesale companies, 2000 204 10.1 Leading convenience store companies, 2001 212 10.2 Leading e-commerce companies 218 10.3 Concerns of Japanese consumers towards e-commerce 219 10.4 Payment options offered by Japanese internet retailers 219 10.5 Organization of e-commerce 224

List of Figures 3.1 Number of reports concerning the opening of large retail stores under the Large Store Law, 1974 99 44 5.1 Development of monthly income and expenditure of an average worker s household, 1984 99 101 6.1 Large retail stores at the end of the 1980s 121 6.2 Daiei store in Shiki 122 6.3 Traditional shops in Shiki 123 6.4 Stores along National Road 254 124 6.5 New large retail stores in the 1990s 125 6.6 Marui store and Shiki station area 127 6.7 Rice vending machines in Shiki 131 6.8 FamilyMart store in Wako 132 6.9 Closed Wellsave store in Niiza 136 6.10 Rogers store in Niiza 138 6.11 Seiyu store in Niiza 140 6.12 Mycal store in Niiza 141 7.1 Fast Retailing Store in Niiza 147 7.2 Dasio Sangyo store in Bizen 152 7.3 Matsumotokiyoshi in Tokyo s Harajuku area 154 7.4 Toys R Us store in Okinawa 157 8.1 Development of prices of land for commercial use, 1971 2000 (change over previous year in per cent) 174 8.2 Carrefour store in Makuhari 182 9.1 Distribution channels in the household goods industry 196 9.2 Development of ratio of ordinary income to sales over major industries, 1981 2000 (average in per cent) 197 9.3 Changes in store delivery for household goods for one part of the stores of Ito Yokado 206 ix

Preface and Acknowledgements This book concludes a decade of research on Japanese retailing, incorporating research for my PhD thesis that focused on the emergence of modern Japanese retail institutions and later research that discussed the development of Japanese retailing in the 1990s. In the course of my research results were presented at various conferences such as the Association of Japanese Business Studies, Euro Asia Management Association and the European Association of Education and Research in Commercial Distribution. I would like to thank all reviewers and participants for their helpful comments. I would also like to thank all the people I interviewed in the course of my research and who provided me with valuable background information. Special thanks go to the institutions where I worked and studied in the course of my research, beginning with the Centre for Japanese Studies of Philipps-Universität Marburg, where I did my PhD studies, and here especially to Erich Pauer, my supervisor, continuing with the German Institute for Japanese Studies in Tokyo, where I worked for five years as a research associate, and finally the Department of Japanese Studies of the National University of Singapore which I joined three years ago. I thank all former and current colleagues for their continuous encouragement and friendship. I thank Tawnya Hartberger for proofreading the final manuscript and Palgrave Macmillan for a speedy and efficient publishing process. The mistakes are all mine. Finally, I thank my wife and my children for sharing my curiosity for all things Asian and having followed me to Tokyo and Singapore. HENDRIK MEYER-OHLE x