Breiffini Kennedy, Asia Manager, Bord Bia

In response to poor consumer confidence and remarkably inclement weather, Japanese retailers are increasingly turning to value lines to offer consumers better value for money. Lawson has extended their value line series of private label from Lawson Store100 to regular Lawson Stores.  This move as well as the success of new lines in fried chicken, desserts, cooked noodles and rice balls has helped deliver increased profits.  The company reported a 3.6% rise in operating profit to JPY30.1bn for the six months to 31st August. 

Aeon Co Ltd also cited a low pricing strategy and cost cutting in its fight against recessionary trends.  Despite low consumer spending and a 3.1% drop in sales for the six months to 31st August the company is maintaining its full-year operating profit forecast of JPY130-140bn. 

Others are looking to drive growth through expansion. Last month FamilyMart announced it would acquire Am/pm for about JPY10bn.  This will add around 1,100 stores to FamilyMart brand, mainly in the Tokyo area. Seven & I are looking further afield however with plans to open 200 convenience stores in Tianjin in China.  Meeting the growing demand of low priced food also forms part of the Seven & I strategy in the Japanese market.

The market remains fragmented and it is likely that consolidation through acquisition or merger will be increasingly used as a means of protecting or growing market share.  The current downturn has also forced a number of retailers in Japan to review their product offering and pricing strategy.  Despite signs of economic recovery the focus will remain on offering consumer lower costs with continued pressure on suppliers to deliver savings.  Lawson have shown what can be achieved by a focused and targeted reaction to difficult market conditions.