Nov. 16 (Bloomberg) -- Keikichi Miyakawa says he earned about $50,000 a month selling golf club memberships during Japan’s bubble economy in the late 1980s.
Now on a pension, the 65-year-old Tokyo resident shops at Seiyu, the discount chain owned by Wal-Mart Stores Inc. He recently bought packs of bean sprouts for 29 yen (36 cents), and croquettes for 49 yen (60 cents), sold as part of the store’s Mainichi Kakaku Yasuku strategy. That’s the Japanese translation of Wal-Mart’s “every day low prices” slogan.
With Japan’s economy on the cusp of a third recession since 2008 and household incomes falling for the last three years, the country’s famously picky and brand-enamored shoppers are in a bargain-hunting mood. Discount stores are gaining and Wal-Mart, after years of mixed results and a 20.9 billion-yen loss for Seiyu in 2007, is expanding for the first time since 2008.
Wal-Mart’s Japan business saw net sales rise 2 percent during the second quarter. Its Seiyu unit, which it has owned outright since 2008, will open seven new stores this year and three more in 2013. Wal-Mart’s head of international business, Doug McMillon, has said the company will even consider acquisitions to increase its presence in Japan.
Wal-Mart faces hurdles in other parts of Asia: In China it’s adding fewer stores than previously planned, and its strategy in India has been stymied by regulations that until September banned foreign companies from investing in supermarkets.
The American retailer is far more enthusiastic about Japan even as European rivals give up. In June, Britain’s Tesco Plc agreed to sell its business to Japan’s Aeon Co. France’s Carrefour SA left in 2005.
With Japanese family budgets under stress, Wal-Mart’s “every day low-price operation is taking root,” says Takayuki Kito, a consultant in Tokyo with Munich-based Roland Berger Strategy Consultants.
By spending less on promotional fliers, Seiyu cut the chain’s advertising expenses by 45 percent from 2008 to 2011, according to Ryo Kanayama, an executive at Wal-Mart Japan. “They have gotten rid of a lot of the middlemen and managed to go more direct to consumers,” says David Strasser, an analyst for Janney Montgomery Scott.
Other foreign retailers such as Hennes & Mauritz AB and Ikea Group are also expanding in Japan. Local retailers are catching the discounting wave, too. Supermarket chain Aeon said in June that it will lower the price of 1,000 items, while rival Daiei Inc. will reduce prices for an additional 2,000 items beginning Nov. 17.
Seiyu has pledged to cut the price of 2,300 items by the end of December. All this is great news for Japanese consumers. “Our monthly budget is now 70,000 yen for the expense for food and eating out. It was about 100,000 yen a couple of years ago,” says Aki Yamada, a 29-year-old housewife shopping at a Seiyu store in southern Tokyo. “The cheaper, the better.”
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