Elderly at Record Spurs Japan Stores Chase $1.4 Trillion
Unicharm Corp. (8113)’s sales of adult diapers in Japan exceeded those for babies for the first time last year. At Daiei Inc. (8263) supermarkets, customers can feel Japan aging -- literally: It has made shopping carts lighter.
Companies are rushing to grab a bigger chunk of the estimated 109 trillion yen ($1.4 trillion) that consumers over 60 spent in the year ended March 31 in Japan. The number of Japanese over 65 hit a record 23.3 percent of the population in October.
“We perceive this change as a golden opportunity for growth,” Shohei Murai, executive vice president of supermarket operator Aeon Co. (8267), told reporters in March. “In the ‘80s and ’90s, Aeon set families that were the massive majority in terms of population as its main target. Now the elderly are going to be the engine of consumption.”
Aeon, Asia’s largest retailer, is putting medical clinics in some of its locations.
Japan’s fertility rate is 1.39 for women, compared with 1.93 in the U.S., according to the Ministry of Health, Labour and Welfare. Japan’s population, which peaked in 2005, is poised to shrink to 125.2 million in 2014 from 126.5 million last year, according to data compiled by Bloomberg.
The country is becoming a test case of how a modern retail economy can switch from focusing on traditional, younger customers.
“It could be a model case,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. “They are remodeling stores and changing products portfolios. It may take time, but their efforts will be successful not only in Japan, but also overseas.”
Unicharm, Japan’s largest diaper maker, said it’s counting on just that. The Tokyo-based company said the lessons it’s learning in Japan will help its expansion in China, where the population at or above 65 rose to 8.87 percent of the total as of Nov. 1, 2010, up 1.91 percentage points from the 2000 census. China introduced a one-child policy in 1979 to curb population growth.
“China will necessarily face the aging society at a faster pace than Japan because of the one-child policy,” said Unicharm Chief Executive Officer Takahisa Takahara in April. “We have the responsibility to take Japan’s standards and spread it into Asia.”
Japanese retailers have no choice. People over 60 spent more than any other age group in the year ended March and accounted for 44 percent of Japan’s consumption, according to calculations from Aeon, based in Chiba, near Tokyo.
“As the aging society proceeds, elderly people are re-evaluating such retailers like convenience stores that sell small packaged foods” said Fujiwara. “The elderly people buy things that have value even if the price is high. They are the group which has that financial power.”
Keizo Okuyama, 93, who lives in Tokyo with his sister, on a recent visit to an Aeon store said he spends about 1,000 yen to 1,500 yen at the outlet every day. He likes the small food packages Japanese retailers offer to attract elderly customers living alone or in small families.
“I have pension from serving the military in addition to regular pension,” he said. “I have more money than others.”
Adapting to Needs
Such shoppers are forcing retailers to retool their businesses. Daiei, based in Tokyo, is slowing escalators to two-third of the speed of regular ones and employing lighter shopping carts using aluminum at some stores, said Daiei spokesman Aichiro Yamaguchi. “We will reinforce our efforts on elderly people as a measure to expand our sales,” he said.
Japan had 29.8 million people over 65 as of October, according to the Ministry of Internal Affairs and Communications.
Seven-Eleven convenience store operator Seven & I Holdings Co. (3382) has a new card in Japan to offer discounts at pension time. In April, the company introduced a variation of its “electric money card,” a kind of debit card, offering a 5 percent discount to people over 65 when pensions are paid out. Aeon and Daiei have similar cards targeting the elderly.
Seven & I has started to operate trucks that go around areas with a shortage of retailers to sell rice balls and sandwiches to reach senior citizens.
Lunch Box Delivery
Convenience store chain FamilyMart Co. (8028) announced in March that it will acquire lunch box delivery operator Senior Life Create Co. to provide services for the elderly.
The two biggest retailers, Aeon and Tokyo-based Seven & I, may have an edge in attracting the elderly because they have the most cash to invest in store changes, said Koji Toda, chief fund manager at Resona Bank Ltd. in Tokyo.
“In terms of financial muscle, companies like Seven & I and Aeon are at an advantage,” Toda said. “Companies have to open not just one or two stores, but many stores to lock in customers.”
At Unicharm, said Takahara, who is also president, the adult diapers business is becoming increasingly important to the company.
“Domestic sales of diapers for the elderly are growing by double digits,” Takahara told reporters last month. “It’s an extremely important business in terms of both sales and profit margin.”
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