Raw Japan
Slices of Japanese business, politics and life
Retailers do the limbo
For some of Japan’s retailers trying to jumpstart consumer spending, setting prices is like doing the limbo: How low can they go?
Japanese retailers reported mostly dismal first-half earnings results, with the industry stuck in a slump as shoppers remain reluctant to open their wallets even as the economy emerges from recession.
With no sales pick-up in sight, stores seem to have no choice but to continue their race to undercut rivals, with prices dropping for everything from cars to clothes to milk.
On the surface it sounds like a shopper’s paradise: Who wouldn’t mind paying less than 1,000 yen ($11) for a pair of jeans?
But it could also lead to a deflationary spiral in which consumers put off spending in hopes of further falls in prices.
And what’s more, these price cuts are slicing into already razor-thin profits at companies, which are then forced to pass on the pain to employees in the form of lower paychecks.
“It’s a death march,” said Junji Ueda, CEO of FamilyMart, Japan’s No. 3 convenience store chain.
Denim deflation
James Dean smouldered in his, the Marlboro men looked rugged in theirs, and now me and hordes of other Japanese people can feel frugal in ours. Jeans — practical, durable and with just a hint of rebelliousness — are at the centre of a price war in Japan, as struggling retailers look to lure cash-strapped customers back through their doors.
With the country slipping deeper into deflation and its jobless rate rising, shops have for some time been marking down almost everything from bags of cereal, to laundry detergent and bicycles.
But curiously it is jeans that have emerged as a symbol of this deflationary race as major retailers roll out dirt-cheap denim in bids to undercut each other.
Fast Retailing, which operates the Uniqlo casual fashion chain, started the phenomenon in March when it said it it would start flogging jeans for 990 yen (about $11) a pair at its g.u. stores.
Back then, this was widely seen as an astoundingly cheap offer — the price was around a quarter of some jeans sold at Uniqlo, a chain known for its competitive pricing. The 990-yen jeans drove up sales at g.u., which had suffered from little consumer recognition until that point.
And the move sparked a round of tit-for-tat discounting, that this week continued with supermarket operator Seiyu, a Japanese unit of Wal-Mart, starting to sell jeans for 850 yen. “We would like to keep our price leadership,” a Seiyu spokeswoman said.
The trend could also indicate that deflation in Japan is worse than government statistics show as this kind of price competition is not fully reflected in official figures.
-
Resident Raw Japan Expert
-
