Raw Japan

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.

Retailers do well by going cheap

Japan is back in deflation, and price falls look like gathering pace as shoppers’ bargain-hunting leads stores to cut prices further to weather the worst retail slump in decades.

Retailers large and small reported hard falls in quarterly profits last week, and the few bright spots were focused on those drawing in thrifty shoppers with their cheap but well-made goods.

Fast Retailing tops the list, as its Uniqlo stores thrive in tough times by selling T-shirts for $10 — that’s cheap here — and other clothing at similar bargain prices. The company is also seeing strong sales growth at its other basic apparel chain g.u.

g.u., the cut-rate sibling of already-cheap Uniqlo, had a low profile for years but shoppers started flooding in after it slashed prices across the board and started flogging $11 jeans and $5 T-shirts this year.

Shoe retailer ABC Mart, which also saw solid growth in its quarterly profits, said its sales of heeled sneakers jumped three-fold after it lopped almost 50 percent off the price-tag back in spring.

Even convenience stores, which had been thought to be pretty well immune to price competition, are starting to cut prices. Seven-Eleven, Japan’s largest chain, has marked down some household items like shampoo recently.