Staff Reporters
May 23, 2016

Walmart aims for Japan turnaround

BRAND HEALTH CHECK: Walmart is set for a makeover in Japan, where it operates as Seiyu. Will remodelled stores be enough to draw people in?

No bargain... renovation needed to win local consumers
No bargain... renovation needed to win local consumers

Seiyu operates in an unforgiving retail market. Known for low price, it’s struggled to compete with domestic players such as Aeon and Seven & i Holdings. The company has debunked speculation that it was going to withdraw from the market, however. In March, it announced plans to remodel its stores. Its CEO was recently quoted by Reuters as saying the company may even open new stores if it can find the right locations. Things are looking up slightly. But is it doing enough to ensure its relevance to the Japanese consumer?

 


Fact file

  • In 2008, Walmart took control of Seiyu
  • It operates 345 stores in Japan
  • Since 2014, it has closed 89 outlets 

DIAGNOSIS 1 
Barry Lustig
Managing partner 
Cormorant Group

In fairness, many of Seiyu’s recent difficulties have not been of its own making. A weak yen and an increase in the national sales tax diminished the overall purchasing power of Japanese consumers who were already bruised by wage stagnation and a gloomy economy. Also, after the 3/11 earthquake, convenience store locations multiplied by over 20 per cent throughout Japan. With a wider selection of food and other necessities, convenience stores began to eat into Seiyu's business.

At the same time, many of Seiyu’s difficulties have also been self-inflicted. The company over expanded, a mistake that its convenience store competitors will realise that they have made too. More fundamentally, ‘Everyday Low Prices’, Walmart's positioning and pricing strategy, doesn't naturally resonate with Japan's bargain crazy consumers—at least within the context of Seiyu.

Sensibly, the company has shuttered its underperforming locations and is busily remodeling its remaining stores over the last year or so. And the chain is currently experiencing a modest uptick in sales as refocuses.

As it refreshes, the chain should consider opening a handful of American-style Walmarts. In recent years, Ikea and Costco have succeeded precisely because they have made a point of not turning Japanese. This gives them greater license to break from stale retailing norms and bring a new shopping experience to their customers. It stands to reason that Japanese shoppers might just warm to ‘Everyday Low Prices’ at their local Walmart too.
 

 

DIAGNOSIS 2
Hal Ito
MD
BBDO Japan

Evaluating Walmart (Seiyu) in Japan is equivalent to putting the whole Japanese consumer market under the microscope. The Japanese population is declining and one-person households are increasing rapidly—in Tokyo almost 50 per cent. They certainly don’t need big supermarket shopping baskets. Subsequently, Japanese mega-chains are shutting down numerous stores and major multinational players have withdrawn or shrunk their operations in Japan.

Furthermore, low price is less appreciated in this mature market so many marketers, including retailers, are shifting from fierce price promotion—which has damaged business profitability and even brand image—to added value marketing by harnessing key trends such as ‘premium’, ‘speciality’ and ‘healthy’.

Walmart’s EDLP (Everyday Low Price) will not be attractive enough if only superficially adapted in Japan. However, Seiyu is leveraging EDLP not just as  price communication but as a driver for business and operational excellence. It is adapting it throughout its supply chain, enabling it to develop and offer highly added-value products at surprisingly attractive prices.

Japanese people love certifications by authority for premium quality or safety, and nowadays the most trusted authority is consumers themselves. Seiyu introduced a new line called ‘Certified by Consumers’ which passed consumer tests with a satisfaction rate of 70 per cent or more. New ‘value’ is created not only by reassuring quality concerns but by involving consumers into the development process. This line continues to grow by 20 per cent year-on-year.

The challenges of the Japanese market should be embraced positively as an opportunity to reinvent your brand and business model generating further innovation opportunities for marketers. I think Seiyu is making a great effort in adapting the core values of Walmart with innovative localisation, which is sometimes missing among other multinational players in Japan.
 

Read this article in Japanese on Campaign Japan

 

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