Japan: Supermarkets switching focus to discount stores

As more consumers seek lower prices amid the economic slump, major supermarket operators are opening new discount outlets to attract customers.

Ito-Yokado Co., a subsidiary of Seven & i Holdings Co., has opened two outlets of its discount supermarket chain The Price in the metropolitan area.

The company plans to open new shops while also transforming about 20 Ito-Yokado outlets into The Price shops within fiscal 2009.

Ito-Yokado will eventually transform about 10 percent of its 180 outlets into The Price outlets.

The low prices offered at such outlets are made possible by slashing operating costs.

The company has reduced in number its full-time employees, who earn relatively high salaries, in favor of hiring more part-time workers. It also has cut spending on advertising.

The company keeps purchase costs low by buying fresh foods directly from production centers. The discount shops also sell irregularly shaped fruits and vegetables, which usually fall short of the standards required by supermarkets, at prices between 10 percent to 30 percent lower than regular prices.

At The Price shops, cup noodles sell for about 130 yen, while an equivalent product sells for about 160 yen at Ito-Yokado outlets. A one-liter carton of a certain brand of milk, which costs about 170 yen at Ito-Yokado, sells for 150 yen at The Price.

The two The Price outlets reportedly have been registering good sales, particularly in February, when sales grew by about 50 percent compared with the previous year when the two shops were operating under the Ito-Yokado name.

As a result, the company altered its initial plans and doubled to about 20 the number of outlets it planned to open under The Price name.

The company also said it planned to develop own-brand products for The Price. Such items will be sold at lower prices than those sold at Ito-Yokado and Seven-Eleven convenience stores, according to the company.

Following the opening of the test store in September, Aeon Co. will open more outlets of its small-scale discount shop A.Colle, which mainly sells processed food products.

Such shops have a floor space slightly larger than an average convenience store. Topvalu products, comprising own-brand items priced between 10 percent and 30 percent lower than brand items, account for about 30 percent of the products the shop sells.

In the wake of brisk sales at a trial outlet, Aeon opened two more outlets in Tokyo in 2009 and plans to open more outlets in the metropolitan area.

Inageya Co., a midsize supermarket chain based in the metropolitan area, has opened five discount stores and plans to open another five by the end of September.

The firm will cut operating expenses, such as labor costs, by refurbishing old small retail premises, cutting down on full-time employees and trimming the shop's product range.

The shop offers fresh and ready-made foods for about the same prices as Inageya, but other items are priced 15 percent lower than those sold at Inageya.

Source: yomiuri.co.jp

Publication date: 3/9/2009

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