Daiei to expand discount chain

Feb 15

Daiei is now part of Aeon Group, and while Aeon decides what to do with its latest acquisition, the opportunity to leverage the Big A discount chain in Tokyo is an obvious first step and one that couldn’t be timed better. If all goes according to plan, store numbers will be doubled over the next couple of years, establishing a major discount food chain at the heart of the capital and putting pressure on other supermarkets and even convenience stores vying for the same market.

Now a part of Aeon Group, Daiei is set to expand its chain of Big A discount food supermarkets in the capital. The long expected takeover of Daiei pushes Aeon into an almost unassailable position in food and FMCG retailing in Japan, but while the bulk of Daiei’s volume comes from its eponymous GMS chain and Gourmet City supermarkets, Big A will be of particularly high value for Aeon in the short-term.

Big A is now one of the largest discount chains in greater Tokyo, Saitama and Chiba, taking on companies like OK Super and Ozaki, and often leading on price. It currently has around 184 stores, but with Aeon’s backing, Big A will expand to close to 300 stores by 2016.

The new stores will be smaller, often resembling a convenience store at less than 200 sqm and operating 24-hours a day, but positioned at much lower prices, on average about 30% cheaper than a typical Seven Eleven. Staff numbers will also be reduced in the new stores and part-time workers will be the main service providers. Full-time managers will act as field supervisors, often taking responsibility for multiple stores. The same system has been in place for a couple of years at Maruetsu Petit, another Aeon affiliate, and Aeon itself has also tried similar experiments with its My Basket chain.

Currently Big A’s turnover stands at around ¥65 billion a year, but it has plans for sales of ¥100 billion by 2016. This would push the chain above Poplar, the sixth largest publicly listed convenience store chain, and make it as large as Ecos in the supermarket category. The doubling of store numbers will also expose the brand to a much wider clientele and allow expansion of Topvalu private brand sales, increasing from the current 400 SKUs already on sale in a typical Big A, to around 600 SKUs in the new, smaller stores.

The aim, of course, is to leverage this discount chain in a time when customers are expected to become increasingly price conscious. Aeon already has a big stable of supermarket brands in its group, including eight Maxvalu chains in different regions, and several different banners just in Tokyo, such as My Basket, A Colle, Maxvalu Express and specialist Yamaya. Although A Colle was set up with discounting in mind, it remains very small, so Big A is the obvious choice for investment. The only other major player in the same position is the Lawson 100 discount chain, which consumers view as a less frequently shopped convenience store rather than a supermarket, so Big A has a clear opportunity to establish a new niche. Given its experience in discounting and the infrastructure to support it, Big A might well take some other chains by surprise.

Get a concise monthly update on Japanese Consumer Markets – and a FREE copy of our monthly report.