Japan faces a massive drop off in population over the next two decades, but the effects of internal emigration out of rural areas into the cities has increased beyond expectation in the past two years. This will have major implications for consumer goods marketers in the future who will need to start planning now. For retailers too, the growing shortage of low cost part-time workers in these areas is becoming a serious one, causing major chains to begin rethinking their entire business model.
There has been an acceleration in migration in recent years, in part exacerbated by the nuclear crisis in Fukushima, compounding the depopulation in some regions. This is now having a major impact on how retailers do business and forcing a rethink of traditional business models which are based on large numbers of low wage, part-time employees. All retailers, but especially labour intensive formats such as supermarkets and convenience stores, are struggling to find enough workers willing to undertake the long hours of relatively mundane labour that has been a standard for these formats for as long as anyone remembers. With other industries from construction to office work also competing for the few workers available, the situation is worsening quickly.
Tohoku is in the deepest crisis, but labour is also short for retail jobs in other less populated regions too, notably Shikoku and Kyushu – areas like Hokkaido, on the other hand, are more sparsely populated meaning there are fewer jobs to begin with. Fukushima Prefecture alone has seen the speed of its population drain double over the past two years, with the latest figures suggesting a 13% decrease overall between 1995 and 2014. In Kochi in Shikoku, the drain has been slower but is even worse, with the population this year 19% below that of 1995. The difference is that there are fewer jobs in Shikoku while companies are desperate to find people in order to rebuild in Fukushima and the rest of Tohoku.
Calculated on the basis of where jobs are rather than simply dividing vacancies by employable people, in Tokyo in 2013 there were 1.05 jobs for every employable person in the same area. For May this year, the same figure for Tokyo was 1.13. In comparison, the ratio was above 1.5 in Fukui, Toyama and even Aichi, and was 1.66 in Fukushima (see Chart).
All the major retailers and brands are increasingly concerned about this trend. The only possible solutions are to increase hourly wages, employ more older people, or drastically change both staffing and store expansion policies. With the labour shortage already pushing up construction costs, Aeon and Seven & I have both curtailed previously announced new store openings over the next 18 months by more than half, but they urgently need other solutions for the labour shortfall in stores.
Seven & I Holdings’ key subsidiary, York Benimaru, is the leading supermarket chain in the Tohoku region and has been pushing hard to rebuild its store portfolio post 2011. A standard 3,000 sqm supermarket employs around 85 part-time people, mostly women, but the chain has recently been forced to open new stores with less than three quarters this number. To make up for the shortage, full-time employees at existing nearby stores are being required to do overtime at new outlets. In a couple of cases, store openings have been delayed and entire staff, full-time and part-time, have been shifted from old stores that have closed down. There is even an increased bonus to employees who introduce new people to take up jobs, up from ¥10,000 per introduction last year to ¥18,000 this year.
What York Benimaru and Seven & I Holdings have steadfastly refused to do so far is increase hourly wages by any significant amount on a store by store basis – and the rates are derisory at just ¥800 an hour. New stores are allowed to offer up to ¥820 an hour but no more, failing to set themselves apart from fast food outlets, some of which offer up to ¥1,500 an hour. Office and construction work not only pays more, it usually means time off at weekends, something retailers rarely offer, so the sector is becoming increasingly unpopular.
Elsewhere, Seven Eleven is facing a different problem. Being present in just 43 of 47 prefectures, the leading convenience store chain still has room to grow, but in reality the 24-7 operation model is struggling in areas like Shikoku. Most of its chain uses students as part-time employees, especially for the long night shifts, but in Shikoku there simply aren’t enough students to take up the jobs available, and most older people interested in retail work have already been snapped up by rivals in the supermarket and drugstore sectors. At one supermarket chain in Takamatsu, 191 of 800 employees are over 60 and still working on the shop floor. Unlike the dreary, manual based jobs in convenience stores, supermarket jobs offer social interaction with customers, making for far more attractive environments for senior employees.
The overriding problem is, however, that there is no solution in the current model. Retailers face a need to rethink their staffing policies, even moving away from the high service levels that they take for granted – and the need for frequent, high-speed shelf-filling in convenience stores – all offered at minimal cost. Either wages in retail will have to rise or more and more stores are going to have to compromise on service levels, splitting the need for customer interaction and store operation into smaller, more employee friendly segments. Whatever solution emerges, the current labour shortage is only going to get worse, and low paid, unpopular jobs like those in supermarkets and convenience stores are going to become increasingly difficult to fill. No wonder LDP leaders are pushing a more open door policy for Japan.
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