Although the impact of the April tax increase is now dissipating for many sectors, it has refocused consumers on price. Lower priced retailers in the FMCG and discount sectors have done particularly well. The four major ¥100 Shop discount chains are all looking to expand store numbers rapidly this year.
The four major ¥100 Shop chains have budgeted for significant expansion this year, adding some 450 stores if targets are reached, a 6% increase in stores compared to 2013. This is a sector where the bulk of merchandise ranges are made up of imported product.
The leading chain is Daiso Sangyo, a privately owned and somewhat secretive company based in Hiroshima that dominates the sector with 3,600 stores (840 of them overseas) and sales of around ¥376.3 billion. Daiso continues to expand at a pace of more than 100 stores a year and plans 140 in FY2014 in the domestic market.
Number two chain, Seria, is using its Color the Days chain to position itself away from the more down market image of Daiso. Including refits of existing stores, 40% of its chain will be under the Color the Days banner by next Spring. Overall Seria will expand store numbers by 16% this year, adding a net 80 stores, with a target of 1,250 stores by March 2015. It will also close some 30 existing stores as it continues to work on marketing and positioning.
The number three chain, Cando, plans to increase stores too, adding 80 this year, while closing 40 others. Meanwhile, number four chain Watts will also add around 80 or so stores, some in the Silk and Meets formats, and close a further 50 or so existing stores.
Seria’s more premium strategy and explicit branding is certainly working. It is currently the strongest player in the market and has continued to improve sales compared to 2013. All the major chains enjoyed boosts to sales pre-tax increase, although Cando failed to make as much headway as Seria and Watts. Since April, however, while all three publicly listed ¥100 Shop chains have seen growth rates slow, both Watts and Seria have continued to record overall sales growth higher than in 2013. For Seria, this growth has extended to same store sales too. Cando has seen sales fall in the same period, and both Cando and Watts have failed to maintain growth in like for like sales since April.
Don Quijote profit up 5.9%
Don Quijote, the leading discount retailer in Japan by a large margin, was widely expected to benefit as consumers became increasing price conscious following the tax increase in April. This was borne out in FY2013 ending June with the chain’s operating profit jumping 5.9% to an all time record of ¥34.2 billion. Sales surged 7.7% to ¥612.4 billion. In particular, Don Quijote has expanded its sales of food items, increasing turnover in this sector by 29.5% compared to last year, but equally this initiative has contributed to a reduced overall gross margin of 26.3%, a 0.1 point fall. Same store sales were up 0.8%. The chain continues to expand, adding 22 stores last year, mostly in and around Tokyo, with a total of 283 stores in operation at the end of the year. Don Quijote also acquired Californian retailer Marukai last year, adding 11 food and wholesale membership stores offering Japanese ranges in California and Hawaii.
FOCUS: Leading shopping centres upgrade their way to 3.9% jump in sales in 2014-15
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