Seiyu to upgrade 50 stores, close 30

Nov 15

Walmart has been operating Seiyu for 14 years, and although estimated sales place Seiyu well down the rankings compared to its heyday, there are growing signs of confidence. Seiyu is looking to redesign more of its existing stores, further improving what is one of the best fresh produce operations in the country. It will also close some 30 poor performing stores, another sign that it is confident in growing volumes in other ways.

When Walmart first began its gradual acquisition of Seiyu in 2002, it took over some 300 or so GMS outlets and a further 100 supermarkets, as well as a number of SCs and other developments. Twelve years on, and despite the mess Walmart encountered when it first arrived, most of those stores survive. Having dealt with the important details of back office operations and links to the global supply network, Seiyu opened its first new stores for five years in 2012 and has been redesigning its better locations.

In October the US retailer announced that in 2015 it will refit a further 50 stores, concentrating on improving store operating efficiency and shopping effectiveness. The fresh produce and deli areas of larger supermarkets will be significantly improved.

These same areas were already overhauled when Walmart took over, implementing global merchandising and display, and creating much simpler, more easily managed sales areas. Despite the usual local insistence that customers prefer the higher SKU count and more complex layouts normal in Japanese chains, in reality these requirements are more to do with supply constraints than consumer behaviour. Not surprisingly the ideas introduced by Walmart have in part been adopted by other large chains – although few have been brave enough to cut down SKU counts on individual displays to quite the same degree. Even Walmart price signage has been mimicked in some Aeon and Ito-Yokado stores.

The latest upgrades will make way for new products, including the still expanding ranges of directly imported foods, as well as allowing some Seiyu stores to be moved up market, making for better margins while still promoting Walmart’s core EDLP (Every Day Low Price) message. The company is emulating convenience stores by investing in new production facilities for deli ranges – traditionally, Japanese supermarkets produce these items in stores, but the system is small scale, slow and means high labour costs. Convenience stores have always used factories, and chains like Maruetsu have just recently adopted a similar strategy for their newer, smaller format stores too (see Page 8).

By mid-2015 all of Seiyu’s DCs will have deli production, with specialist quality control teams also in place responsible for ensuring the much higher production volumes don’t lead to poor quality in stores. They will also check quality of fresh produce at DC level.

Seiyu also confirmed last month that it is expanding coverage for its online supermarket, the only online commercial operation so far outside the coops that has confirmed it is in the black. Over the next three years, Seiyu will begin taking orders in the greater Tokyo area, beyond the current limit of central Tokyo alone.

Finally, Seiyu will close around 30 under performing stores next year, another sign that the company is feeling confident about future volumes. Many of these stores are long overdue for closure, given their dated locations, shrinking catchments, and depressingly drab and outdated interiors.