Matsukiyo to introduce duty-free and EDLP formats

With competitive pressures building, Matsumotokiyoshi is looking to maintain its lead by introducing new store formats, expanding the range of non-prescription merchandise like cosmetics and household goods. The move comes in response to Aeon’s desire to consolidate its drugstore operations in the coming year, making it the largest player in the sector when all GMS and other non-specialty drugstore format sales are included. Matsukiyo will also join a host of other retailers in rolling out duty-free services aimed at tourists. 

Matsumotokiyoshi will open the first duty-free store for tourists this year with a target to expand to 20 stores in 2015 and introduce new formats designed to target suburban households, notably senior consumers. For the tourist orientated stores, it is hoping to generate around ¥20 billion a year. Both moves are seen as steps towards boosting sales following a fall off after April, and a means to combat increasingly aggressive expansion by its main rival, Aeon Group.

The first duty-free ‘Matsukiyo’ store is still in the planning stage, with the company saying it hopes to open either in an airport or one of the outlet malls more popular with visiting tourists. It is also grappling with merchandise planning to keep the stores relevant to both tourists and locals alike, although proof of tourist visa will be needed for duty-free purchases.

As many retailers have confirmed, from GMS chains like Aeon and Ito-Yokado through to major electronics retailers and even convenience stores, tourists are eager to buy high quality Japanese brands, including FMCG items such as basic toiletries, cosmetics and even nappies, often purchasing in bulk. Matsukiyo’s own brands are also proving popular at its stores in central Tokyo, and it has begun introducing both Chinese and English signage at a number of locations. From October, it began offering duty-free services at standard cash registers and sale of over-the-counter medicines to tourists at 30 stores with heavy tourist traffic such as in Ginza and Shinsaibashi.

Meanwhile, with Aeon ramping up its drugstore business through more centralised control of its amorphous buying group, Matsukiyo is introducing a new store format that it claims will emphasise Every Day Low Price (EDLP) rather than in-store promotions. The first will be a refitted store in Noda in Chiba Prefecture, which will operate as an experimental store until March, but there are plans for up to 100 stores to be converted by 2016.

Even though the chain is ubiquitous, commands excellent locations in and around Tokyo and is very popular, Matsukiyo still uses price-orientated marketing and the usual series of weekly special offers to entice customers. Arguably, it is already the most trusted drugstore brand in the capital, with or without its special deals, so an EDLP format makes sense, and adds to the growing shift towards EDLP retailing initiated by Walmart Seiyu. Manufacturer items will be 10-20% cheaper than at standard Matsukiyo stores, and the new formats will increase food and other non-drugstore ranges by 10-30% depending on location. A new store logo will be introduced for the EDLP orientated stores to emphasise the difference.

Matsukiyo is looking to reduce costs by doing away with newspaper flyers and other promotional ads. The stores will also be the first format to offer an off-site pharmacist service, reducing costs again, but also limiting the new format’s ability to sell prescription drugs. As a result, sales of prescription drugs and cosmetics, which make up 60% of turnover at standard Matsukiyo stores, will be reduced to around 40% of the total.

The new EDLP format will be for suburban locations. Cosmetics will remain a strong merchandise category, with new efforts here to further attract younger female shoppers with improved branding and expanded product ranges. Out of town stores, however, will be designed to cater to older customers and more family shoppers.

Although the new format is a departure from a fairly uniform Matsukiyo model, it is not actually new for the sector. Kyushu based Cosmos Yakuhin is one of the fastest growing chains, and has long used this type of EDLP format with wide ranges of non-drugstore items, including both food and even kitchen utensils.

As previously reported, the drugstore sector is currently one of the most dynamic overall, rapidly following consumer electronics on the path of major consolidation and modernisation, and Matsukiyo’s latest announcement reflects not only growing competitive pressures across the format, but also growing maturity of a company that has the reach to expand beyond its traditional merchandise base.