Yamada Denki’s efforts at building up online sales have been hampered by a high level of strategic inertia which continues to emphasise store-based sales. Now, leveraging its growing network of independent franchisees, Yamada plans to kill two birds with one stone, using the franchise network as a new sales arm to reach local customers and boost online sales at the same time, expanding sales not only of electronics but household goods, food and books.
Yamada Denki will launch a new, direct to home sales service next April, aiming to leverage its growing chain of small, franchise stores, offer services to older and more remote customers, as well as boost its own online sales.
The chain as a whole has an overwhelming share of consumer electronics sales in Japan already, estimated in excess of 24% of the total. For the past 10 years, it has been using its brand and distribution strength to recruit local independent electronics retailers in a loose franchise system organised by subsidiary company, Cosmos Berry’s, based in Nagoya. While the consumer electronics sector is stagnant with few routes to growth, Yamada is hoping the latest initiative will help stretch the brand into the last remaining corners of the market. The group’s considerable buying power means that it now sells a wide range of products well beyond consumer electronics including foods, daily goods, books, and even OTC medicines. The new service will give its 3,400 franchise stores full access to all 35 million SKUs that are available already through Yamada’s online store.
Under the current system, independent stores joining the group pay an initial ¥100,000 entry fee and then a minimal ¥10,000 a month membership. In return, they are able to access Yamada’s full catalogue, accept the company’s loyalty card, and so compete even with other large chains on price and product range, while still offering that local, personal service that is particularly popular with seniors. Until now, however, this service has largely been restricted to consumer electronics. In addition to FMCG, member stores will also be able to offer home building and refitting services from Yamada. The new service is being called ‘Go-You kiki’ or ‘Tell me what you need’.
Yamada is expecting member stores to add a significant layer of promotion, specifically visiting customer homes and providing remote sales options. In particular it is targeting senior consumers, many of whom are still more comfortable shopping at long-familiar neighbourhood stores than at large electronics supermarkets or online. Yamada is providing member stores with dedicated tablets, complete with built in marketing software, for in-home product explanations. Logistics tracking of orders made through franchise stores, right through to delivery and installation, is also already in place, with an undisclosed incentive system for member stores.
Yamada itself has more than 1,000 stores of its own already, giving it few remaining routes to growth – a situation facing the entire CE sector. A government subsidised sales initiative in 2010 and boom-buying prior to the April tax increase have both contributed to a market where the majority of households have already satisfied their electronics needs for the time being, and sales at all the big chains have been declining. There is also new pressure from online retailers, notably Amazon, which offer identical products frequently at considerably reduced prices.
Yamada has been slow in shifting from physical to online sales, but the latest initiative is likely to help towards boosting its online business by having franchise stores act as an intermediate sales force. By 2020, Yamada now expects online sales to double to ¥200 billion – although even this is hardly impressive given the growth at Amazon and other major online specialists.
As of 2012, there were some 27,000 independent consumer electronics stores remaining in Japan, half the number of 10 years previously, but still far too many for the market to support. By 2020, this number is expected to fall to around 13,000. Yamada hopes to have between a third and half of these under its control by that time.
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