Sales of Seven & I private brands already exceed ¥700 billion a year. The company is now expanding the number of lines dual branded with major manufacturers, ranging from apparel to food and across its empire from convenience stores to Sogo Seibu. This seems like a win-win situation, giving Seven & I access to well-established manufacturer brand names, while suppliers from Japan and overseas get their products sold in large quantities in one of the biggest retailers in the country.
As of February 2013, Seven & I Holdings had private brand sales of ¥670 billion from 2,400 SKUs. It racked up another ¥402 billion in 1HFY2014, aiming to beat ¥800 billion for the year, and then more than ¥1 trillion in FY2015. This strategy links directly to both its convenience stores and its ambitions to build an omnichannel retail empire across categories as diverse as apparel and home fashion.
Products like Kin no Shokupan (Gold bread) and Seven Cafe coffee are selling in the hundreds of millions of units, and Seven & I is keen to add more proven, high quality brands that can provide some differentiation.
Seven & I chooses to call private brands ‘retailer-managed merchandise’ or RMMs to get around the growing stigma of private brands replacing manufacture alternatives. The growth of RMMs is tough on major existing brands, but a fantastic opportunity for those looking to break into the market. A recent example is the launch of New Zealand’s Charlie’s brand from Better Drinks in an exclusive one year deal with Seven Eleven. In this way Seven Eleven is now turning to suppliers of particularly successful brands to produce new lines that complement what is available independently.
Seven & I keeps the suppliers’ names on the packaging of all its RMMs, or if not a brand, at least the provenance. This is the case whether it is for beer such as its deals with Kirin and Sapporo, or clothing such as the Limited Edition brand where the brand of fabric or, say, Italian manufacture is prominent.
The value to the customer of adding the original manufacturer’s label is more about brand reassurance than any special recipe or unique fabric. Seven & I is able to leverage the equity of major brand names or European design and quality, while suppliers are assured sales in large volumes. Seven & I is more than willing to look to overseas manufacturers for exclusive ranges, notably those it can sell at a premium due to some significant USP.
Major domestic manufacturers see the switch to dual branding as a necessary, but unfortunate development. For medium sized firms, as well as those not yet in Japan, the opportunity is far greater. As has been the case for manufacturers supplying private brands in other markets, there is the chance to establish a significant long-term business here.
Of course, while Japanese retailing is rapidly consolidating into the hands of just a few major players, it remains a highly competitive market. Even though Seven & I and Aeon have considerable, growing channel power, there are many alternatives, and success with one of the major players can often open doors elsewhere too. For overseas firms looking to break into the market or expand, now may be the perfect time.
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