Tobu Stores’ Ikebukuro branch is one of the world’s largest department stores, and its toy department is proportionately huge. Gleaming arrays of everything from trains to teddy bears tempt tens of thousands of shoppers daily.
Toraya, a 50-year-old toy store at the Gakugei University train station, is tiny, its selection limited, its appearance a touch sad as the worst winter shopping season in at least a decade draws to a close.
But the obvious differences notwithstanding, these two retailing operations have something in common: Both are in danger of being driven out of existence by changes that are shaking Japanese retailing to its foundations, changes that soon may bring some segments of this country’s extensive and arcane distribution structure tumbling down.
Discount stores selling clothes, meat, liquor and many other goods are opening across Japan, and consumers, rebelling at the country’s highest-in-the-world prices and frightened by its deep recession, are beating paths to their no-frills sales floors.
“This Christmas was different because of Toys `R’ Us,” said Yujiro Eguchi, dean of the school of business administration at Soka University in Tokyo, referring to the U.S.-based discount toy chain that in just two years has opened 12 stores and won a substantial share of the market in Japan. “The toys were cheaper.” Shops for Japanese-made toys “did poorly, and the market overall is suffering.”
“This is just the first phenomenon,” Eguchi said. “Many discount stores are appearing. We are seeing the destruction of the pricing structure. Within one or two years, the transformation will be very big.”
In addition to producing lower consumer prices, many analysts said the rise of discounters will benefit U.S. manufacturers, who long have complained that the traditional, multilayered retail-distribution system here obstructs their access to consumers and greatly increases the prices of their products. A key to the discounters’ success is that they are moving goods more directly from producers to consumers, cutting many intermediaries out of the action.
Regular retailers are beginning to acknowledge that they, too, will have to circumvent the old system in order to compete, and they are being urged on by reformist forces in the government and the business community.
The prime minister’s advisory group for economic structural reform, headed by the leader of Japan’s most powerful business association, recently recommended “deregulation in distribution and other inefficient industrial sectors” as a means of reducing prices and stimulating the country’s economy.
There are many signs that a broadly based change is in the works.
On a side street in the posh Ginza district, Aoyama Shoji is selling directly imported men’s wear for half the prices such goods go for in the famous department stores nearby. The Daiei chain, which combines supermarkets with no-frills furniture and clothing departments, is directly importing beer from Belgium, undercutting by 40 percent the prices imposed on domestic and foreign beers by the traditional, multilayered distribution system.
Perhaps of equal significance is the fact that some retail giants also are joining the rebellion.
“I personally value this rise of discounters,” said Koichi Nezu, executive vice president of Tobu Department Stores. “They are exerting a great influence, having a great impact on the retail system.
“Such businesses never existed before,” Nezu said, and their success “is a challenge to the status quo. It is a great achievement. Because of it, all retail business must change.”
The reasons that change has become imperative are clear, he said. People have money, but they just won’t pay the prevailing prices for consumer goods, which run 40 percent and more above prices in other developed countries. Department stores and other traditional retailers are in a deflationary cycle, while discounters are going great guns.
“For 40 years we benefited from a seller’s market,” Nezu said. “Whatever we had, we sold. Domestic demand was so great we didn’t have to think seriously about the price of the merchandise. Now it has changed to a buyer’s market.”
In those four decades, Japanese stores, from huge chains to neighborhood vegetable shops, sold most of their products on consignment from wholesalers or producers. This meant that retailers could return unsold goods without losing money, but also meant manufacturers and wholesalers could control the price structure, keeping retailer profit margins down and consumer prices up.
“The stores are beautiful, but they are essentially landlords,” says Bernice Cramer, a Boston-based business consultant whose client list includes Tobu. “Japan is 5, 10, maybe 20 years behind the United States in retailing.”
“Japanese housewives,” Cramer said, “have realized they are being snookered.”
Nezu, the Tobu executive, says “retail management feels the danger in the current conditions.”
