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Saturday, May 26, 2012

EDITORIAL

Survival of the fittest

Bic Camera Inc., the nation's No. 5 retailer of home electronics, plans to create the second biggest electronics retail chain after Yamada Denki Co. by acquiring Kojima Co., the seventh largest player in the industry.

Bic Camera will acquire a more than 50 percent stake in Kojima, possibly in June, but Kojima will remain on the Tokyo Stock Exchange with its name intact. The tieup between Bic Camera and Kojima represents an attempt by the home electronics retailers to survive in a shrinking market and to launch an offensive on Yamada Denki, the peerless leader in the industry.

Yamada had ¥2.15 trillion in sales in the year ended in March 2011. Bic Camera and Kojima had combined sales of ¥1.06 trillion in their latest reporting years. The two can expect to combine their respective strength to create complementary relationship. While Bic Camera has nearly 40 stores, mainly in front of large stations or in busy urban districts, Kojima has about 200 stores primarily in suburban areas. Kojima plans to shutter 40 to 50 unprofitable outlets over the next three years. It should take measures to minimize the damage those closures cause to local economies.

Home electronics retailers have been engaged in cut-throat price competition on the basis of a business model of stocking products in large quantities and holding down profits. They have tried to strengthen their positions by acquiring rival companies or shops. Enlargement of company size makes it possible for companies to increase the number of products they can stock, thus strengthening their power to negotiate with manufacturers over the prices at which they buy products from them. But market conditions show that their survival will not be easy.

Japan's low birth rate and decreasing population will have a long-term negative effect on the market. Demand for flat-screen TVs rose when consumers rushed to buy such TVs ahead of the nation's switch to digital terrestrial broadcasting format, but it has now dropped. The termination of the government's "eco-point" incentive system to encourage consumers to buy energy-saving appliances has also led to lower sales.

Simply selling products at low prices may not be enough to attract consumers anymore. Electronics retailers must strive to improve in the following areas: the variety and arrangement of products, employee knowledge of products, attitudes toward customers, after-service care and their point-card systems. Retailers and manufactures should also cooperate to develop new products that both grab the attention of consumers and meet their needs.



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