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Sunday, April 29, 2001

MEDIA MIX

No frills, no thrills: the hottest trend in retailing


The news that the discount department store chain Jusco made money last year while its two perennial competitors sank deeper into the red was met with surprise by the media. One can get a handle on how the press views the former underdog by reading this week's Aera, in which it describes the three-way rivalry as one between "excellence" (Ito-Yokado), "charisma" (Daiei) and "a wishy-washy image" (Jusco).

Jusco's also-ran reputation was founded mainly on its deceptively modest ambitions. Both Daiei and Ito-Yokado have worked hard to make themselves into urban fixtures that were convenient to public transportation and that carried pretty much everything you needed, from food to hardware to clothing. Jusco has always been seen strictly as an inaka (rural) operation, which meant it didn't have to be convenient to public transportation. Easy-access parking lots encouraged shoppers to drive and, thus, buy more.

Consequently, Jusco's lower prices are justified by the low overhead. Land, the priciest commodity on the archipelago, is not as much of a burden for Jusco as it is for the other two. More importantly, because of Jusco's locations, there was little competition to get in the way of profit-making.

Before commercial laws were amended to appease Americans who thought that what Japan really needed was unlimited access to Toys 'R' Us, you had your dinky mom-and-pop stores and your huge, shiny department stores with their elevator girls and armies of uniformed salesclerks, and not much in between. Once retailers were allowed to sell whatever they wanted, everybody became a department store, with the main differences among them being price and decor.

Genuine department stores were the first to feel the pinch of competition, first from specialty stores and then from discount retailers. Every week, you can read about another one dropping by the wayside. As the public realizes that it owns all it will ever want and starts comparison shopping for the things it actually needs, deflation spirals. Daiei and Ito-Yokado's profits sag, as customers flock to stores like Uniqlo.

Uniqlo's unbelievable success is only partly due to its skillful combination of low prices and good (not great) quality. Basically, Uniqlo emerged at the moment when the public had given up on shopping as a social activity, which is what department stores have always offered. Uniqlo's simplicity of purpose attracts consumers because it relieves them of the need to make decisions. The stores are reassuringly boring, the merchandise resolutely unthreatening (there's never any danger that you will like the shirt you bought today any less tomorrow).

Last Sunday, NHK aired a documentary on Daiei's attempts to recover its fiscal footing. Much was made of the fact that the two executives who helped make the store a success in the past were back on board, but their new ideas still take the discredited multifunction retail concept for granted. Tough times call for drastic measures.

They invited Uniqlo to open an outlet in a Daiei store in Kanagawa, right next to a new section that sells Daiei's private brand of inexpensive, good (not great) quality clothing. The idea is that Uniqlo will attract customers who will then wander over to the clothing section and buy the same T-shirt at the same price they could get at Uniqlo but with a different label.

Everyone agreed that this was a bold and risky move, but from where I sat it lacked imagination, not to mention common sense. It is one thing for Daiei to copy Uniqlo's success by creating its own line of cheap everyday clothing and quite another to invite Uniqlo into their store to make their desperation that much more obvious. The customers who came to shop at Uniqlo did, however, buy food at Daiei's supermarket.

In the end, Daiei's problems seem to stem from a commitment to retain its image as one big happy corporate family, which is rather odd for a retailer. No amount of PR (and that includes the baseball team) will give Daiei the same measure of big-company prestige that, say, Mitsubishi has. Jusco's relative success is due to its flexibility. Its operations are closer to those of a classic department store in that it rents space to vendors who are forced to take care of themselves. But that aspect is changing, too. Jusco is developing its own private brand (Top Value) and opening a chain of American warehouse-style discount outlets.

Social critics have claimed that commercial laws destroyed small businesses. The shopping arcades that were once the heart of many urban neighborhoods couldn't compete with larger all-in-one stores, and they've been vanishing ever since, in many cases taking entire neighborhoods with them. The big stores that replaced them are now falling victim to their own diversity.

It won't be long before every place you shop will be just like Uniqlo: bland and economically effective. Maybe by then, everyone will have decided that they might as well stay home and read a book.



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