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We round up the latest trading updates and news for Japan's four largest retailers, Seven & i Holdings, FamilyMart UNY, Lawson and AEON.

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Amazon has increased the price of Amazon Japan’s Prime membership.

Fee flat for 11 years

Amazon Prime was launched in Japan 11 years ago and the 3,900 yen cost has remained unchanged up until now. Amazon has increased the cost to 4,900 yen (US$44), a 26% increase. The company cited the growing number of services available to members. In recent years, Amazon has improved its offering in Japan, including adding services such as Amazon Fresh, Prime Wardrobe, music and video. Whilst the cost of Prime membership has increased, the price is still lower in comparison to the US, where the annual cost is US$119.

Profitability

Amazon’s annual report shows that the retailer’s international business saw a loss of US$2.1bn in 2018. The move by Amazon to increase its Prime subscription fee in Japan highlights the company is increasingly prioritising profitability. In April 2018, Amazon increased the Prime membership fee in the US by 20%. In addition to increasing the cost of Prime, Amazon is also looking to improve profitability through the expansion of private label; creating a more efficient supply chain, for example, working with vendors to develop Frustration Free Packaging (FPP) and growing its Amazon Advertising business.

The three leading convenience store chains in Japan are facing increasing challenges to hiring staff for their stores. Labour shortages driven by the country's ageing population is deepening and retailers opening new stores require new workers.

Discounts and benefits for workers

The current approach for many convenience store operators is to incentivise workers with benefits and discounts. The average wage for convenience staff is around JPY1,000 an hour, but varies based on location in the country.

Seven & i Holdings, which operates over 20,600 7-Eleven stores in Japan, opened a day care centre for employees on the second floor of a store in the northern city of Sendai in July. In April 2017, it began offering workers discounts on hotels and travel services.

The second largest CVS chain in the country, FamilyMart, is partnering with Iris Ohyama to offer part-time workers nationwide discounts of up to 60% on rice cookers and other appliances. While Lawson, which operates more than 14,300 stores, offers its employees discounts on DVDs and books, serviced by the retailer's subsidiary companies.

Automation part of the solution

At an exhibition in October last year, Lawson launched an unstaffed store concept, featuring a robot that can prepare food as per customer preferences, e.g. cook gyoza dumplings. About two years ago, we covered how Japan's Ministry of Economy, Trade and Industry is backing the introduction of RFID technology in retail. Since then, we have seen Japanese retailers in different industries trial this technology. Retailers are now working harder to retain and attract new employees, but also promote automation to drive efficiencies in-store.

Lawson testing unstaffed stores during early hours

To reduce the burden on store employees and compensate for labour shortagess, Lawson has announced that it will test unstaffed operations at two outlets for several months from this summer. The concept was first announced back in December 2017.

Unstaffed service hours will be between midnight to 5 a.m each day. While a staff member will be available to support during the trial, Lawson hopes the outlets will be fully operational without personnel in the future. Certain categories, including cigarettes, alcohol, and postage stamps will be unavailable for purchase during unstaffed hours.

Smartphone-based self-payment is already available at Lawson stores in Shanghai. If self-checkout is rolled-out to other times of the day in Japan, customers will be able to avoid long lines at cash registers during busy hours. It will also help drive in-store efficiencies and boost productivity.

FamilyMart UNY partners Panasonic Corp

FamilyMart UNY has partnered Panasonic Corp to introduce technology in its stores to drive in-store efficiencies. The first FamilyMart store using Panasonic technology has opened in Kanagawa, southwest of Tokyo. The retailer will test advanced sensors and artificial intelligence to help stores restock more efficiently, as well as self-checkout, digital displays and price tags.

A shrinking workforce has seen retailers reduce and test shorter operating hours. FamilyMart in Japan plans to test reduced hours at up to 270 of its stores in Tokyo, Akita and Nagasaki prefectures beginning in June.

FamilyMart’s UNY’s Representative Director and Executive Vice President, Takashi Sawada, said, “We are faced with a labour shortage, and the issue of 24-hour operations. There is no time to waste."

The Japan External Trade Organisation is offering small to medium-sized domestic retailers free access to global ecommerce platforms to help them sell products in 18 markets abroad.

Supporting smaller retailers grow online

The initiative is expected to increase trade for local businesses, maximising the global popularity of Japanese products around the world. Twenty four ecommerce operators, including Rakuten, Alibaba, JD.com, Red (Xiaohongshu), Lazada (in Singapore) and Ocado have signed up to take part in the program starting this summer. Some of these platforms are expected to setup a dedicated section to sell Japanese products under the program later this year.

Driving Japanese exports

For some smaller businesses, the program could offer their first export opportunity. The initiative eliminates the fee that would normally be required for sellers to list their products on third-party marketplaces. Following successful application, sellers will be asked to provide items chosen by the platform operator, who will negotiate and complete purchases.

 

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AEONs Maxvalu in Hiroshima and a handful of 7-Eleven stores are reducing their operating hours in Japan.

Maxvalu in Hiroshima ending 24-hour operations

Maxvalu Nishinihon, a Hiroshima-based subsidiary of AEON, is ending 24-hour operations for 25 stores later this month. The company plans to refocus its staff members' attention on improving customer service. The move should also help the business cope with labour shortages in western Japan prefectures, including Hyogo and Hiroshima, where its stores are mainly located.

7-Eleven reducing opening hours in some stores

Seven-Eleven Japan has announced that it will reduce operating hours at some of its stores later this month. This will be tested on 10 company-run 7-Eleven stores across the country, operating only between 7am and 11pm rather than 24 hours.

Labour shortages driving change

Around 96% of 7-Eleven stores in Japan operate 24 hours a day, excluding any located inside external office buildings and train stations. Labour shortages for the night shift remains a challenge for convenience operators across the market.

Both Lawson and FamilyMart have experimented with reduced opening hours at their convenience stores. The former for example, has also launched self-checkout counters to support staff members. With increasing pressures, many franchise owners are trying to negotiate shorter operating hours and other subsidies.

Retailers are introducing a number of different initiatives to combat labour shortages in the market. Japan's Ministry of Economy, Trade and Industry is also helping drive automation in retail. Furthermore, 50 Japanese banks have recently joined Tokyo bank J-Coin to set up a cashless payment system developed by Mizuho Financial Group. J-Coin payments are processed via a mobile app using a QR code, a phone number or a LINE Messenger ID number. We expect Japanese retailers to further integrate cashless payments in-store to drive efficiencies and offer shoppers greater convenience. 

 

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Five year growth forecasts for the grocery market, the leading retailers and modern trade grocery channels in Japan.

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