No. 29: Publishing e-books and taking in people in general simultaneously is vital to spread Japanese culture (May 20, 2013)

Marketing:

Mickey Mouse is unquestionably the world’s most famous character, but Japan’s Hello Kitty is growing popular even in the U.S., the home country of Mickey Mouse. Sanrio, the creator of Kitty, reportedly renewed the highest operating profit in fiscal ended March 2013 and will supposedly renew it again in fiscal ending March 2014. Likewise, Japan’s two mobile game developers, DeNA and Gree, are growing very fast these days.

Cool Japan is a national policy to dispatch Japanese culture to the world. However, Japan has to overcome several headaches. One of them is unauthorized copies. In the world, underground websites get data on the latest issues of Japanese comics one week before they are sold at Japanese booksellers and put their unauthorized English versions on the Internet in just two days. That is, foreign readers read the latest contents free well before Japanese readers buy their favorite comics at a bookseller. Several Japanese publishers started to distribute e-books in alliance with foreign Internet companies, and publish a new issue simultaneously both at home and abroad. For example, an American venture, Crunchyroll, has been offering the charge system since 2009. The company has now 200,000 members who can read all comics at a flat rate of 6.55 dollars per month. As far as comics are concerned, the strategy to publish e-books and offer them to members all over the world simultaneously at a flat rate in alliance foreign Internet service companies has become vital.

The Japanese government is trying hard to keep foreign people informed of Japanese culture. Actually, Japanese contents successfully got fans called “Otaku (Fanatics)” worldwide. In fact, there are lots of people enchanted with Japanese culture, and it seems that the Japanese content industry is doing well in the export business. The fact remains that it exports only 5% of its total sales of 12 trillion yen. One of the reasons for the stagnant export value is the lack of efforts to increase fans. Japanese contents companies have been increasing fans with a focus on Otaku (fanatics). However, it is time to shift the focus from Otaku to non Otaku, who can be called people in general, to spread Japanese culture worldwide. Think about Nintendo’s strategy. Nintendo recorded a remarkable sales increase by taking in people uninterested in video games.  

The above story can apply not only to a country but also to a company. It is vital for every company to increase customers by strengthening its technology and service, responding to the change of market situation. In the case of the content industry, creativity matters most. Companies successful in trying to keep people excited with new contents will survive. As Peter Drucker taught us, “The purpose of business is to create and keep a customer.”  

 Is Japan cool?

No. 28: Convenience store chains in a turbulent age: IT and differentiation are the keys to survival (2/2) (May 9, 2013)

Management:

As leading chains focus more on locality, local chains are fighting back with their own strategies. There are about 2,700 convenience stores in Hokkaido that is the northernmost island, and a local chain by the name of Seicomart has 40% share there. The chain introduced the 100-yen prepared foods corner in 2009. They always sell about 50 kinds of 100-yen prepared foods and change menu seasonally to prevent customers from getting bored with the same menu. Every store of this chain has a kitchen inside, and customers shop around for 100-yen prepared foods, fresh foods, and drinks while they are waiting for their orders to be cooked. Seven-Eleven also offers 100-yen prepared foods, but it offers only 10 kinds. The game is over. The difference between 50 kinds and 10 kinds is too great.  

Self-efficiency supports prepared foods offered by Seicomart. As vegetables used for prepared foods are subject to market fluctuations, it is hard to maintain the price at 100 yen. This local chain procures 50% of vegetables from its own farms. It gets nearly 50% of its sales from private brands that range from 100-yen prepared foods to pickles and milk products. Trucks travel around the farms to pick vegetables and pickles after delivering commodities to each store. The logistics this chain built is working very well. This strategy helps it increase sales by 20% and operating profit by more than 70% in the past five years. As this chain shows, differentiation based on locality is important for survival.

As IT grows more important to business expansion, no chain is free from the pursuit of economies of scale. It is natural that some member stores affiliated with smaller chains are eager to increase sales by becoming a member of a larger chain. A convenience store in a rural area increased sales by 6.8% by changing the franchise to a larger nationwide chain. While the larger chain delivers commodities three times a day, the smaller chain decreased the frequency to two times a day. The store owner renewed his awareness of the comprehensive strength of the large chain. In fact, the brand strength of a larger chain is vital for convenience store owners. The difference of sales per store between Seven-Eleven and medium-sized chains increased from 140,000 yen in 2002 to 200,000 yen in 2012.

Accordingly, large chains open new stores in succession. Seven Eleven and Family Mart will open 1,500 new stores this year. Lawson, however, is taking a different approach, saying that being absorbed in opening new stores may impair the mind to develop innovative products and services. Lawson decreased the number of new stores to be opened this year 7% from the previous year to 870 stores this year. Lawson put more energy on making the existing network of chains more versatile. No one can tell which strategy will work well in the long run. As always, there is no correct answer in business. What is clear is that IT-supported efficiency and differentiation seem to be the two keys to survival.  

Super delicious fried chicken by Seicomart 

 

No. 27: Convenience store chains in a turbulent age: IT and differentiation are the keys to survival (1/2) (May 8, 2013)

Management:

There are more than 50,000 convenience stores at present, increasing from 44,500 stores to 50,000 stores in the past five years. Combined sales are 9,000 billion yen today. Leading chains now focus on local regions to expand business. Tokyo has one store for every 1,992 people, whereas Kagoshima Prefecture, southernmost prefecture, has one store for every 3,159 people.

Top five convenience store chains in Japan

Convenience store chain	No. of stores in Japan	Domestic sales (billion yen)
Seven-Eleven Japan	15,072	3,508
Lawson	11,130	1,906
Family Mart	9,481	1,715
Circle K Thanks	6,242	946
Ministop	2,168	352

With the accelerating aging of population, the access provided by a convenience store is growing more appealing to consumers. The boundary between supermarket and convenience store is growing more ambiguous. Many convenience stores are handling fresh foods and sell them in small packs for 100 yen apiece. The 100 yen groceries corner is growing more popular these days. It is no longer unusual that housewives and the elderly buy fresh foods with prepared foods in the evening. It is crucial for every chain to enclose customers. They key to the enclosure is IT and differentiation.

Lawson introduced Ponta that is a point card system usable at every Lawson store. One point is one yen, and shoppers can exchange their points for discount and designated products. Since the system was introduced, the assortment improved and shortage of popular products decreased dramatically. Enchanted by the effect of Ponta, stores are very eager to obtain new members. This good cycle helped Lawson increase sales greatly.

Seven-Eleven is taking another strategy. It sells fresh coffee nationwide. The prefecture that sells most is Kagoshima Prefecture. A Seven-Eleven store in this prefecture sells 280 cups of fresh coffee a day, and sales increase to 360 cups on the weekend. Seven-Eleven spends two months to educate employees for new stores, and they are competent enough to tell the difference in taste between generally available coffee and Seven-Eleven’s fresh coffee. Family Mart is also carrying out a new strategy. It concluded a franchise agreement with two organizations affiliated with Japan Agricultural Cooperatives. They also started mobile catering of vegetables. A new system is required to sell consumers in a scarcely populated area.  

 

Introduction of Japanese convenience stores