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Japan’s supermarket sales up 1.4% in March for second straight monthly rise

In February, Japan’s supermarkets finally showed an official rise in sales after having declined for 25 straight months. However, as we noted, sales were actually down 2.39% when not “adjusted”, i.e., when stores opened in the past year were included. March figures were similar, with a 1.4% official rise reported, but sales down 4.0% when newly opened shops are included.

In March, total sales rose 0.4% to 1.08 trillion yen. Once again, aside from food sales, supermarkets did not fare well. Here’s a breakdown of sales by category in March (these are adjusted figures):

• Food: +2.7%, 61.5% of total revenue
• Household Products: -0.4, 20.0% of total revenue
• Clothing: -2.5%, 11.8% of total revenue
• Miscellaneous Items: +2.2%, 6.3% of total revenue
• Services: -1.8%, 0.4% of total revenue

Just slightly over a year ago, we reported with some surprise that Tesco had decided to move into the Japanese market, with plans to open up to 35 shops. At that time, Japan’s supermarket sales had been down for 15 straight months, and the growth of discount 100 yen shops, the surge in department store food sales, the increase in the number of single person households and the ongoing woes of Wal-Mart made Tesco’s task seem difficult, to say the least. On Monday, the Nikkei Marketing Journal reported that things have been somewhat difficult for Tesco thus far, with sales at its 8 Japan locations showing a 4% decline in year-on-year sales.

Tesco has a reputation of quickly exiting markets that do not turn out to be profitable. However, the firm seems to be echoing Wal-Mart in its dogged pursuit of success in Japan. Tesco plans to send Michael Fleming, who has a very strong record with bringing success to the firm’s Asia operations, over to join the management team in Japan.

Best of luck to Mr Fleming. Supermarket operations are one of the toughest businesses in Japan, and although a shrinking population combined with the growth in single person households will make his task daunting one, there are still inefficiencies in the market to overcome and competitive advantages to be had.

It may also interest our readers that while convenience store sales fell 0.6% in March, 7-11 Japan has been quick to react to the desire of many consumers to buy domestic food products. According to the Nikkei, 93% of vegetables in 7-11’s bentos are domestically-sourced:

Seven-Eleven Japan Co. is accelerating its efforts to raise the percentage of domestically grown vegetables in its bento boxed meals, sandwiches and other items to improve the taste of its offerings as well as address growing consumer concern about food safety.

Currently, 93% of the vegetables used by the firm are grown in Japan, a relatively high percentage compared to the 80% level at major retailers of prepared foods and family restaurants, and the even lower ratio at rival convenience stores.

Of course, 7-11 was ahead of the curve on this one:

Seven-Eleven’s plan, which dates back to around 2000, started in order to offer more delicious food items, rather than to ensure safety.

They do seem to be trying hard to beat us over the head with the “taste” factor.

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