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Retail Roundup: Seiyu announces more changes to come

July 7, 2008
By Ken Worsley


Let’s start by looking at Seiyu, a firm that has been much discussed on this website over the past year or so. According to the Nikkei, Seiyu intends to renovate about 90 of its locations over the coming two years, at a cost of over 30 billion yen.

Seiyu lost about 20 billion yen in fiscal 2007 and has been in the red for six straight years. The Nikkei tells us that Seiyu intends to sell more Wal-Mart brand casual clothing at its shops, despite the fact that clothing sales at supermarkets continues to fall - they were down 8.6% in May alone. Seiyu also intends to link up further with Wal-Mart in terms of sourcing products from China. Although this might make economic sense, it also bucks the trend of consumer mistrust of goods produced in China.

Finally, we see that Seiyu intends to carry an “expanded lineup” of flat-panel TVs. Again, supermarkets are generally selling less of this kind of stuff, and it’s hard to imagine Seiyu outpricing, let alone out-marketing the Yodabashi, Bic Cameras and Kojima Denki shops in this area.

Finally, sales per square meter continue to decline at Japan’s supermarkets. Yet again, Seiyu intends to focus its renovation efforts on its larger locations, with 6,000 to 10,000 square meters of shop space.

Filed Under Business, Japan, Retail 

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Comments

12 Responses to “Retail Roundup: Seiyu announces more changes to come”

  1. Ken Worsley on July 9th, 2008 12:45 am

    Follow up from the Nikkei:

    Wal-Mart To Offer Y60bn In Samurai Bonds Next Month

    U.S. firm Wal-Mart Stores Inc. plans to float around 60 billion yen in samurai bonds in Japan as soon as early August, The Nikkei learned Tuesday.

    This is the first issuance of yen-denominated debt by a foreign retailer in almost 30 years, market insiders say…

    … Amid the drawn-out global market turmoil, Japan’s capital markets are more stable than those in Europe and the U.S. And long-term interest rates, the benchmark for bond rates, are still low. As a result, Wal-Mart likely decided that by issuing samurai bonds, it could raise funds at low cost.

    The filings do not reveal Wal-Mart’s intentions for the financing, but the funds will probably be devoted to bolstering the operations of supermarket chain operator Seiyu Ltd., which the American retail giant brought under its umbrella in April.

    Since Seiyu’s flagging profits are due partly to its aging large stores, it plans to renovate 90 locations over two years or so, spending an estimated 30 billion yen-plus. Some of the funds raised by Wal-Mart could be used to help with Seiyu’s refurbishments.

  2. able stranger on July 9th, 2008 12:42 pm

    First time commenter but I’ve been reading a while and love the site. The supermarket industry in Japan looks like a slow-motion car crash to me. I’m not sure if you’ve seen this, but Aeon apparently intends to close 40 supermarkets:
    http://www.japantoday.com/category/business/view/aeon-to-close-40-supermarkets

  3. Ken Worsley on July 9th, 2008 2:07 pm

    AS, thanks for the comment. I think your description is apt. With Wal-Mart seeking cash to fund its Seiyu adventure, Aeon now closing shops and Tesco having over-extended its outlays to secure locations and price-warred itself into a war of attrition, there’s bound to be some turmoil on the horizon. Someone is going to emerge as a survivor, but it’s impossible to see who just yet. I tend to doubt it will be a foreign firm.

  4. Ken Worsley on July 9th, 2008 2:10 pm

    Just to add, I’d love to know where those 40 Aeon stores to be closed are. Most likely somewhere in the countryside, but it seems telling that they’re not telling.

  5. WG on July 10th, 2008 8:59 pm

    Issuing debt to fund Seiyu? That simply boggles the mind.

  6. able stranger on July 13th, 2008 9:42 am

    I tend to doubt it will be a foreign firm.

    Other than Wal-mart, how many are active in Japan on a big scale? The problems here seem to be more with Seiyu than Wal-mart. They would have been better coming into Japan with their own name and brand and setting up their own locations.

  7. WG on July 13th, 2008 7:16 pm

    They would have a hard time setting up their own locations. The name of the game is to be near stations, and most of that space is already taken.

    Buying Seiyu got them lots of great locations, but not necessarily a great firm. Rebranding all the existing locations is an idea. I’m sure it must have been discussed. Maybe the idea of everything becoming Wal-Mart was just too alienating for customers.

  8. kev on July 14th, 2008 11:22 am

    More likely Wal-Mart wants to see Seiyu get its act together before they can be blessed with the Wal-Mart name.

  9. Ken Worsley on July 14th, 2008 3:38 pm

    AS, there are few other than Wal-Mart. I wouldn’t count CostCo because what they do is fundamentally different. Tesco’s ops are too small. It looks like a test of the water. They’re known for pulling out quickly when things don’t work.

    WG, I agree. It would be impossible to secure prime locations without buying in. I don’t see anything wrong with the rebranding idea, except that it would requite every location to go through a hugely expensive facelift. The again, that appears to be what they’re doing anyway.

    kev, I’m not sure if that’s meant to be sarcastic or not, but you actually might be on to something.

  10. kev on July 16th, 2008 10:48 pm

    I’m not being sarcastic at all. Wal-Mart’s not exactly high class, but at least they’re uniform…every shop is the same. Seiyu is all over the place. They sell different stuff, some places are nicer than others, some could have horror movies made inside. It’s sort of a local brand. If teh place near you is nice, you think it’s ok. But if the place near you is a dump, as most are, then that’s your idea of them.

  11. Ken Worsley on August 3rd, 2008 10:58 pm

    Seiyu will be cutting flyer distribution down to once a week.

  12. TE on August 5th, 2008 8:30 pm

    What Costco does may be fundamentaly different from what other supers do but I think more Japanese will be adopting the “Costco Lifestyle” ie buyinig in bulk and keeping stock even though the houses are smaller and all that, inflation is going to drive more people to change their lifestyles. Costco has also succesfully built a brand name image known for high quality and they are talking a slow growth strategy.

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