The 3-point rise in the sales tax may turn shoppers frugal, leading to price wars among retailers and accelerating realignment in the industry.
Industry watchers say that small retailers with poor product development capabilities are likely to face difficulties surviving the fierce competition on their own.
Akio Nitori, president of furniture producer and retailer Nitori Holdings Co., predicted that Tuesday’s consumption tax hike to 8 percent from 5 percent will trigger a shakeout in the distribution industry.
“The gaps among well- and poor-performing companies will widen, and an era of oligopoly is set to start,” he said. “We will have to compete with mail-order companies, do-it-yourself stores and all other types of retailers.”
Mitsuo Takahashi, senior managing director of discount chain Don Quijote Holdings Co., agreed the tax hike will spark a realignment and signaled that the company is prepared to mull acquisitions.
“Just selling conventional products would be insufficient for survival,” an official of a major retailer said. “Small regional supermarkets that do not have their own private brand items could be pushed into a corner.”
Realignment has already begun. Last Friday, Arcs Co., which runs stores in Hokkaido and Tohoku, announced a deal to acquire a rival group operating in Iwate and Miyagi prefectures in September.
In January, Ito-Yokado Co., a store chain run by retailing giant Seven & i Holdings Co., acquired an equity stake of about 20 percent in Tenmaya Store Co., which runs in Okayama and Hiroshima prefectures.
The situation now differs from 1997, when the sales tax rose to 5 percent from 3 percent, as it could polarize consumers with its severity, said Motoya Okada, president of retail giant Aeon Co.
Seven & i, Aeon and others appear to be targeting their rivals by developing private brand products, analysts say.