On May 25, Yamada Denki Co., the largest home electronics retailer in Japan, announced that it would be closing 46 outlets. Given that the stores had been losing money for at least a year and Yamada operates more than 1,000, the announcement wasn’t surprising, though the swiftness of its actions was. The targeted stores were shuttered a week later.
NHK visited a store in Tokyo’s Koto Ward three days after the announcement and found hundreds of banners advertising a closing sale with Yamada’s already low prices slashed by up to 50 percent. One employee told the reporter that he had only learned about the store’s closing less than a week earlier, and expressed anxiety over where he would be transferred. A woman who lived nearby said it would be an inconvenience since the store not only sold electronics at a discount, but also inexpensive food and sundries.
Why the big hurry? Like all retailers in Japan, Yamada expected some fall-off in sales following last year’s consumption tax hike, but it didn’t expect it to be as steep at 12 percent compared to the previous year. More significantly, Yamada’s business profits declined by 42 percent, and not just due to the effect of the tax hike or last summer’s unstable weather, which was seen to have stunted consumption. Yamada acknowledged that the country’s population is shrinking, especially among its target demographic, and that it had to review its policy, which since the early ’90s was based on one thing only: expansion.
As one executive told NHK, Yamada opened so many stores in Japan over the past 20 years that it ended up competing with itself in certain regional markets, so the plan now is to switch from being a “quantity seller” to a “quality seller.” That means not only closing unprofitable stores, but establishing new ones in places where people are likely to spend more money for home electronics, mainly in central urban areas. Yamada is opening new stores near Tokyo and Shinbashi stations in the capital in order to attract foreign tourists with specific items, such as luxury brand accessories and rice cookers, which are very popular among well-to-do Chinese visitors.
Yamada has been less forthright about another aspect of its expansion policy, namely a perceived deterioration in service. In its ranking of home electronics retailers, Nikkei BP Consulting listed Yamada in last place in terms of “after-service” for eight years in a row, with customers complaining of unhelpful floor staff. In the retail industry, Yamada is notorious for over-working its salespeople, and even won an award one year for being a “black company” that underpays employees.
Yamada, headquartered in Maebashi, Gunma Prefecture, practically invented the idea of the discount mass sales electronics store in the ’90s, when it was in heated competition with two other Kanto area chains, Kato Denki (now K’s Denki) from Ibaraki Prefecture and Kojima from Tochigi. Yamada’s winning strategy was to saturate well-traveled suburban routes with stores featuring large parking lots, a scheme that received a huge boost with the passage of the so-called big store law that former Prime Minister Junichiro Koizumi passed as part of his deregulation push to please American trade negotiators. Yamada’s aggressive combination of mass sales and low overhead — that is, low personnel costs — drove its profits ever skyward. Everyone else had to follow suit, at least to a certain extent.
The upshot is that what were once called discount electronics stores are now just electronics stores, thus forcing out of business the standard retailer associated with a certain manufacturer, like Sony or Panasonic. These neighborhood mom-and-pop operations sold products at recommended list prices, but were full-service in that they delivered the product, installed it and instructed the buyer in its use for as long as they owned it. Sometimes they fixed it for free even after the warranty ran out.
This retail model withered after Japan entered its long period of stagnation in the early ’90s and consumers wanted only one thing: low prices. Manufacturers were forced to de-emphasize design for “cost-performance,” which some believe led to Japan’s international decline as a technological innovator.
However, the demand for cheap eventually overran discount electronics stores, as more people went online to buy appliances at even lower prices through portal sites such as kakaku.com. This phenomenon led to the practice known as “showrooming”: Consumers only used retailers to check out the merchandise, and then went home and bought it over the Internet.
The market may be swinging back. There is a home electronics chain in Kyushu called Atom Denki, which is basically a collective of surviving franchise outlets who work together to buy products en masse but retain the full-service/personal attention nature of the old neighborhood electronics store. They now count more than 1,000 members and continue to grow.
Cultural Convenience Club, the company that runs the Tsutaya chain of book and entertainment software stores, recently opened an electronics outlet in the upscale Futago-Tamagawa area of Tokyo called Tsutaya Kaden that in terms of decor is the opposite of the fluorescent-lit, white-metal-rack Yamada model. The interior is all dark wood and indirect lighting, and the salespeople are called concierges. The store features a cafe and a bookseller, and there are no bargain sales. The “regular prices” are cheap to begin with, though not as cheap as they are on the web. As the store’s manager told Asahi Shimbun, the purpose is not selling products, but “lifestyles based on products.” The only phones on display are iPhones and the only TVs ones with 4K screens over 50 inches. In this case, the term “lifestyle” translates as “money to spend on stuff.”
Yen for Living covers issues related to making, spending and saving money in Japan on the second and fourth Sundays of the month. For related online content, see blog.japantimes.co.jp/yen-for-living.