Paper short abstract:

This paper investigates challenges of the Japanese retail industry related to a fundamental shift in consumer's attitudes towards higher price-sensitivity and value orientation. Private label strategies of major retailers are analysed to discuss how Japan can regain retail growth and productivity.

Paper long abstract:

In the aftermath of East Japan's earthquake and tsunami in 2011, the country's economic growth came to a halt, and the situation has not significantly improved since. An increase in consumption tax in 2014 had a big negative impact on consumer spending, and progress with reflation from Abenomics appears to have stalled. Consumer confidence continues to be at a low level, and market analysts have low expectations towards GDP growth. This situation is also reflected in the food and consumer packaged good market which shows only little growth.

Much research focused on the question how structural reforms can help Japan to find back to its path of economic growth. However, the discussions have put relatively little emphasis on the fundamental shift in Japanese consumer's attitude and behaviour that is observable in the recent years. In particular, the traditional view of Japanese consumers being very brand conscious and paying premium price for superior quality and convenience stands against a growing number of consumers who are more price-sensitive, spending time at home rather than going out and use different purchase channels to look for the best value. In order to respond to these changing consumer needs, various retailers including department stores, large-scale supermarkets and convenience stores increasingly put efforts in the development and promotion of private label goods. The Japanese private label goods market still lags behind globally in terms of market penetration, but recent statistics show a clear trend in positive sales growth.

The purpose of this research is to highlight recent retail consumer trends and to investigate private label strategies of major Japanese retailers. The research highlights a shift from the traditional use of private label goods as a means to cut production and marketing costs while offering quality similar to national brands, to a more comprehensive approach that uses private labels as an essential tool to better position the company strategically against competitors and offer a unique brand experience. Insights from this paper may provide a better way of understanding necessary improvements in the Japan retail industry to regain productivity and growth.