The Japanese retail market serves as a valuable benchmark for Chinese consumer entrepreneurship and investment research. China and Japan share similar cultural environment, lifestyle habits, densely populated urban living patterns, economic development cycles, and demographic evolution cycles. This similarity positions Japan’s more advanced and mature retail industry as an inspiration for the future evolution of China’s retail sector. By leveraging insights from Japan, we can better contemplate the developmental trajectory of China’s retail industry.

We have systematically studied Japan’s consumer retail sector since the inception of GenBridge, and our benchmarking research spans three dimensions: macroeconomics, industry evolution, and enterprise development. To date, we have completed nearly a hundred in-depth research reports. Continual comparative analysis has deepened our understanding of China’s offline retail trends. This accumulated knowledge has also enabled us to invest in and support the growth of emerging national chains like Qiandama, Guoquan, and Xueji.

As Inamori Kazuo once said, “The answer is in the field.” The GenBridge team has undertaken numerous on-site visits to Japan for firsthand research and learning. In early November, we organized a “Deep Dive into the Japanese Retail Landscape” for key personnel from various retail enterprises.

During the three-day visit to Japan, we meticulously studied six renowned retail outlets and engaged in profound discussions with executives from three pivotal companies in Japan’s retail industry: Japan’s leading food supply chain company – Japan ACCESS, Japan’s premier domestic consultancy -JMAC, and the renowned Japanese retail consultancy – Retail Science.

This immersive experience left our delegation with profound insights and inspirations. We recognize that China still harbors abundant opportunities for retail innovation. We are eager to share the core takeaways from our in-depth exploration of Japan’s retail landscape, aiming to inspire and foster collective growth among GenBridge partners.

To better understand the evolution, driving forces and core capabilities of each enterprise within Japan’s retail sector, we had the privilege of engaging in profound discussions with top executives from ACCESS, JMAC and Retail Science.

ACCESS: Integrated Retail Supply Chain Management

ACCESS stands as a wholly-owned subsidiary under Japan’s Itochu Corporation. Primarily catering to supermarkets, restaurants, and convenience stores, ACCESS offers integrated supply chain solutions. The top executives at ACCESS shared us with comprehensive insights into their primary operations, core competencies, strategies for market expansion in China, and collaborative models.

Key Insights:

1. Industry Relations: A notable trend in Japan’s emerging retail landscape is a shift from adversarial relationships with suppliers to fostering genuine partnerships.
2. Freshness Mastery: At the heart of ACCESS’s prowess in fresh produce lies its end-to-end supply chain management. From harvest to store shelves, a meticulous cold chain and temperature control are maintained throughout. This meticulous approach includes precise tracking of production times, the establishment of visualized processes, ensuring efficient inventory turnover with minimal stagnation or losses in transit. Notably, this exceptional freshness is achieved without relying extensively on cutting-edge technology but, rather, on human expertise. Every participant in the chain is dedicated to ensuring the freshness of the products, with each intermediate point maintaining stringent temperature controls, down to every minute, leaving no room for oversight.
3. Private Label Strategy: ACCESS currently values product development, recognizing the necessity to transcend the role of a mere wholesaler and establish distinctive capabilities. While the company doesn’t operate its own manufacturing facilities, it predominantly engages in joint product development with selected, compatible factories. Additionally, ACCESS has ventured into substantial investments in big data market analysis, providing valuable insights to manufacturers or retailers to collaboratively produce superior products.

Retail Science: Opportunities in Convenience Store Growth

Retail Science stands as a renowned retail consultancy in Japan. Over the two enlightening hours with experts from Retail Science, they took us on a journey through the developmental history of Japan’s retail industry, dissecting the underlying dynamics of its rise and fall, and the future growth avenues for Japanese convenience stores and the pivotal capabilities they would require.

Key Insights:

1. Future Growth Categories: Currently, the fastest-growing category in Japan is frozen foods. The surge in the popularity of frozen foods in Japan can be attributed to matured infrastructures like cold chain logistics and advancements in frozen food R&D technology. As the technology for frozen foods has advanced—with reduced cell damage during freezing processes—there’s a noticeable improvement in the taste of these products. Coupled with the fact that many shelf-stable and refrigerated foods contain additives, this has led to a shift in consumer perception that they now perceive frozen foods as not only tastier but also free from additives.
2. Retail Strategies in a Stable Economy: During Japan’s rapid economic growth, profits naturally followed increased sales. However, as retail channels are currently grappling with stagnant sales figures, they have to shift the focus to competing on margins. The overarching strategy across channels now revolves around targeting specific demographics, creating differentiated value propositions, and ensuring cost-effective operations.
3. Core Capability of Convenience Stores: The most crucial capability for convenience stores is the ability to forecast demands with pinpoint accuracy.
4. Core Assets of Storefronts: The zoning and categorization of products on store shelves are the most significant intangible assets in the retail sector.
5. Execution of EDLP: Discount stores aren’t merely engaging in a price war but are embracing the concept of EDLP. This entails achieving lower operational costs through savings in labor and logistics expenses. Essentially, it’s the concept of EDLC that paves the way for EDLP.

JMAC: Poring on Retail Store Competencies through the Lens of Regional Convenience Store Seicomart

Established in 1942, JMAC is Japan’s earliest consulting firm. It is dedicated to enhancing operational efficiency for clients in the manufacturing, retail, and logistics sectors. With approximately 2,000 employees, the association undertakes around 1,500 projects annually. Mr. Katsuki Fujikura, the General Manager of JMAC China, used Seicomart as a case study to elucidate the distinct positioning and success strategies of a regional convenience store brand. He also highlighted the core operational competencies inherent in Japan’s exemplary retail and convenience store enterprises.

Key Insights:

1. As a player in Hokkaido’s regional convenience store market, Seicomart has charted a path widely divergent from that of 7-Eleven. By managing its entire supply chain in-house to reduce costs, establishing its own logistics to ensure freshness, and focusing on hot foods as a core product category, Seicomart has erected formidable competitive barriers.
2. Core competencies requisite for outstanding retail and convenience store enterprises include:
   • Store Management Capability: The crux of all retail issues and solutions lies within the store. Regardless of scale, every reform initiative originates from the store. If consumers leave without buying anything, it indicates they might have had no expectations from certain channels or not sure about why they come in the first place. Challenges might arise from extreme product structures, price ranges, excessive stockouts (common issues faced by Chinese enterprises), or disjointed shelf displays. Therefore, it’s imperative to refine the shopping experience for every consumer and continuously optimize the store visit cycle.
   • Supply Chain Management Capability: While Chinese enterprises possess commendable prowess in popular product creation, there are still substantial room for improvement in overall supply chain capabilities. In contrast, 7-Eleven’s notable distinction lies in its profound capabilities and barriers at the comprehensive supply chain level. The ten pivotal supply chain competencies of 7-Eleven have evolved into intangible assets that competitors find challenging to discern or emulate.