"EDLP didn't penetrate," reads the headline in Nikkan Gendai (July 19). Er, come again? Is that an acronym for "Erectile Dysfunction, Long Play?"
Actually it stands for "Every Day Low Price," the slogan of Seiyu stores, Walmart's presence in Japan for the past decade and a half. Walmart, the world's largest retailer, announced it is bailing out of Japan. Its business philosophy of offering goods at low cost was not enough to generate profits for the 335 Seiyu outlets around the nation -- down from 341 in January 2017. Of the total now in operation, 78 are situated in in Tokyo, 60 in Fukuoka, 26 in Saitama and 20 in Kanagawa.
Walmart made the decision to acquire a stake in Seiyu in March 2002. In December 2005, it raised its share participation to 50%, raising it again to 95% in 2007. Two years later, Seiyu became a fully owned entity of the Bentonville, Arkansas-based corporation.
"When Walmart arrived in Japan, regional supermarkets were terrified that they'd be eaten alive by Walmart," remarked Takayuki Suzuki, an analyst of distribution at Primo Research Japan, who was formerly employed by Seiyu. "The general view was that they would harness the merits of scale and expand through mergers and acquisitions. They would grow their turnover, first to 1 trillion yen, then 2 trillion, and then 3 trillion."
Its strategy failed to materialize, however, and Seiyu revenues fell short of expectations, reaching around 700 billion yen. During the last calendar year the group barely broke even. In contrast, two other major retailers, Aeon and Seven & I Holdings, ended their first quarters of the current fiscal year (March to May) with record-breaking profits.
"I think there were aspects of the Walmart-style EDLP retailing that didn't resonate well with Japanese consumers," explained an executive at a medium-size supermarket chain. "It dispensed with advertising and circulating flyers that announced special offers on certain dates and just adopted a policy of low prices across the board. But actually Seiyu's prices weren't that different when compared with prices at other chains. Customers seem to respond more favorably to store specials announced on flyers."
Last February Walmart announced a name change, dropping the "Stores" from "Walmart Stores," simply calling itself "Walmart." This was done in the hope of shedding the strong image of it conducting business only in stores, "in order to better compete with net sales companies like Amazon," said the aforementioned Suzuki.
Walmart has begun moving gradually in that direction through its acquisition of Jet.com in the U.S. and investments in similar online sales companies in India and China. On the other hand, Walmart has shed its investments in chain store outlets in the UK and Brazil.
Two foreign-affiliated superstore chains, France's Carrefour and the UK's Tesco, withdrew from Japan in 2005 and 2013 respectively. America's Costco (which operates 26 outlets) and Germany's Metro (10 outlets) are still holding out.
So who will be Seiyu's next owner? Don Quijote Holdings, Aeon, Amazon, China's Alibaba, and Rakuten have been raised as possible candidates.
While it's all speculation at this point, some industry gurus have remarked that Walmart's shedding of Seiyu at this time might lead to a major restructuring of the entire retailing system in Japan.© Japan Today