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Yoshinoya's dilemma: Whether to lower prices or not

41 Comments

What would you do if you were in Yoshinoya’s place?

Yoshinoya, of course, is Yoshinoya Holdings Company, operator of Japan’s largest chain of beef-bowl restaurants. A heaping bowl of beef and rice (gyudon) is yours for a mere 380 yen, and so popular has the formula proved that precisely a year ago, with the economy on the brink of collapse and workers being thrown out of work by the tens of thousands, the chain, seeing opportunity in mass misery, laid plans to open 100 new outlets. High-end restaurants were racking up Michelin Guide stars but losing customers. The action was at Yoshinoya and its price-slashing competitors.

The competitors, their ranks growing and their prices falling, are the rub. Yoshinoya has no monopoly on budget dining. Sukiya, to cite just one example, offers 280 yen gyudon. So what should Yoshinoya do, asks Shukan Gendai (Dec 26–Jan 2). Lower its prices? Or leave them, hoping customers will accept that the quality is worth it?

It’s a dilemma the Japanese of 20 years ago could scarcely have imagined. Before the 1980s bubble economy burst, high prices, not low, were the consumer’s delight. Gold-flecked sushi is the enduring symbol of those days and their reckless disregard for the most elementary economic prudence. Now the struggle is to dine and clothe oneself on pocket change.

Uniqlo is to clothing what Yoshinoya is to dining. It soars from success to success on the strength of its unpretentiously artful designs and shockingly low prices. Recession? What recession?

If Uniqlo’s place in the sun seems assured for now, Yoshinoya’s, though its sales have risen for 28 months straight, is less so, and so we return to Shukan Gendai’s question. What course should it take?

Disagreement among the experts the magazine consults highlights the uncertainties involved -- there are no certified answers, clear if only you’re clever and qualified enough. Lower prices, recommends consultant Kazunori Komiya. “Customers,” he says, “judge companies on the basis of ‘QPS’ -- quality, price, service. If there are a Yoshinoya restaurant and another gyudon outlet in the same neighborhood, most customers probably feel there won’t be much difference with regard to Q and S. That leaves P, and a 100 yen difference will probably be decisive.”

Yes, but, says Asia University economist Shintaro Mogi, that contradicts Yoshinoya surveys which suggest that if you lower prices beyond a certain point, customers get suspicious. “If I was president of Yoshinoya,” Mogi continues, “I would pay attention to what my customers want, and what they want is for Yoshinoya to be the top brand in its sector.”

There’s another point to consider, Shukan Gendai hears from economist Yoshio Yoshimoto. If Yoshinoya lowers its prices, he says, competitors will follow suit, until finally doing business loses its economic point. That is the shadow deflation casts on the economy of a nation struggling to stay afloat.

© Japan Today

©2020 GPlusMedia Inc.

41 Comments
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Yoshinoya : food of the homeless, unemployed and day labourers.

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They should first lower the amount of sodium they use in preparing most of their dishes.

Now the struggle is to dine and clothe oneself on pocket change.

For many Japanese and foreigners alike.

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Actually, I can better explain by saying that if your GF likes Matsuya she has no taste. Yoshinoya is good, nothing spectacular by Japanese standards. Matsuya is like American fast food. That's the best I can explain the basic difference. Have you tried both?

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I've always enjoyed Sukiya more and it was gravy that their beef bowls were cheaper than Yoshinoya's. GF says the same about Matsuya's. So can all you Yoshinoya fans explain to me what it is you especially like about Yoshinoya and why you pay the brand premium?

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Yoshinoya low, low price newsflash bonanza

Yoshinoya will drop the price of their bowls of delicious gruel from 380 to 300 yen during the following period.

Jan 11, 11am - Jan 21, 3pm

Further developments to be announced at a time convenient to me.

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Judging by some of the comments here, it's a damned good thing JT posters aren't in charge of anything more fiscally demanding than paying their monthly Internet bill.

Most respected economists agree: Ever-dropping prices, better known as deflation, is generally bad for an economy. It's why the Ministry of Finance is wringing its hands right now over situations precisely like what Yoshinoya is facing with the problem of lowering its prices to keep up with competition.

Simply defined, a deflationary spiral is a situation where decreases in price lead to lower production, which in turn leads to lower wages and demand, which leads to further decreases in price.

What commonly happens during a deflationary spiral is that the consumer, expecting prices to fall even more as a result of feircer competition, sit on their money and wait to see how low prices go. Businesses, suffering from the resultant lack of revenue from these reluctant consumers, drop their prices even lower in an attempt to lure them back. Eventually, prices fall to a point where businesses can no longer make a reasonable profit. Without profits, there can be no growth for a company. Without growth, there can be no hiring new staff. Without the creation of new jobs, the overall economy becomes stagnant.

But the fun doesn't end there. At some point, profits go from being simply flat to becoming unabsorbable debt, or more simply put "negative profit." With negative profit, there must inevitably be labor cuts. With labor cuts comes a growing unemployed consumer base that no longer has the buying power it once did. This poorer consumer base will then join those other consumers who started the whole mess waiting for prices to fall unreasonably in the first place, starting the cycle up again, but with progressively worse consequences for businesses, and subsequently the society those businesses serve.

This cycle continues until businesses go bankrupt, leading to ever increasing unemployment figures, ever-shrinking consumer spending power, and the inevitable conclusion of an economic depression -- which is infinitely worse than any recession.

Demanding that businesses continually lower prices in order to appeal to skinflint consumers who somehow expect the world to believe that a paltry 380 yen for a beef bowl is too expensive isn't just economic suicide -- it's bucket-of-hammers, Curly, Larry, and Moe stupidity on a Biblical scale. Yoshinoya should hold its ground, as should all retailers across the country.

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They should keep doing what they're doing. Sales and profits are up, and they serve a loyal customer base. Who cares about weak competition.

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Keep the price the way it is but offer a complimentary sallad/misosoup/whatever, for the time being, to attract customers from the competition.

When time comes, and the economy picks up, Yoshinoya could simply stop that "campaign" and thus wouldn't have to resort to raise their prices (back up).

The perceived quality by the higher price is there, the offer to customers there, and no risk in changing prices up and down (and the backlash that would follow with it).

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They should lower their prices and lessen the quantity. A lot of big brands have been doing that for years. A fast food place like this can certainly do the same.

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Beef, it's what's for dinner.

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boohoo money making company, give something to the customers not your pocket, I don't feel sorry for a company and this article shouldn't be written like that, it should be written as a benefit to the reader / customer.

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What this article completely neglects is the fact that the yen/dollar exchange rate is at historic highs. The beef that they are importing from the states is, unless they are locked into long term contracts, significantly cheaper. Why not pass those savings on the the customers. Don't call it a spiraling recession sale but a strong yen sale and people will be lining up around the block. I'm getting tired of these companies that bitch and moan and raise prices when rates are unfavorable and then completely ignore their customers when the shoe is on the other foot

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Supercub, you are only half right. Deflation indeed does discourage investment, for obvious reasons, and that's what causes the deflationary spiral. But deflation does not lead to recessions. Deflation is the net effect of a severe credit crisis culminating in a depression; Japan has been in a depression now for 20 years. It is the poster boy for why Keynesian economics does not work--in Japan, or elsewhere. Net debt/GDP is currently over 200% in Japan, the highest in the world, and still they keep it up with QE. If it hasn't worked after 20 years, and countless zombie banks, why should it magically work now? A question that both Mr. Obama and Mr. Brown should pose to themselves, if they are at all honest.

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Whether made with American beef or Aussie beef does not matter. The food at this chain is garbage. I would never eat it, nor would I let my pets eat it either.

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People usually agree that inflation is a bad thing. So why is it that when prices finally move in the other direction, the only thing I seem to read is people bitching and moaning about things getting cheaper?

Because deflation discourages investment and causes the infamous "deflationary spiral." Deflation generally leads to recessions.

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People usually agree that inflation is a bad thing. So why is it that when prices finally move in the other direction, the only thing I seem to read is people bitching and moaning about things getting cheaper?

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Unless your diet consists of gyudon and little else, 100 yen one way or the other really doesn't matter. If I like Yoshinoya more than I like Sukiya, I think I can spring for an extra 100 yen without feeling the pinch, even in the worst of times.

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People need to accept that food costs money and doesn't come for free - especially in a country without acres and acres of farmland. 380 yen is very cheap; if people adapt to food that's too cheap they will get used to poverty they don't deserve.

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The remorse comes when they get back to Japan and their stomach explodes with BSE madness

Huh? 310 million Americans plus at the least another 200 million people eat USA beef everyday, I guess its delayed onset BSE, cause there are zero (0)cases of BSE it the USA!!

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Definitely keep it at 380. It gives people the impression it's actually better quality than Sukiya or wherever, but still affordable. In business, people tend to shy away from the lowest priced item unless they're really in dire straits.

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Yoshinoya should keep their price.It is cheap as it is and if people are that kechi over 100 yen,well gaijin are,they should not worry about losing that big spender.

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C'mon R M s, dontcha know that Yoshinoya had stopped serving gyudon because the Japanese gov't banned U.S. beef over this silly BSE scare ( no one in the U.S. has ever contracted BSE ) and they refused to lower their standards to buy Aussie beef? ( Hey, I like Aussie beef, but that's me )

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C'mon Sarge, it wasn't all that long ago we were reading stories on JT about Yoshinaya halting sales of gyudon because of a ban on US beef! A ban that was in place as a result of BSE outbreaks. From memory, Yoshinoya were locked into a contract forcing them to buy US beef. If they had been able to switch to Aussie, Kiwi or even South American beef they could have continued serving gyudon and maybe even cut costs, like their competitors.

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-they are only asking this question since sales/profits are most likely falling.

You must satisfy the customer. You must make money.

Every lady that makes home-made street bentos knows this.

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RoqueFive - Har!

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Yoshinoya gyudon beef is no fattier than the famous marbled Japanese wagyu beef that sells for ridiculously high prices.

They should be at the same price, shouldn't they Sarge? Bloody outrage it is.

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why do all these Japanese people living in or visiting the USA eat it without hesitation or remorse?

There's no hesitation because American staff are pushy and may start a fight if the customer does not order promptly. The remorse comes when they get back to Japan and their stomach explodes with BSE madness.

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Dick, Yoshinoya gyudon beef is no fattier than the famous marbled Japanese wagyu beef that sells for ridiculously high prices.

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"Yes it ( USA beef ) is ( BSE-stained)"

According to who? You?

"oh dear sarge, you should check the facts"

Oh dear DenDon, you're the one ( along with RoqueFiver ) who should check the facts.

If USA beef were BSE-stained, why do all these Japanese people living in or visiting the USA eat it without hesitation or remorse?

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Yoshinoya is low class aretrery hardening trash, for people not concerend for their health. The meat is almost pure fat and gristle and i wouldn`t eat that filth if someone paid me.

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Yoshinoya should operate their restaurants reliably. If they are in it for the long haul, they should protect their employees, their customers, and their reputation. Cut prices if you can, but if it means risk to operations forget it. Businesses need to stop shooting craps and stick to their knitting.

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What's superior about it?

It's not American, for starters. And also,

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USA beef is not BSE-stained.

oh dear sarge, you should check the facts.

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USA beef is not BSE-stained. You should check the facts before posting.

Yes, it is. Tee hee! And you should think twice before jumping in blindly with your number one rhetoric.

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"Please keep your BSE-stained lard away"

USA beef is not BSE-stained. You should check the facts before posting.

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What's superior about it?

Ha ha. Please keep your BSE-stained lard away. Thank you.

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"Matsuya and Sukiya use superior yet one-third cheaper Aussie beef"

What's superior about it?

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seeing opportunity in mass misery

Wow. Shukan Gendai. What a piece of crap publication.

So what should Yoshinoya do, asks Shukan Gendai. Lower its prices? Or leave them, hoping customers will accept that the quality is worth it? It’s a dilemma the Japanese of 20 years ago could scarcely have imagined

Uggh. What about the Japanese of 10 years ago, during the deflationary spiral in 2001? When Yoshinoya lowered their bowls from 400 to 280 yen? Hmm? Or how about 30 years ago, in 1980? When they lowered prices and went into the red big time?

Yoshinoya’s, though its sales have risen for 28 months straight

Dear god. Yoshinoya's beef bowl operations - which is what this article is supposed to be about - have reported decreased sales in the nine months up to November.

吉野家本体の既存店売上高も11月までに9カ月連続のマイナスと苦戦している

http://www.sankeibiz.jp/business/news/091213/bsd0912130701001-n1.htm

P.S. Matsuya and Sukiya use superior yet one-third cheaper Aussie beef, which partly explains the discount party going on. Go team.

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Yoshinoya and Sukiya no doubt have access to sophisticated data on their customers, which makes our speculation about customer preference somewhat meaningless.

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Yoshinoya and Sukiya no doubt have access to sophisticated data on their customers, which makes speculation about customer preference somewhat meaningless.

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Don't maitain same price don't lower either - Go and increase the prices that will not only dispel customers suspicion but may encourage the competitors to follow suit and mint money in recession. (sarcasm over) Answer is clear...known to all the economists....it is recession and nobody cares for anything but price, keep brand image aside.

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