No.2636
01/29/2021
Distribution and Retailing Market in Japan: Key Research Findings 2020

Convenience Stores and Drugstores Expanded Sales by Increasing Number of Stores, but Growth Slowed Down by 2019

Yano Research Institute (the President, Takashi Mizukoshi) carried out a survey on the domestic distribution and retailing market, and found out the current status and trends, the present conditions of 32 markets by industry, and the market perspectives.


Market Overview

The domestic retailing market size seemed to have leveled off in 2019. In that year, consumption tax hike and natural disasters drove down the consumption and diminished the market size of some types of retailers. When observing by business form, supermarkets, shopping centers, and car-gear specialty stores took a downturn. Convenience stores and drugstores having enjoyed sales growth, due to increase in the number of stores during the past few years, remained the market expansion, though the growth rate somewhat slowed down.

Although inbound tourism demand expanded, the travel expense per tourist has recently been declining from previous years, particularly so for the travelers from China, South Korea and Taiwan where many people visit Japan. In addition, the sales growth from inbound tourism demand has decelerated because the number of tourists from South Korea that used to flourish sharply decreased due to worsened relationship with Japan, and because new e-commerce law that took effect in China in January 2019 reduced so-called shopping spree by the Chinese tourists. As tourists from overseas have become more attracted to experiencing than buying things, the stores providing some experiences have gained the upper hand.

In recent years, subscription services have emerged one after another. They are expected to diversify and increase furthermore, because of spread of sharing economy which encourages sharing than possessing things, and because of prevalence of smart devices and IoT. In the status where business is changing the form from selling things, retailers may need to pay attention to providing and improving the customer value as one of the business models to consider hereafter.

Noteworthy Topics

Status of Inbound Tourism Demand and Cross-Border Ecommerce

The domestic inbound tourism demand was brisk in recent years, due to rapid increase in the number of travelers from around the world. Until 2015, the stock prices of department stores and electronics retail stores soared, but the revision of tariff rate by China in 2016 significantly dropped all such prices. However, as tourists from overseas continued increasing, and as the safety toward Japanese cosmetics products, pharmaceutical products, food, and clothing has been highly credible, and as more tourists started visiting extensive areas including Kansai and other parts of Japan, the opportunities for overseas travelers to buy products as souvenirs expanded, restoring inbound tourism demand.

Drugstores have enjoyed the thriving sales from inbound tourism demand in recent years, as more foreign tourists started buying cosmetics not to mention some drugs at drugstores rather than at department stores. In addition, as the travelers from overseas have shifted to cherish experiencing than buying things, GINZA SIX and other commercial complex that enhanced offering experiences have benefitted.

According to JNTO (Japan National Tourism Organization), the number of tourists from overseas from January to November 2020 totaled only 4.05 million. “Tax-Free Sales and Trend of Overseas Tourists Visiting Stores” by the Japan Department Stores Association showed that there had been around 400 thousand customers visiting the department stores per month until January 2020, but the number suddenly dropped to 134 thousand in February, and then to 2,400 by April. Although restriction of immigration has relaxed in October, non-business tourists have still been restricted to enter the country, which is reducing the number of customers as well as tax-free sales.

As inbound tourism demand suddenly diminished by the COVID-19 pandemic, the retailers that used to focus on the sales from international travelers have started figuring out the way to recover the demand from overseas customers. One of the ways includes opening stores at cross-border ecommerce malls such as Tmall and JD.com. However, the entry to such ecommerce sites is not easy and the running costs are said to be costly. On the other hand, an SNS “WeChat” offers ecommerce service for the brands with WeChat account, requiring relatively simple steps. Growing numbers of Japanese brands seem to have started using the site.  

Future Outlook

The domestic retailing market size is projected to shrink for 2020.

In April 2020, a State of Emergency was declared and many stores had to close or shorten the business hours, which rapidly diminished store sales. Even after the declaration was lifted in May, citizens were asked to stay home as much as possible, which resulted in reducing the visitors at stores and the store sales. In particular, significant decrease in the number of customers was observed at some small stores located in the neighborhood of railway stations and in business districts, reducing the sales considerably, because of difficulty to secure social distance within such stores, and also because of increased stay-home workers.

On the other hand, the stores in the suburbs tend to have smaller influence of “New Normal” than in the metropolitan areas. Even if they had some influence, the customers quickly returned to visit the stores in the suburbs. Therefore, depending on the store strategy taken so far, some stores increased the sales while some reduced the sales even in the same market.

When observing the status by market, stay-home demand has increased and has substantially expanded some markets such as food, TV sets, games, books, etc. Most of the markets have increased the ratio of ecommerce sales, and the sales performance differ by company depending on how well they enhanced ecommerce since before the pandemic, or how quickly and effectively coped with this “With corona” era. Although inbound tourism demand has almost disappeared, those companies that have focused on cross-border ecommerce are likely to be able to benefit from the consumers in China, the largest market where the consumption quickly recovered. Therefore, those companies that have been tackling for shifting to DX or for work efficiency by introducing self-checkout, etc. or for adopting new ideas including RaaS (Retail as a Service) have begun paid attention.  

Research Outline

1.Research Period: October to December, 2020
2.Research Object: Domestic distribution and retailing companies
3.Research Methogology: Literature search by our specialized researchers

The Distribution and Retailing Market

The distribution and retailing market in this research refers to the market of those businesses that procure products from manufacturers and/or intermediaries including wholesalers, and directly sell them to consumers. Such businesses include department stores, GMS, specialty stores, and some store-less retailers (catalog/mail order businesses and online retailers.) 

<Products and Services in the Market>

Distribution and retailing business in the forms of GMS, department stores, mail-order business

Published Report

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