Trading up for leading Japanese retailers

Two leading Japanese retailers have reported strong earnings for the year and predict continued growth for 2006. Seven & I and Daiei cited strong consumer spending boosted by Japan's strongest economic recovery in ten years.

Seven & I, the country's second largest retailer, said net profit for this year would rise 71 percent to Y150 billion (£722 million) thanks to a jump in consumer spending and the recent acquisition of Millenium Retailing, the Japanese department store group. It also said revenue would increase from Y3,890 billion to Y5,200 billion. Last year the company reported net earnings of Y87.9 billion.

“So far, only limited retail segments, such as department stores, have been benefiting from a turnaround in consumer spending. But we think that it is expected to be felt gradually in a broader retail segment, such as the supermarket business,” said Seven & I president Noritoshi Murata.

Daiei, meanwhile, saw net profits of Y413.2 billion, thanks mainly to debt waivers and improved performances of its subsidiaries. However the troubled retailer reported a drop in sales of 9 percent to Y1,675 billion due to competition in the Japanese market and the closing of 53 unprofitable stores last year. Furthermore, although the company is concentrating on improving its grocery business, its non-food businesses are struggling. Consumers prefer to buy clothes and electronics at specialist retailers.

www.daiei.com
13 April 2006

Luxury brands lose billions to Japanese fakes

Luxury brands including Louis Vuitton, Chanel, Cartier, Gucci, Prada, Bulgari and Rolex are losing as much as an estimated $4.3 billion a year in Japan to the sale on internet of designer counterfeits.

Laurent Dubois, chairman of the Japanese branch of the Union des Fabricant, a global organisation which was set up to combat counterfeiting, said that over half of all luxury branded products sold over the internet in Japan is fake. He told the FT that this is the worst case of counterfeiting in Asia.

In 2002 the Japanese government promised to make the country a “nation of intellectual property”, but the astronomical losses suffered by the luxury goods companies is raising doubts about the country's commitment to the pledge, and manufacturers are demanding new rules to fight fakes.

It is legal to import fake goods into Japan as long as they are for “personal use”. This leniency has resulted in “mules” transporting the counterfeit goods from China and South Korea into Japan claiming they are for personal use.

Another problem is that Japanese authorities are unable to regulate the sale of goods online. Internet service providers are not legally obligated to remove products placed on auction sites by suspected sellers of fake goods. According to Dubois, the online sale of counterfeit goods are made easier by the legality of parallel imports - goods imported without authorisation from the owner of the copyrights or trademarks – in the country. Furthermore, the fines for these purveyors of fakes are not high enough to prevent them from doing so.

Dubois told the FT that the Union des Fabricants is in talks with the Ministry of Justice and the Ministry of the Economy, Trade and Industry about the problem and believes that a solution will be approved this year. The Ministry of the Economy, Trade and Industry is also contemplating new legislation that would prohibit the import of counterfeit goods for personal use.

Limit on foreign investments in Japan

According to a report in the Financial Times, the Japanese government is contemplating new regulations for foreign investors in that country. If the new regulations are passed, large foreign retailers would have difficulty establishing a presence in Japan. This has sparked accusations that Japan is trying to protect its small local retailers from foreign competition.

According to experts, the Japanese Ministry of Economy, Trade and Industry, and the Ministry of Land are considering new rules that would discourage foreign retailers from settling on agricultural land on the city outskirts.

The move would have major repercussions for retailers like Ikea, the Swedish furniture group that pans to open two new stores there next year. US retail giant Wal-Mart has ties with Japanese retailer Seiyu.

“These new regulations would be tantamount to a regression in regulations governing retailers,” Kazumasa Konno, director of the Japan Chain Stores Organisation, told the FT. “From the point of view of a foreign company, these new regulations and laws would deter investment by retailers. Japan would be seen as a difficult country in which to establish operations.”

It would also impact plans by Japanese retailers like Aeon and Ito-Yokado to expand their operations and set up new stores.

Experts have pointed out that building permission will be subject to local governments, which protect the interests of their local retailers. They will be concerned that large foreign retailers will bankrupt smaller local ones.

Large retailers can argue that the new regulations are unconstitutional because they are in violation of a law that prohibits supply-demand manipulation. In fact, Aeon has already done so.

Tokyo gets new shopping complex

Tokyo's Roppongi district, well-known for its prostitution and shady foreigners, is about to get a much needed facelift with Roppongi Hills - a complex of office buildings, shops and restaurants. It is set to open in April 2003 and is comparable to Rockefeller Center in New York City. This is the most ambitious development for Tokyo in recent years.

The marketing appeal of Roppongi Hills is its exclusivity. In short, it's not for everybody. The retail section boasts a line-up of luxury brands such as Bally, Hugo Boss and Max Mara. Roppongo Hills is aiming for Western tourists, therefore the complex ends up with a little that's uniquely Japanese. The solitary expectation of something genuinely Japanese is a Japanese-style garden with a pond scattered with rocks.

January 3, 2003

Tough education at Japan Fashion College

Attending the legendary Bunka Fashion College is not something for the faint hearted. The Bunka Fashion College in Tokyo is Japan’s most influential fashion school. The school is famous - one could also say: notorious – for its strict curriculum and very heavy workload with deadlines piled on mercilessly. Students contend they get an average of five to six hours sleep a night and no sleep at all before big display events.

Typical for a male or female Bunka graduate is that he or she can work long hours, something that always seems to amaze Europeans and Americans. But being accepted to Bunka means a student is already halfway up the ladder leading to a slot in the nation’s $80 million fashion industry. Anyone who designs anything be it an apron or an evening gown has been inspired by or actually attended Bunka.

Bunka has no less than 70 branch schools across the nation and is the last word on Japanese fashion. During the ‘60s at the highlight of French couture the school felt confident enough to invite men like Christian Dior and Pierre Cardin to come and tour the premises.

Originally only women attended Bunka but now the number of men on campus is almost equal to that of women.

Outside Japan people think the tiresome working hours these students keep are part of the Japanese workaholic mentality. They forget though that clothing design in Japan is so competitive that if one stops a moment to take a break one of her competitors will railroad over her.

October 23, 2002