KUCHING: As a high-income economy leading the world in research and development, Japan is fast evolving into a powerhouse that succumbs to better economies of scale, enhanced product mix and variable retail choices.
Yet, it is this trend that heightens competition for retaillers. A low barrier to entry allows one too many corporations dvelving into retail as well as food and beverage (FB), heightening competition especially from competitors within the region.
Thus, it comes as no surprise to see Japanese retaillers looking beyond its barriers for new growth nodes. Malaysia is fast becoming one of these hotspots for investment, with Malaysian Investment Development Authority (MIDA) acknowledging that the country has spared no effort in positioning itself as an ideal destination for investments into high value-added, high technology, knowledge-intensive and innovation-based industries.
This lines up with Japanese corporations’ offerings.
“With its inherent economic strengths as well as its competitive costs, skilled and educated workforce and business-friendly Government policies, the country attracted significant levels of investments in quality projects within the earmarked National Key Economic Areas (NKEAs) in 2013,” MIDA highlighted.
All in, the authority noted that these industries had attracted an impressive RM89.9 billion in investments in 2013, or 41.5 per cent of the year’s total investments.
“There were also significant investments in projects approved within the Non-NKEAs which amounted to RM126.6 billion,” it added.
Despite foreign direct investment (FDI) inflows having slowed in the Association of Southeast Asian Nations (Asean) as inflows to Singapore stagnated at US$56 billion, Malaysia again defied a regional slowdown by attracting US$12.4 billion in foreign direct investment, 25.3 per cent more than in 2012 (US$9.9 billion).
“Given the uncertain economic climate of the developed world, it is no surprise that investors have set their sights on growing business opportunities in developing economies,” MIDA pointed out.
Barring any major economic shocks, investment flows are expected to continue to recover over the next few years to US$1.6 trillion in 2014 and US$1.8 trillion in 2015.
However, there are significant risks to this growth scenario, including structural weaknesses in the global financial system, policy uncertainty in areas crucial for investor confidence and the ever-present threat of a deterioration in the macroeconomic environment.
“All these factors could influence further declines in global FDI flows,” it added.
Despite these risks, investor sentiment about Malaysia remains positive, with MIDA highlighting that the nation ranks as the sixth most competitive country in the Asia-Pacific region ahead of China, India and the Republic of Korea.
Malaysia on the radar
To date, Malaysia has increasingly grown prominent on the radar of major departmental and mid-to-high end international fashion retailers.
Japanese department store operator Takashimaya Co Ltd (Takashimaya) is looking to enter the Malaysian market following news of the potential entry of Galeries Lafayette, a French department store retailer.
“Takashimaya is said to be scouting for a suitable location in Malaysia, following its venture into other Southeast Asia countries,” the research house noted. It further highlighted Takashimaya’s intention to operate eight stores in Asia within five years from 2013.
“In addition to its 20 stores in Japan, it currently operates in Taiwan, China and Singapore. It is also scheduled to open another store in Ho Chi Minh, Vietnam in 2015,” it said.
Takashimaya is reported to be eyeing a presence in the upcoming financial district in Kuala Lumpur, the Tun Razak Exchange.
“Other Japanese-based departmental stores such as Aeon and Isetan, along with Japanese-based retailers such as Uniqlo and Daiso, have also been expanding rapidly in the country,” AmResearch added.
Closer to home, reknowned Japanese home goods brand Daiso has recently opened a branch in Kuching, Sarawak on December 25 last year.
Aeon looks at furniture, electronics
The latest update on Aeon Co (M) Bhd’s (Aeon Malaysia) is that it is diversifying into furniture and electronics stores as competition from new shopping malls intensifies.
According to Bloomberg, Aeon Malaysia does not have a mandate to expand regionally yet and is focused on enlarging its domestic operations, executive director Poh Ying Loo said in an interview in Kuala Lumpur yesterday.
That said, there has been a lack of updates on Aeon Malaysia’s expansion plans into the Sarawak market.
Previously, the research arm of Maybank Investment Bank Bhd (Maybank IB Research) had noted that the markets in Sabah and Sarawak were not entirely underserved, with dominant players and first movers — such as Parkson Holdings Bhd (Parkson), Giant Hypermarket (Giant) and The Store Corporation Bhd (The Store) — already taking up a good hold of market share.
“Competition, changing consumer market behaviors all warrant this kind of evolving change,” Poh said. “Retail industry is actually very competitive. There’s an ample increase in retail space in the last one year and it’s going to increase further in the next two or three years.”
Aeon Malaysia plans to spend RM1.4 billion this year and next to open more stores and refurbish existing ones as it prepares for a goods and services tax that it says may hurt sales for three months after implementation in April.
On a side note, Bloomberg highlighted that retailers in the Southeast Asian nation are seeking new ways to lure customers as price increases on fuel, power and sugar slow private consumption.
Private-sector consumption expanded 7.1 per cent in the first quarter from a year earlier, after climbing 7.4 per cent in the last three months of 2013, according to central bank data.
Aside from Aeon Malaysia and Daiso, renowned Japanese fashion brand Uniqlo also outlined its interest to enter the Sarawakian market by opening outlets in Sabah and Sarawak as well as states in the east coast.
Although Uniqlo has not revealed any further updates on the matter, its operations manager Yuichi Ito said the expansion plans are aggressively underway as Uniqlo is always looking for opportunities to expand its business in this country.
All in, AmResearch noted that many retailers have expanded in Malaysia given its growth potential due to the limited choice of fashion brands in the country and its attractiveness as a shopping destination.
“Last year alone, we understand that about 100 international brands had ventured into Asia, with the majority being European brands.
“The retail scene is matured in countries like Singapore, Hong Kong and Japan compared to Malaysia, Indonesia, Philippines and Vietnam, which are seen as potential new markets by retailers.
“We think that the trend of international retailers seeking an entry into Malaysia will grow amid an overall slowdown in consumer spending following the government’s subsidy rationalisation exercise.”
Nevertheless, AmResearch maintained a neutral and cautious stance on the sector as it believed consumers are likely to adopt a more prudent spending approach due to higher cost of living.
100 Yen Shop still going strong in Kuching despite growing competition
KUCHING: The first Japanese product speciality store to enter Sarawak – 100 Yen Kuching – is still going strong even after five years of establishments.
Having discovered that there were no such store at that time, 100 Yen Kuching business manager Wilson Chai decided to venture into this market believing that there is demand for these products.
The 100 Yen Kuching outlet is a Japanese products speciality store which sells, among others, food and beverages, kitchen wares, cleanings products, do it yourself (DIY) products, stationeries and mostly household items.
Prices for majority of the products range from RM4.90 to RM6.90, while there are also products available at the store which retails from RM9.90 to RM50 and even RM100 and above.
Products retailing at RM100 and above, are the Hello Kitty merchandise, figurines and display products which mainly appeals to collectors.
Chai noted that these are very rare products, pointing out that they restock twice a month, indicating that while pick-up in demand is a bit slow, there is definitely demand for these merchandises.
No compromise in quality
“One thing we are concerned about and that is, it is hard for us to do repeat sales,” Chai noted.
“One thing good about Japanese products is that their quality is very good and thus; quite long-lasting.”
As the products last for quite a long time, he acknowledged that this is not such a good thing for the business environment, adding that a lot of people are concerned about this.
He explained that he has been queried by people as to why he does not want to import and sell China-made products, cheaper products, which can be spoilt easily, as in the long run, customers will repeatedly return to purchase more of these products instead.
“Although it’s cheap, but these products may break down maybe six to seven months later, and then these customers will buy again, allowing businesses to earn another turnover,” he explained.
However, Chai highlighted that they need to stay focused on their theme as he believes that products must be of good quality.
He believes that once you win the customers’ heart, you have the business too; as in returning customers.
When asked whether they always change their product brands regularly, Chai affirmed that every month they have five to 15 new products in the food section.
As for other product segments, they have an average of 50 to 80 new products every month available at the outlets.
The food and cleaning products are actually the bestsellers at 100 Yen Kuching. Chai explained, as Japanese products are very practical and ideal, allowing consumers to solve a lot of small house issues, thus making the products very unique.
With the entry of other Japanese-based product retailers, Chai aims to differentiate 100 Yen by their good customer service, wide range of products and by ensuring the quality of their products.
“Seventy to 80 per cent of our products are purely made in Japan,” he explained, adding that for their competitors, the majority of their household items are actually made in China.
That, he explained, is how they compete in terms of price.
However, Chai acknowledged that as time goes by, and the business environment gets tougher and more competitive, they themselves also need to improve and upgrade their knowledge in product varieties, product quality improvements, while also providing better customer service and educating customers.
Addressing the FB lifespan issue
Most of the Japanese food and beverage products have a short life span due to the absence of preservatives, Chai highlighted. He explained that this is one of the big issues they have encountered.
“That’s why our products, when they have arrived at the outlet here, normally they can last for about two to three months only,” he said.
However, he added that these do not indicate the expiry dates for the food, but rather ‘best before’ dates. Which means, the food are not expired, only that the texture of the food is not as great as before but still can be eaten, up to three months after the ‘best before’ date.
This excludes food which contains egg and milk.
This is an unfortunate issue as Chai pointed out that a lot of the nice Japanese food and beverage products have very short lifespans. For that reason, they cannot order in big bulks, instead they order in minimal bulks and this leads to their products always being out of stock.
The lifespan of the products from the date they manufacture is usually from six to nine months.
He further explained that after that the transportation of the products all the way from Japan’s factory to Kuching takes up one and a half to two months.
“That is why once everything arrives and is put on our shelves, the products will only last for three to four months,” he added.
That said, they still maintain their food and beverages section as there is still demand out there for these unique and quality products.
Location, location, location
The first outlet Chai set up was at RH Plaza, citing the location as a prime area and that it is at a residential area, which is where their target market is situated.
Generally, 100 Yen Kuching’s main target market are housewives and working women. That said, he highlighted that there are basically no specific age ranges for their products.
“For kids, we have toys; for middle-working class people, we have stationeries and DIY products; for housewives, there are kitchen wares and food and beverages and many more available for sale,” he explained.
On why he chose Green Heights Mall for the second outlet of 100 Yen Kuching, Chai explained that the mall there has it’s own different customer base there.
Regarding the second outlet (Green Heights Mall), which has been in operation for almost three years now, Chai opined that the sales there has been alright so far.
He explained that the people who go to the outlet at Green Heights Mall are mostly “pure shoppers”, meaning they are genuine shoppers.
“They really do buy there, although their crowd flow is not big. People do not go there just for window shopping, they are real shoppers,” he emphasised.
Chai strongly believes the location of the two outlets in Kuching is a prime area as he observed that people who go to and from from work will usually use the roads around that area.
These customers, he added, will then stop by the RH Plaza area after work to shop around either at the 100 Yen outlet or go to the nearby banks or bakeries.
At the moment, Chai has no plans to open up any more outlets in Kuching as the market these few months, this year, has been a bit slow.
While other companies expand their businesses, Chai believes it is not a good idea at the moment, especially with the goods and services tax (GST) coming in next year.
“As spending power declines, you will lose some of your customers as they are trying to save more month to make ends meet,” he opined.
Demand still growing
Since expansion into Sarawak market, Chai observed that demand for Japanese products has been increasing as people starts to understand why Japanese products are better and more practical for use .
“Product education is very important as to attract more sales,” he pointed out.
Generally, in regards to the demand of the Japanese products compared to when the 100 Yen outlet first opened in 2009, Chai opined that the demand has been consistent so far.
That said, Chai shared that demand for 100 Yen’s Japanese products was good for the first three years, but that perhaps of a sudden increase in shopping malls in Kuching, there was a saturation in the consumer market?
After that, maybe because there were too many shopping malls springing up, people get saturated a lot? (not sure how to rephrase this)
“So, during weekends people prefer to go shopping malls nowadays and do not really go out to outside retail outlets,” he observed.
Overall, Chai opined that there needs to be more Japanese products, for example more Japanese restaurants, to increase the trend and demand for Japanese goods. “Once you bring out the trend, more people will start to like Japanese products,” he believed.
With more people now able to have visa-free travels to Japan, he observed that this has increased the Japanese product trend and demand in that once they have flown back to Kuching, they will likely still miss Japanese food or products. This thus leads to them visiting the 100 Yen outlets.
Generating more excitement
To keep the crowd coming into the outlets, Chai acknowledged that now and then, they will need to do some special events.
Currently, on a yearly basis, they hold Members’ Day twice and for this particular month of June, they will be holding a week-long anniversary promotion, marking their fifth year in operation.
“For our loyal customers and members, they will be entitled to special privileges and discounts for every item,” Chai explained, adding that 100 Yen Kuching’s peak period is during Christmas and Chinese New Year.
Aside from their special events, in order to allow consumers to have a taste of Japanese goods at a lower price, 100 Yen Kuching also holds online auctions for their products in their Facebook page (www.facebook.com/100YenStoreKuching).
“We have online auctions two to three times per week. We will put up our products on the page, such as food and drinks, household items, and we will start our auction prices from RM0.10,” he explained.
Having first started the online auction two months ago, Chai has found the response to the auction has been quite good and is improving, to date.
Chai explained that the purpose of this auction, aside from it being a part of their advertising campaign, is to generate some excitement from consumers for the outlets and on the Facebook page, and is also one way to let people try out 100 Yen Kuching’s products at the same time.
retailers join the fray