BEIJING - As the Japanese manufacturing industry undergoes a general malaise at home, Japan's retail sector is gaining momentum overseas, particularly in the Chinese market. At the Beijing Trade Fair held last week, the chief executives of several Japanese service industry giants all talked about their expansion plans in China.

From Uniqlo, the clothing retailing chain to MUJI, the household goods and clothing chain, to Lawson and 7-Eleven (7-11 in China) -- two U.S.-born convenience store giants now under Japanese ownership -- this year China will see the opening of over 50,000 stores owned by Japanese corporations.

As the first foreign-owned convenience store chain to be approved by China, 7-11 opened its first Chinese franchise in 2004 and within eight years swept across the country with 855 shops -- 50 in Beijing alone, with a daily turnover up 20% in comparison with last year.

MUJI, which owns currently 42 stores in China, has been accelerating the opening of stores in the past three years.

What is most interesting is that the competition for these two stores which do particularly well in China comes from other Japanese companies such as Lawson and Uniqlo respectively. MUJI's CEO, Matsui Tadamitsu, told E.O., "I don't think this will affect Muji's business. On the contrary, it can bring a synergetic effect."

Up to now, China itself has not yet developed any convenience store chains with a reputation comparable to 7-11 or Lawson, and the ones that already exist do not cover the country's vast territory as extensively.

Apart from the high quality service these Japanese stores provide, another winning point is the Japanese firms' flexibility in catering to local authorities or the local environment: "In China if you want to open a shop, you must have a good relationship with the developer, because the store's rent can be equivalent to 15% of its sales - which is a very large operating cost. It's not even possible to rent a store unless one has a good relationship with the developer. This is a very different business environment. China is a challenge", Matsui Tadamitsu stated.

Different strategies

7-11 and MUJI have very different strategies in China. 7-11 opens a huge number of stores in the same cities, while MUJI tries to cover as many Chinese regions as possible: 7-11's 855 shops are concentrated in the four cities of Beijing, Shanghai, Guangzhou and Chengdu, whereas MUJI's 41 stores are spread out in 21 cities.

Other convenience store chains such as Lawson and FamilyMart follow the same strategy as 7-11. The advantage is that the density of their implantation makes them live up to the name of "convenience" stores. From a logistics and cost-cutting point of view, this is optimal, in addition to being more environmentally friendly.

As for MUJI, it needs to set up a brand image in order to expand its influence, which explains why it has gone for a wider diffusion in China.

Their ways of operation are different too: While 7-11 prefers franchising, which helps them adapt to local conditions, MUJI has chosen to develop outlets. MUJI also keeps operating rights so it can control the shops' quality.

In Japan and other developed countries today, tertiary industry accounts for more than 70% of GDP --only just about 50% in China. China's retail sector still has a lot to learn from Japanese brands' business models and experiences. 

Read the original article in Chinese by Wu Haishan

Photo - Eric Chan

*This is a digest item, not a direct translation