Wal-Mart Wants to Eat Zombie, Zombie Runs For It

[Taro Toporific]

CNN: Wal-Mart won't sponsor Japan retailer
TOKYO (Reuters) - Foreign bidders including Wal-Mart Stores Inc. have been dropped from the race to sponsor ailing Japanese supermarket operator Daiei Inc., sources familiar with the selection process said Friday...{/quote]

I bumped in the Wal-Mart acquistion team waiting for the Narita NEX train leaving Japan last week. They were real unhappy I spotted 'em and acted both obsequetious and snotty to me. I didn't have the heart to tell them I haven't freelanced as a finance analysist in years.

[canman]

No surprise Wal-mart got the boot. But I'm surprised that Yokado, didn;t make it into the last three. Aren't they the largest retailer in Japan, if you include their 7/11 chain.
I'm amazed at how Marubeni has just constantly changed partners etc. until they have set themsleves as the main takeover bidder. I wonder who they know?
http://www.asahi.com/english/business/TKY200501220169.html[url][/url]

[Mulboyne]

Business Week: Japan Isn't Buying The Wal-Mart Idea
Seiyu -- in which Wal-Mart owns a controlling 37% share -- on Feb. 15 reported a loss for 2004 of $117 million, more than triple its earlier projections. Revenues, meanwhile, slipped by 3.7%, to $9.8 billion. Worse, the decline seems to be accelerating: Sales tumbled by 5.7% in the second half, compared with a 3.5% drop in the first.
...Seiyu says full implementation of Wal-Mart's Every Day Low Prices -- which everyone at the company refers to as "EDLP" -- is at least two years away because the company hasn't yet been able to cut costs enough to allow it to offer the deep discounts necessary to keep customers coming back. And Seiyu continues to use chirashi, newspaper inserts that are a staple of Japanese retail outlets. They offer a handful of weekly specials but otherwise keep prices relatively high. That's anathema to Wal-Mart and its EDLP mantra. The company says, though, that it will keep on using the flyers until customers no longer require wooing.
...One big problem is that Japanese customers don't seem as motivated by rock-bottom prices as Americans. U.S. shoppers generally believe Wal-Mart sells the same products as other stores but for 15% to 20% less. In Japan, shoppers associate low prices with low quality and are suspicious when a retailer offers jeans for $10...One big issue for the supermarket side is that Japanese consumers buy more fresh produce than shoppers elsewhere. That makes lowering costs difficult since most farms and fisheries in Japan are small, family-run operations that frequently offer better deals on smaller orders rather than on larger ones. And what sells well in Hokkaido is often eschewed in Kyushu, so retailers have to do lots of local customization, which creates logistical headaches that can cut into profits.

From the same edition:
Aeon: Japan's Answer to Wal-Mart?

[Taro Toporific]

[homesweethome]

Business Week:

..One big problem is that Japanese customers don't seem as motivated by rock-bottom prices as Americans. U.S. shoppers generally believe Wal-Mart sells the same products as other stores but for 15% to 20% less. In Japan, shoppers associate low prices with low quality and are suspicious when a retailer offers jeans for $10...

This Business Week writer needs to get out of Azabu.

http://www.japantimes.co.jp/cgi-bin/geted.pl5?ed20050702a1.htm

Rising numbers of Japanese are online: Japan's Information and Communications White Paper reported that there were about 79 million Internet users at the end of 2004, an increase of nearly 100 percent in five years. They like to shop. According to a government survey, Japan's business-to-business e-commerce grew 33 percent in 2004 from the previous year to reach 102.7 trillion yen. Business-to-consumer e-commerce expanded 28 percent to 5.6 trillion, yen and the consumer-to-consumer e-commerce market for Internet auctions last year reached 784 billion yen.

This is an unrelated article but notice it mentions Internet Auctions. Where else can the Japanese consumer get a better discount, knowing even less than they do about anything any department store offers. What smart shoppers do is go to the discount places to see what they have, and then go Internet Shopping when they get home. Wall Mart won't fail, They are too big, smart and rich for that, though they may get their hands slapped from time to time. Even the guy at the entrance to Costco apologizes for the humongous crowds you have to deal with when going there (they ain't los'in money) . Wall Mart will do what it always does. The Deep Impact probe of the retailers will demolish all in it's way eventually. After that is anybody's guess.

[Andocrates]

Seiyu needs to quit talking about it and do it. Levi's jeans at wal-mart $17.00. Charge 2.000 - 2.500 yen for a pair of Levi's and watch the customers flock in. Wal-Mart will win eventually, but building big-box stores would be difficult for them, that's why they want the seiyu chain.

(I know, I'm Capt obvious)

[homesweethome]

Andocrates wrote:

that's why they want the seiyu chain.

I understand, but how do most J folks get around nowadays in the rural areas? Seiyu seems to have vacant 'for sale' places that are inaccessable by most people who don't ride the trains everyday. Why would W- Mart be interested in that when it goes against their success story. Even in Japan location is everything, but the city centers are dead ends (no place to park even if you can get there).

[homesweethome]

http://asia.news.yahoo.com/050705/afp/050705193254business.html

Seiyu has posted net losses for the past two years as the "everyday low price" motto of Wal-Mart, the world's largest retailer, flops in Japan.

This bothers me because it makes it sound like Wall Mart is the cause of Seiyu's troubles. They were in financial quicksand long before Wall Mart ever put up any motto's in their stores. Unfortunately operating under the Seiyu name will probably handicap any effort Wall Mart makes, even if it remodels all of Seiyu's stores (which I am sure the Seiyu folks would love).

Come on Sugar Daddy, come to mama.

I hate to say it but, it looks like the Ole "we've got enough of your money, NOW GET THE HELL OUT" sucker play Japan has been duping the gaijins with for years. I totally fail to believe that Wall Mart is interested in the 'philanthropic rehabilitation' (Nomura style) of failed Japanese retail dinosaurs.

ARE THEY?

If they are...well, I guess I will sell my WM preferred. It looks to me like W Mart needs to roll out the wrecking balls they have in storage and kick some Seiyu butt into the Sea of Japan.

Japanese consumers are often more drawn to speciality shops or upscale department stores with a wider range of higher quality goods, even if they are concerned about their budget.

This is such bull it doesn't even deserve a roll of Seiyu brand TP.

[Andocrates]

But homesweethome san, that's what I love about business. It's a lot like war, the outcome is based purely on tactics and weapons (money.) It doesn't matter if Japan likes it or not because they are being invaded.

[homesweethome]

Andocrates, I know you know it, and I know it, and I am sure the 'invaded' know it. I'm just an armchair quarterback.
I love it too!

[Kurofune]

Japanese consumers are often more drawn to speciality shops or upscale department stores with a wider range of higher quality goods, even if they are concerned about their budget.

It might appear that way if your view of Japanese shopping is Takashimaya and Isetan in Shinjuku. They're fun places to shop, but people look quite happy at the everyday stores too.

I cringed when I first heard Wal-mart had a hand in Japanese retail. I've never liked the company's tendencies and consider their prominence a pox on the US. I'm no Nippon apologist, but I liked what I saw in Japan's mainstream retail industry and would hate to see a scummy company like Wal-mart mess that up.

[Taro Toporific]

Japan's Seiyu[Wal-Mart] sees fourth straight loss in 2005
TOKYO, July 20 (Reuters) - Seiyu Ltd. (8268.T: Quote, Profile, Research), Wal-Mart Stores Inc.'s (WMT.N: Quote, Profile, Research) Japanese affiliate, on Wednesday forecast a net loss in 2005 for the fourth consecutive year because of sluggish sales and said its chief executive would step down.
Seiyu, 42.4 percent owned by the world's largest retailer, said it forecast a net loss of 7.5 billion yen ($66.5 million) in the current year to December, down from its previous forecast of nil profit. Its 2004 net loss was 12.32 billion yen....
Japan's fourth-largest retailer said Chief Executive Masao Kiuchi would step down as of Wednesday and Noriyuki Watanabe would replace him. Kiuchi will remain in the company as a director but will leave day-to-day operations to Watanabe.

P

[homesweethome]

Andocrates:

Seiyu needs to quit talking about it and do it.

Looks like they got the message.

[homesweethome]

Kurofune:

I liked what I saw in Japan's mainstream retail industry and would hate to see a scummy company like Wal-mart mess that up.

I just have a couple questions.

What was it you liked seeing in Japan's retail industry?

Was it:

1. Obvious prejudice towards prominently displaying lower quality, higher priced domesticaly produced items?

2. Arrogant sales staff with a take-it-or-leave-it attitude when you ask about a foreign made competitive product?

3. Being told: 'sorry no gaijin allowed in our store'?

This used to be the case in a lot of places in the world until the 'scummy' Wall Mart people showed up and kicked some butts.

[Somerandomgaijin]

My only gripe about Japan is that 6-packs are not that much of a savings in comparison to per can purchasing.
I don't care if the company is foreign or domestic, but
for the love of Christ PLEASE INTRODUCE THE MORE YOU BUY THE MORE YOU SAVE SYSTEM. i.e. one beer costs 150, a six pack then should cost around 5__ something, and a case should be in the 2___ range.

My math is not the greatest but perhaps you get the jist.
So, in sum if it takes Wal-Mart or Seiyu or even Sabetsu Inc. please lower the beer.

Thank You.

[Kurofune]

Kurofune:

I liked what I saw in Japan's mainstream retail industry and would hate to see a scummy company like Wal-mart mess that up.

I just have a couple questions.

What was it you liked seeing in Japan's retail industry?

Was it:

1. Obvious prejudice towards prominently displaying lower quality, higher priced domesticaly produced items?

2. Arrogant sales staff with a take-it-or-leave-it attitude when you ask about a foreign made competitive product?

3. Being told: 'sorry no gaijin allowed in our store'?

I never had those problems. But if I did see that kind of thing, I'd realize it's their store and therefore their right to sell what they want. Supporting the domestic economy and the jobs of one's compatriots isn't a bad thing. Here in the US, I'd love to have the opportunity to shop at a store that sold nothing but American-made merchandise (other people's opinion of American merchandise nothwithstanding).

This used to be the case in a lot of places in the world until the 'scummy' Wall Mart people showed up and kicked some butts.

So now Walmart is the angel of retail political correctness or some such nonsense?

[homesweethome]

Kurofune:

So now Walmart is the angel of retail political correctness or some such nonsense?

No nothing as silly as that. I understand that it is anybody's right to set up a store and sell the things they choose to sell. It is also my right to dispense with the money that is in my wallet to whomever I decide to give it to. I just would like to have more of a choice (in Japan) than the locals are willing to provide. It is also a fact that Wallmart (shortcomings they have I admit) has done much to bring competiveness to the uncompetitive, discounts to the overpriced, and choice to many who previously had very little. Japan needs this like a drink of water in the desert.

That's my position as a buyer, political correctness aside.

[Kurofune]

That's my position as a buyer, political correctness aside.

Well stated. Maybe our difference of perspective comes from our locations in Japan. I was in Tokyo, so I had plenty of opportunity to buy foreign stuff, often at reasonable prices (for Japan). If you're in the sticks, you might be stuck with po-dunk shops. I understand how the lack of choice would get to you.

Still, I'd rather see a company other than Walmart make the move. On the American east coast, we have a department store called Boscov's. It is, in my opinion, what a department store should be. They aren't in the business of sucking small towns dry and then closing the store; the stores are clean and well staffed with courteous workers; you can get mid-high brands and bargain brands, all reasonably priced. If it were a retail company with a sensibility like Boscov's moving into the Japanese market, I'd feel better. I doubt Boscov's has that kind of money, but I'm speaking hypothetically.

[homesweethome]

Kurofune:

I doubt Boscov's has that kind of money, but I'm speaking hypothetically.

I understand. What bothers me is the perspective. Why does it take a Mega-Hyper-Ultra enterprise like Wallmart to even consider moving into the second largest economy in the world. Even they do it tentatively. Even in the news today also- ranFamily Mart has opened a store abroad. They are not an Ultra Rich Angelic leader of the Japan retail free world. It seems like in Japan three people sitting in a closet will start a company and go abroad to make their fame and fortune, but it never goes the other way. Everybody just comes here and becomes an English teacher. Why? I know from experience most Americans think that they have a big enough market at home to keep them busy, why go abroad. But the Japanese have the opposite outlook, even though they too also have a big enough market at home to keep them busy, they go abroad at the first opportunity and then come back with thumbs in armpits whether they succeed or fail.

Seems like if Family Mart can do it Boscov's could too. Of course this too is just a generalization on my part.

[Kurofune]

It seems like in Japan three people sitting in a closet will start a company and go abroad to make their fame and fortune, but it never goes the other way.

I think it has a lot to do with openness. Japan is known in other countries as being particularly difficult to operate in, but many Western countries practically invite other countries to set up shop. Also, it's a bargain doing business in most parts of the US compared with the cost of doing business in Japan.

You see the similar low-end shopping in the rural US. You'd typically find ratty department stores with the standard selection of low-end American market crap. Ask where you can get an Omega watch, and they'll point to the NASCAR wall clock in aisle 3 and tell you that's all you need.

You might try to work in an occasional trip to Tokyo. I had a friend who lived in Shizuoka, and he was hurting for hometown goods. He came up to Tokyo and was blown away by Tower Records' English book floor and magazine rack and the availability of stores like The Gap.

Don't forget online shopping. It's not the same as browsing in person, but it isn't a bad choice. Once I tried Land's End, Japanese clothes ceased to exist for me.

[Mulboyne]

What bothers me is the perspective. Why does it take a Mega-Hyper-Ultra enterprise like Wallmart to even consider moving into the second largest economy in the world.

Japan's retail industry may be inefficient but it is not uncompetitive. Good ideas get copied quickly. Boots, the UK cosmetics retailer, discovered this its considerable cost a few years ago. A similar situation exists in German retail banking.

Everybody just comes here and becomes an English teacher. Why? I know from experience most Americans think that they have a big enough market at home to keep them busy, why go abroad. But the Japanese have the opposite outlook, even though they too also have a big enough market at home to keep them busy, they go abroad at the first opportunity and then come back with thumbs in armpits whether they succeed or fail.

It is easier to for a foreigner to set up a company in Japan now than at any time since after the war. And more people are, especially Chinese and Korean businessman who don't generally consider making a career teaching English.
I don't know too many of these Japanese you speak of who take off for the States to set up their first company. I would think that there would be a higher proportion of Irish and British who do that. Since the US is the largest and most entrepeneurial economy, it would make some sense that it would attract would-be businessman but how many other countries in the world do you think that applies to?

[homesweethome]

Mulboyne:

I don't know too many of these Japanese you speak of who take off for the States to set up their first company. I would think that there would be a higher proportion of Irish and British who do that. Since the US is the largest and most entrepeneurial economy, it would make some sense that it would attract would-be businessman but how many other countries in the world do you think that applies to?

I would say if it applies to Japan in the least, it applies to all countries in the rest of the world. Maybe not from the American/British/Anglo Saxon perspective though. Take China for example. It arguably could be the largest and most entrepeneurial economy in the world today. It certainly has a bigger growth rate than the US. Do most Chinese entrepeneurs sit around all day thinking about how they can live off their parent's success? I don't think so. They are some of the most economically agressive folks in Asia and many places in the world, including the US. Most that I know personally didn't come to Japan as Expats for Mega Chinese companies setting up branches abroad, they came yuan-less and dismantled wrecked cars and sold the scrap. They set up small Chinese food waks, collected used newspapers, etc. and went from there. There is just a difference of perspective, or I guess I would call it HUNGER that most Westerner's don't have and even most Japanese have satisfied. I admit my attitude might be jaudiced with age, I still remember a time when even Japanese worked hard, and I knew some of them. Where are they now?

[Mulboyne]

I wouldn't disagree that Japan lost a good deal of its entrepeneur spirit over the last 25 years. Most countries, though would suffer in comparison with China on that score.
Two features which suppressed Japan's entrepeneurs were the growing stigma of failure and a misunderstanding of opportunity cost. Lenders always used to be reluctant to fund an individual who had already tried and failed to set up a company whereas US lenders have always been prepared to consider such an applicant on the grounds that he or she may have picked up valuable experience. On the opportunity cost side, many larger firms refused to exit businesses and property when the bubble burst since this required recognizing a loss and admitting a mistake. Consequently, assets remained in unproductive hands. In Hong Kong, by contrast, and downturn leads to a firesale and assets are bought by owners who want to make use of them rather than squat on them.

The Yomiuri has an article today about the 1 yen yugen gaisha:

Yomiuri: 1- yencapitalized firms to revitalize economy

...The new law, which abolishes the regulation on the minimum capital required to establish a business, is expected to help entrepreneurs establish companies and revitalize the economy...According to the Economy, Trade and Industry Ministry, as of January this year, 20,413 companies had been established since the 1 yen system was introduced. In the first year of the system, these 1 yen companies accounted for 9 percent of new companies opened, increasing to 12 percent in the second year...Prof. Takeru Oe of Waseda University graduate school said: "A small failure is necessary for success after starting a business. But it's important to nurture the ability of an entrepreneur to survive the small failure and not become a business fatality. It [the revised Company Law] will boost the Japanese economy, too."

[homesweethome]

Mulboyne:

In Hong Kong, by contrast, and downturn leads to a firesale and assets are bought by owners who want to make use of them rather than squat on them.

I was discussing with this person recently on this very subject. We were talking about buying distressed properties through the court. This was the response she made in another forum:

By Vicki on Saturday, June 18, 2005 - 02:28 am:
Thanks for posting the info and your experience with us, HSH. But my problem is that, as a gaijin woman, I cannot get a loan (even though I have permanent residency). So if I were to successfully bid on a reposessed property, I couldn't get a loan for it.

Especially in Japan, even trying to buy property to reside in results in the frustration mentioned by Vicki. In my case I just had to work my rear enough to be able to not need the banks when I wanted to buy my home and start my business, I saw the article about the one yen capital companies and being willing to put up with small failures in the beginning, which you posted, and I agree, but this risk aversiveness is not inherant in the Japanese national psyche. That's why this woman and many others have no success when they go to a Japanese bank and want to borrow money, they just get shown the door.

[homesweethome]

Sorry, I meant to say this risk aversiveness is inheirant in the Japanese psyche, not isn't.

[Greji]

That's why this woman and many others have no success when they go to a Japanese bank and want to borrow money, they just get shown the door.

I don't know the whole details of her case, but I can only say that in my case, I have not had any difficulty with Japanese banks. They have rather straight foward rules of the road when it comes to loans and if you have all of the requirements met, they are hard pressed to say no, or show you to the door. This means maekin down payments and having collateral in any country is a winner, but especially if it is a bank that you have been using for a length of time, I have found them more than receptive, then I first thought they would ever be. The FG must have in most cases permenant residency, but I have used them for morgages, college loans and other small loans and haven't been turned down when I had met all of the requirements they have posted up.

My local rice cooker is unemployed and just supervises the home and me (when I can't sneak away), so I thought it might be good to put a property morgage in an insured account in her name and was surprised to be told by my bank that this would not do because she has no income and even though she's a J type, they wanted the morgage in my name, the FG. I suppose that if you get the Yankee-go-home senmon on the loan desk, he can find a reason to in fact show you the door (or more than likely, make up a reason), but most bank rules are so cut and dry that you won't be refused if you rightfully qualify for the loan.

At any rate, that has been my experience and I sure there are many others, good and bad!

[Taro Toporific]

< ---Yoshioka, consultant for women's trends, is looking to the turn of the last century for fall 2006 themes.
Pinch Me -- Is That a Wal-Mart?
The House of Fuddy-Duddy Wants To Be a Trendy-Setter
Washington Post, Sunday, August 7, 2005
...tthe only Wal-Mart in Manhattan -- not a store, but offices, a laboratory even, where veterans from Nautica, OshKosh B'Gosh and the West Elm furniture catalogue work, largely in secret, to help the nation's largest retailer earn one designation that has long eluded it:
Hip.
These retail warriors walk the streets of SoHo, notebooks in hand, sneak into boutiques in London and snap photos of teens in Tokyo to divine what's hot. They forecast trends in clothing, home decor and furniture in advance of a season, then transmit the details back to the colleagues in northwest Arkansas who ultimately determine what reaches the shelves of the company's 3,400 stores....more...

[Taro Toporific]

Wal-Mart Japan dead pool: How many more months/years can they continue to lose?

Seiyu Same-Store Sales Decline 2.6 Percent in JulyAug. 16 (Bloomberg) --Seiyu Ltd., a Japanese unit of Wal- Mart Stores Inc., said same-store sales fell 2.6 percent in July from a year earlier, a ninth month of decline.....more...

[Mulboyne]

[Taro Toporific]

Wal-Mart hasn't decided on executing an option to raise to more than 50 percent its 42 percent stake in Seiyu. The option expires in December...more...

"Let it expire: That is a wise idea!" says Mrs Ex-Seiyu/Walmart.