FOCUS: Consumers, retailers fend for themselves amid deflation+

TOKYO, Nov. 24 Kyodo -
The bleak economic outlook is spurring Japanese consumers to pinch their
pennies. In response, retailers are offering ever deeper discounts to lure
shoppers smarting from falling income and worried about their future.

The government assessed the situation as a state of deflation for the first
time in three years in its monthly economic report released Friday.
Saving money has become the top priority of housewives and they are banding
together to trade tips on discounts and brainstorm in search of innovative
ideas necessary to ride out the tough economic times.
''I don't spend money to buy things for my kids,'' said a 40-year-old housewife
in Yokohama. She and several other neighborhood moms are sharing their
children's clothes, underwear and shoes as their husbands have taken pay cuts.
When none of them has items they want, they shop at discount stores that sell
recycled goods. They hardly ever buy new products.
''We can't skimp on education because we want our children to have a happy
future,'' said the Yokohama housewife. ''When it comes to clothing, borrowed
stuff will do because kids grow fast and soon become unable to fit into their
old clothes.''
As consumers grow increasingly price-conscious, producers and retailers are
bending over backwards to meet their customers' budgets.
In July, Daiei Inc. cut the price of a South Korean-made beer-like alcoholic
drink, commonly known as third-category beer, by 10 yen to 79 yen. A mere
10-yen discount turned out to be enough to nearly quadruple sales over the
year-earlier level.
Confectionary maker Morinaga & Co., after seeing sales of its Dars chocolate
sink at an alarming pace, slashed the price to 105 yen from 120 yen in
September, though the price was hiked in the spring of last year.
''We won't raise the price again even when ingredients costs are climbing,''
said a senior Morinaga official.
Amid the harsh business climate, retailers are broadening their offerings of
goods sold under their private labels at cut-rate prices. Competition among
retailers over jeans in particular has drawn attention.
A price war broke out when Fast Retailing Co., the operator of the Uniqlo
casual clothing chain, released its ''g.u.'' jeans for 990 yen per pair in
March. Aeon Co. and Daiei then joined the fray, marketing their jeans for under
1,000 yen.
Seiyu Ltd., a wholly-owned subsidiary of U.S. retail giant Wal-Mart Stores
Inc., launched an 850-yen pair of jeans in October. Toru Noda, a senior Seiyu
official, is confident in undercutting rival firms.
''We will endeavor to cut costs and offer lower prices than our competitors,''
he said.
Fast Retailing Chairman and President Tadashi Yanai expressed concern about the
ongoing trend, despite his company triggered the frenetic price competition.
''You can't create added product value if you just go along with other
companies by cutting prices,'' he said. ''Besides, you could be shooting
yourself in the foot.''
Actually, only a handful of companies such as Fast Retailing and furniture
retailer Nitori Co. are doing well through their price-cutting tactics. Other
retailers have seen their earnings erode amid increasing pressure to reduce the
prices of their products.
The effects of slumping prices are making themselves felt at shops on the main
streets of regional cities.
Futsukaichi Street in Chikushino, Fukuoka Prefecture, is lined with empty shops
plastered with ''for rent'' signs.
''We lost many of our customers who live some distance away to a large retail
store,'' said hardware shop owner Tsunehisa Suetsugu, 61.
''We just can't cope with the aggressive pricing style of large-lot
retailers,'' he said.
In Chikushino, home to a sizable residential community, competition is fierce
as there are six large-lot stores.
Owners of small stores in older shopping districts are organizing joint events
in a desperate effort to regain business. Still, they are falling victim as
large stores are battling it out with cheaper goods.
As consumers and small business continue their struggle, the government has yet
to come up with a remedy to lift the economy out of deflation.
==Kyodo
2009-11-24 23:19:57