Japan store chains aim for “luxury budget” consumers

In Other News - October 7th, 2013

For some the effects of Abenomics have yet to be felt, but Japanese retailers have mapped out a plan to still turn a profit, enticing thrifty customers to loosen their pockets.

Fast Retailing Co and Seven & I Holdings Co Ltd, two of Japan’s biggest retailers, plan to lift profit margins by encouraging spending on “luxury budget” items.

Uniqlo, owned by Fast Retailing, introduced its line of pricey cashmere sweaters, which it hopes will turn plunging customer spending around.

The fashion giant’s cashmere sweaters and cardigans cost 5,990 yen ($62) and 7,990 ($82) respectively, but come at a fraction of the cost of luxury designer wear.

However, it remains uncertain whether cashmere will appeal to usually frugal Japanese shoppers accustomed to Uniqlo’s discounts.

“It’s possible that the pricing policies will face bigger challenges than the market’s optimism suggests,” said Taketo Yamate, a Credit Suisse analyst.

Although Uniqlo is expected to report a record-high operating profit for its full financial year, Yamate forecast an 8% drop in Fast Retailing’s operating profit in the current financial year.

Uniqlo also saw domestic sales and customer traffic grew during the second-half at double-digit rates, but spending per customer fell more than 5%.

Seven & I’s success with premium brands has apparently encouraged Fast Retailing. The operator of Japan’s biggest convenience store chain now sells luxury home-brand food and drinks, such as freshly brewed coffee.

Seven & I Holdings President Noritoshi Murata said Prime Minister Shinzo Abe’s Abenomics have little impact on Japanese spending.

“When it comes to day-to-day spending,” Murata said. “Japan has a lot of people with money to spend… If we make things of quality, of value and at a reasonable price, we can breathe some life into the market.”

By: Maesie Bertumen

Image: sleepyneko/Flickr