TT-569 -- World's Fastest Donki, e-biz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, June 13, 2010 Issue No. 569


- What's New
- News
- Candidate Roundup/Vacancies
- Upcoming Events
- Corrections/Feedback
- News Credits

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The Japanese retailing scene is undergoing a
transformational change, as deflation ensures that only
innovators and price busters make money and pretty much
everyone else loses. The biggest losers are those unwilling
or unable to make/source their own products and who are
hamstrung by intransigent suppliers who won't cut costs.
Thus it has come about that the big brands who rely on
Japan's famously byzantine distribution networks are
suffering serious declines in sales.

In our opinion there are four domestic companies leading
the charge towards efficiency, vertical integration, and
price cutting in four major retailing sectors. These are
companies that over the next 5-10 years will start to grow
overseas and could challenge the foreign leaders in each
sector with their self discipline and increasing purchasing
power. Significantly, they will grow in Asia first, out of
the reach of the U.S. majors who could most seriously
damage them while they are learning to navigate
international markets. If they can stay under the radar for
a while, then we may be witnessing the next generation of
Japanese global competitors.

The four sectors are apparel, furniture, shoes, and general
merchandise and the players are Uniqlo, Nittori, ABC-Mart,
and Don Quijote. Of course there are also some very
aggressive and successful foreign brands in the first two
sectors: such as The Gap and Ikea, but we've yet to see
strong foreign players in footwear or general merchandising
(GMS) -- perhaps Walmart over time will fill the GMS

It's often occurred to us that there is one more important
retailing sector which has yet to be staked out by a single
retailing chain, and that's cosmetics. Yes, there is DHC,
which now has over 100 stores nationwide, about 3,000
employees, and almost 8m mail order customers. But the
company is private and no one really knows what condition
the business is in or if it is making serious profits in
the order of its listed compatriots. We definitely think
there is an open opportunity for Uniqlo or someone else to
create a similar phenomenon to the clothing business in
cosmetics. It would need, as DHC is already doing, an
end-to-end capability, so as to give Japanese consumers the
same quality they get with brand products, for a fraction
of the price -- and of course strong marketing

[Continued below...]

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[...Article continues]

Most of these relatively new players were established in
the 1980's (Uniqlo stores appeared in 1983, although Fast
Retailing was established much earlier in 1963) and were
just "one of the pack" for the first 10-15 years of their
existence. But with the bursting of the bubble in the early
1990's, deflation started kicking in and Japanese who still
needed their shopping therapy, even though their purchasing
power had dropped, started flocking to the leading
cost-cutters. Bred in a mercantilistic society, each firm has
understood that it needs to control the end-to-end production
of goods that it sells to its consumers, thus eliminating
middleman margins and allowing absolute quality control and
responsiveness to consumer demands.

What a minute, you might say, what about Don Quijote? Don't
they just sell loads of junk and other people's brands,
rather than having end-to-end control? If you're familiar
with Donki's (an affectionate term for the store by
regulars) standard stores, yes, you would have to say that
they are more of a traditional retailer and you would have
to wonder how they are able to push prices down so low.

But if you take a look at their recent acquisitions such as
Nagasakiya GMS and Big1 discounters (they took over
Nagasakiya in 2007 and Big1 last year), they are hard at
work turning them into MEGA Don Quijote stores, which are
more like regular supermarkets. In doing this, it appears
that even Don Quijote is moving to an end-to-end model, not
just with products made in China, but also local products
and produce as well.

Don Quijote is an interesting company. It isn't as
profitable as Uniqlo, but is nonetheless growing by leaps
and bounds both through M&A and also through continuing
store openings and regular refreshment of existing stores.
Surprisingly the company is only 21 years old and yet
already has estimated sales (as of the end of this month,
June, 2010) of JPY496bn (US$5.45bn) and anticipated profits
this year of JPY20.7bn (US$220.77m).

The company is famous for its unconventional retailing
style, using what it called a "compressed" presentation
system. By this it means that it haphazardly stacks goods
of all types from floor to ceiling and challenges shoppers
to find what they are looking for. This type of format has
been criticized in the past as a fire hazard, and an
arsonist tried to prove that point a few years ago.
However, according to the founder, Takao Yasuda, the
shopping maze approach is on purpose, so that people will
keep coming back to make fresh finds -- a bit like being in
a treasure hunt.

Clearly this kind of shopping is not for people who know
what they want, but rather those who are shopping for
recreation. Yasuda recognizes this and says that regular
Don Quijote stores are for younger people and night owls,
who shop for therapy. To emphasize the point, the company
shows in its IR materials that foot traffic after 23:00 is
still quite high. On the other hand, more purposeful
customers like housewives can go to the new and
much more orderly MEGA stores, which are also
opening all around the country.

Shopping therapy is a recurring theme with this new
generation of successful cost cutting retailers, where the
products themselves are so cheap people can afford to buy
them for entertainment, not because they necessarily need
them. However, unlike Don Quijote, which just keeps piling
products on top of others, Uniqlo et al are more into more
disciplined displays and rely on regular highly-publicized
refreshment of their store inventories to bring shoppers
back on a repeating basis.

Another difference with Don Quijote is that it isn't trying
to stake out any particular niche, indicating the fact that
they are not yet completely bought in to the concept of
controlling the entire concept-to-sale process. Instead,
they are more conventionally traders, seizing opportunistic
deals to present and shock/entertain their customers. In
May they announced the cheapest suit you can buy in Japan,
at just JPY4,900, including a jacket and trousers. Until
that time, the cheapest suit was a JPY5,000 outfit from
Seiyu GK (aka Walmart). We don't think Don Quijote was
really looking for profits in marketing the suit -- it is
just one more piece of entertainment for loyal shoppers.

...The information janitors/


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provider, delivering SI and business support services to
foreign multinationals, including some of the world's
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* BiOS Advanceserve: Secure Online Data Backup (free trial)

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+++ NEWS

- Golf club memberships get cheaper
- Good time to be negotiating rents
- Mortgages way down as well
- Satellite proves space program isn't so bad after all
- PM says Miyazaki foot & mouth epidemic a national crisis

-> Golf club memberships get cheaper

Golf club membership broker and industry publisher Juchi
Golf has announced that the value of golf club memberships
continued to drop and were down 4% since January 2010. It
now costs an average of JPY1.55m to buy a membership, well
down on the JPY10m or more being paid out 20 years ago at
the peak of the bubble. Juchi says that selling by
corporations looking to hoard cash is pushing down club
membership values. Currently there are more sellers than
buyers. ***Ed: While Juchi expects prices to fall even
further, we don't think it will be long before savvy
Chinese players realize that they can get better golfing
here in Japan and start buying up golf courses to cater to
the new-rich from that country.** (Source: TT commentary
from, Jun 11, 2010)

-> Good time to be negotiating rents

Your landlord giving you a hard time (ours certainly is)?
Maybe you need to quote them the fact that according to
realtor Miki Shoji, the office vacancy rate in central
Tokyo is at a record high 8.94%, up 0.12% in May from
April. This is the highest vacancy rate since Miki Shoji
started tracking rents in 1989. The average rents are down
12.45% from the same period in 2009. (Source: TT commentary
from, Jun 11, 2010)

-> Mortgages way down as well

When people are worried about their futures, they
stop making large capital investments, particularly on
homes. And that is what is happening in the domestic
housing sector this year. According to the Bank of Japan,
new mortgages were down 4.6%, falling to JPY14.15trn, which
is the lowest loan level in 9 years. The Ministry of Land
reckons that a small uptick in housing starts in April, to
66,568 units, indicates that things may be turning around,
but at 0.6% of an increase, it's obviously not enough to be
a solid trend at this stage. As a result, banks are
offering very competitive home mortgage rates -- with SBI
Sumishin Net Bank offering a variable rate loan of just
1.075% annual interest at present. (Source: TT commentary
from, Jun 10, 2010)

-> Satellite proves space program isn't so bad after all

Although the Japanese space program has suffered a number
of setbacks in the last nine months resulting in the loss
of at least two JPY10bn satellites, the JAXA team have had
at least one impressive win. Their Hayabusa spacecraft,
launched 7 years ago to land on a passing asteroid and take
samples, is about to touch down somewhere in Australia
today (June 13th). This has been quite an amazing feat,
sending the spacecraft out 3bn kilometers to land on a 540m
hunk of rock then travel another 3bn kilometers back
again... (Source: TT commentary from, Jun
12, 2010)

-> PM says Miyazaki foot & mouth epidemic a national crisis

Those of us living in Tokyo forget that although Japan is
not self sufficient in food, its farming industry is
nonetheless quite substantial. However, now one of the
leading breeding areas in the country for Wagyu beef is
about to have its entire herd wiped out by government
exterminators seeking to get the foot-and-mouth outbreak
under control. The PM traveled to Miyazaki and after seeing
the extent of the cull sales that the outbreak is a
national crisis. More than 200k animals are scheduled to be
culled, and now it looks like a lot more will have to go as
well. (Source: TT commentary from, Jun
12, 2010)

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.


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The easiest way to help MicroDreams is by donating online



=> BiOS, a Division of the LINC Media group, is actively
marketing the following positions for customers setting up
or expanding in Japan, as well as other employers of


BiOS is currently looking for S&P Vendor Business Manager,
for an exciting opportunity to expand your product,
business management expertise and take a leadership
position on this key function. This is a highly dynamic
role where you will have the opportunity to work with
talented people across the various departments at a highly
visible Global vendor, and be highly influential in
delivering the optimal business result for the client, and
would be well suited to either a System Consultant or a
Solutions Architect looking to expand their career in the
product/business management field.

Your key responsibilities in this role will be driving and
delivering on the APC Business result, driving effective
sales engagement while managing related product lines.
This is a challenging and rewarding role, requiring an
in-depth ability to assess and manage the project
portfolio. As you will be required to operate with a
minimum of supervision and liaise on a regular basis with
project stake holders and executive managers, high levels
of responsibility in your previous roles are a must, as are
excellent communication skills and an eye for detail. This
is a challenging step up for an experienced PM looking to
ground their career in a more international setting.

Remuneration is up to JPY10m depending on your experience
and technical level.


- Jnr Sales Rep, Plastics Manf, Ebina, JPY4m – JPY6m
- eSourcing Account Manager, JPY4.5m – JPY5.5m
- Enterprise System Team Lead JPY6m – JPY8m
- Level 3 support Enginer, Global Vendor., JPY6m – JPY8m
- Unix Engineer, Okinawa I-Bank, JPY4m – JPY5m

Interested individuals may e-mail resumes to:

** BiOS Job Mail

Every 2 weeks BiOS sends out a regular communication to its
job seeking candidates, called BiOS Job Mail. Every edition
carries a list of BiOS's current and most up-to-date
vacancies, with each entry featuring a short job
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searching, thinking about a career change, or just curious
to know if there is something out there that might suit you
better, the BiOS Job Mail newsletter is an easy and
convenient way for you to stay informed. If you would like
to register for the BiOS Job Mail, or to find out more,
please email

Interested individuals may e-mail resumes to:


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------------------ ICA Event - June 17th ------------------

Speaker: Dr. Gerhard Fasol, CEO-Eurotechnology Japan K.K.
Topic: Current Mobile Market Trends - Opportunities For

Details: Complete event details at:
(RSVP Required)

Date: Thursday, June 17, 2010
Time: 6:30 Doors open, Pizza and Drinks included.
Cost: 4,000 yen (members), 6,000 yen (non-members)

Open to all - Venue is Beacon Communications.
Address: 11F JR Tokyu Meguro Building (Tokyu-line Meguro
Station) 3-1-1 Kami-Osaki, Shinagawa-ku.

------------------- CCH HR Seminars 2010 ------------------

1. Japan Labor & Employment Law Seminar
- Navigating Common issues in Managing HR Matters
- Review of amendments to Labor & Employment Law 2010
- Topical Issues: Bullying (Power Harassment) & Sexual

Date: Friday, June 25th, 1:30pm-5:00pm
Speaker: Hideki Kano, Attorney, Anderson, Mori & Tomotsune

2. Managing and Motivating Your Japanese Team for Success
-Bridging Cultural Difference as a Leader

Date: Thursday, 29th July, 1:30pm-5:00pm
Speaker: Rochelle Kopp, Principal, Japan Intercultural

--Both Seminars--

Venue: Happo-en 5F Linden Room
Number of Seats: Each Seminar-50 seats
Language: English
Fees: Each Seminar-20,000JPY+Tax
If you attend both seminars you can receive a 5,000 yen
discount!! Register at:

For more details, Please Contact us at:,
or 03-3265-1161,

------------- ICA Summer Networking Party!!!!! ------------

The ICA invites you to join our Summer Networking Party at
La Boheme in Shirogane. This will be an excellent
opportunity to catch up with old friends, meet new people
and network with peers in related industries, or simply to
put names to faces.

Open bar (beer, wine, soft drinks) and great food will
be included. Be sure to bring your colleagues and friends
to join the party. Open to all, RSVP required.

Date: Thursday, 29th July, 2010
Time: 19:00 to 21:30pm
Venue: La Boheme, Shirogane
Cost: 3,000yen ICA members, 5,000yen non-members.
*Includes open bar (beer, wine, soft drinks) & great
quality food.



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