Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Equity Bottom-Up

The supermarket sector is the most fragmented and uncompetitive of all retail sectors, a situation encouraged by major suppliers and not ideal for consumers.
Despite some effort from the likes of Aeon, consolidation has failed to materialise beyond a few in-group mergers.
Yet pressure on supermarkets to consolidate has been building due to depopulation in the regions, competitive pressures from other food retailers such as convenience stores and drugstore chains, as well as the emerging online food services.
Change is now coming. The biggest industry consolidation yet was announced last month, a precedent-setting alliance between three major supermarkets, <a href="https://www.smartkarma.com/entities/7580" target="_blank" data-smartkarma-citation="entities:7580:1">Arcs Co Ltd (9948 JP)</a>, <a href="https://www.smartkarma.com/entities/2256" target="_blank" data-smartkarma-citation="entities:2256:1">Valor Holdings (9956 JP)</a> and <a href="https://www.smartkarma.com/entities/7435" target="_blank" data-smartkarma-citation="entities:7435:1">Retail Partners (8167 JP)</a>, carving up a large chunk of the country into three regional fiefdoms.

The supermarket sector is the most fragmented and uncompetitive of all retail sectors, a situation encouraged by major suppliers and not ideal for consumers.
Despite some effort from the likes of Aeon, consolidation has failed to materialise beyond a few in-group mergers.
Yet pressure on supermarkets to consolidate has been building due to depopulation in the regions, competitive pressures from other food retailers such as convenience stores and drugstore chains, as well as the emerging online food services.
Change is now coming. The biggest industry consolidation yet was announced last month, a precedent-setting alliance between three major supermarkets, Arcs Co Ltd (9948 JP), Valor Holdings (9956 JP) and Retail Partners (8167 JP), carving up a large chunk of the country into three regional fiefdoms.

Arcs, Valor and Retail Partners Form First Nationwide Supermarket Alliance

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

<a href="https://www.smartkarma.com/entities/18379" target="_blank" data-smartkarma-citation="entities:18379:1">ZOZO (3092 JP)</a>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/254/original/2019-01-11_07-07-55.png?1547158094" class="editor-image img-responsive" data-smartkarma-image-id="75254"></figure>
<div style="text-align: center;" class="content-caption">Source: Japan Analytics</div>
ONWARD AND OUT - <a href="https://www.smartkarma.com/entities/18379" target="_blank" data-smartkarma-citation="entities:18379:1">ZOZO (3092 JP)</a>, formerly Start Today, has been the sixth-most-traded large capitalisation stock over the last ten trading days after <a href="https://www.smartkarma.com/entities/14502" target="_blank" data-smartkarma-citation="entities:14502:1">Benefit One (2412 JP)</a>, <a href="https://www.smartkarma.com/entities/14750" target="_blank" data-smartkarma-citation="entities:14750:1">Rizap (2928 JP)</a>, <a href="https://www.smartkarma.com/entities/11747" target="_blank" data-smartkarma-citation="entities:11747:1">Takeda Pharmaceutical (4502 JP)</a>, <a href="https://www.smartkarma.com/entities/7611" target="_blank" data-smartkarma-citation="entities:7611:1">Hoshizaki (6465 JP)</a>, and <a href="https://www.smartkarma.com/entities/8467" target="_blank" data-smartkarma-citation="entities:8467:1">Workman Co Ltd (7564 JP)</a>. According to Nikkei XTECH, on 25th December apparel maker <a href="https://www.smartkarma.com/entities/11370" target="_blank" data-smartkarma-citation="entities:11370:1">Onward (8016 JP)</a> suspended selling of its products on ZOZOTOWN and will leave the platform altogether. Although Onward products are estimated to account for less than 3% of total transactions on the site, there are concerns that other apparel makers will follow suit as a result of the emerging direct competition on the site from ZOZO's private label. Since reaching our 4.0 'Overbought' threshold on 9th July 2018, ZOZO shares have corrected by 57% - the worst performance of any large cap from that date - as concerns mounted over the private brand strategy and the behaviour of CEO Yusaku Maezawa.  Since bottoming on 4th January, the shares have risen by 18% following positive comments from the CEO about sales over the New Year holiday period.    
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/074/908/original/2019-01-08_11-30-36.png?1546914652" class="editor-image img-responsive" data-smartkarma-image-id="74908"></figure>
PRIVATE-LABEL STRETCH GOALS- The 'teething problems' of ZOZO entering the private-label apparel business have been well-documented by <a href="https://www.smartkarma.com/profiles/2415" target="_blank" data-smartkarma-citation="accounts:2415">Michael Causton</a> in a recent <a href="https://www.smartkarma.com/insights/zozo-teething-problems-for-private-brand-and-signs-of-hubris" target="_blank" data-smartkarma-citation="insights:26266">Insight</a> on Smartkarma. Michael rightly questions the feasibility of the company scaling a ¥200b apparel business within the next three years while targeting an additional incremental ¥400b in e-commerce revenue, particularly as it has taken ZOZO twenty years to reach the first ¥100b in annual revenues. In the DETAIL section below, we shall examine ZOZO's current and possible future financial condition as it strives to become one of the top-ten global fashion retailers. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/261/original/2019-01-11_07-22-02.png?1547158945" class="editor-image img-responsive" data-smartkarma-image-id="75261"></figure>
'ZOSO' &amp; THE STAIRWAY TO HEAVEN - In addition to some notable purchases of modern art at record-breaking prices, CEO Maezawa also last year booked himself on Space X's first flight to the moon. With apologies, the lyrics of the peerless song from Led Zeppelin's untitled fourth album - known by fans as 'Zoso' after the symbol designed by Jimmy Page for the inner sleeve - come to mind:- 
There's a lad(y) who's sure All that glitters is gold And (s)he's buying a stairway to heaven When(s)he gets there (s)he knows If the stores are all closed With a word (s)he can get what (s)he came for.

ZOZO (3092 JP)

Source: Japan Analytics
ONWARD AND OUT - ZOZO (3092 JP), formerly Start Today, has been the sixth-most-traded large capitalisation stock over the last ten trading days after Benefit One (2412 JP), Rizap (2928 JP), Takeda Pharmaceutical (4502 JP), Hoshizaki (6465 JP), and Workman Co Ltd (7564 JP). According to Nikkei XTECH, on 25th December apparel maker Onward (8016 JP) suspended selling of its products on ZOZOTOWN and will leave the platform altogether. Although Onward products are estimated to account for less than 3% of total transactions on the site, there are concerns that other apparel makers will follow suit as a result of the emerging direct competition on the site from ZOZO's private label. Since reaching our 4.0 'Overbought' threshold on 9th July 2018, ZOZO shares have corrected by 57% - the worst performance of any large cap from that date - as concerns mounted over the private brand strategy and the behaviour of CEO Yusaku Maezawa.  Since bottoming on 4th January, the shares have risen by 18% following positive comments from the CEO about sales over the New Year holiday period.    

PRIVATE-LABEL STRETCH GOALS- The 'teething problems' of ZOZO entering the private-label apparel business have been well-documented by Michael Causton in a recent Insight on Smartkarma. Michael rightly questions the feasibility of the company scaling a ¥200b apparel business within the next three years while targeting an additional incremental ¥400b in e-commerce revenue, particularly as it has taken ZOZO twenty years to reach the first ¥100b in annual revenues. In the DETAIL section below, we shall examine ZOZO's current and possible future financial condition as it strives to become one of the top-ten global fashion retailers. 

'ZOSO' &amp; THE STAIRWAY TO HEAVEN - In addition to some notable purchases of modern art at record-breaking prices, CEO Maezawa also last year booked himself on Space X's first flight to the moon. With apologies, the lyrics of the peerless song from Led Zeppelin's untitled fourth album - known by fans as 'Zoso' after the symbol designed by Jimmy Page for the inner sleeve - come to mind:- 
There's a lad(y) who's sure All that glitters is gold And (s)he's buying a stairway to heaven When(s)he gets there (s)he knows If the stores are all closed With a word (s)he can get what (s)he came for.

Thematic (Sector/Industry)

The following is an in-depth review of the big three Japanese convenience store (CVS) players, Seven Eleven (<a href="https://www.smartkarma.com/entities/1041" target="_blank" data-smartkarma-citation="entities:1041:1">Seven &amp; I Holdings (3382 JP)</a>), <a href="https://www.smartkarma.com/entities/320" target="_blank" data-smartkarma-citation="entities:320:1">Familymart (8028 JP)</a> and <a href="https://www.smartkarma.com/entities/1040" target="_blank" data-smartkarma-citation="entities:1040:1">Lawson Inc (2651 JP)</a>. This follows <a href="https://www.smartkarma.com/insights/japan-convenience-stores-still-innovating-in-a-saturated-market" target="_blank">our review of the Japanese convenience store sector overall</a>, which is best to read first.
The key operational and strategic themes relevant to investors regarding the Big Three in Japan:
<ul class="">
<li>Saturation has encouraged the top three operators to take over the remaining smaller chains while pushing into regions where they have fewer stores.</li>
<li>All are expanding new forms of retail:
<ul>
<li>Seven Eleven and Lawson have launched new e-commerce ventures that make the best use of their existing store networks and could reach national coverage quite soon.</li>
<li>Diversification: Familymart, in particular, is tying with all manner of partners to try and come up with a hit hybrid format to find new growth.</li>
</ul>
</li>
<li>While competition from drugstores and discount food retailers is a threat, convenience stores will continue to find new growth from e-commerce, hybrid stores and innovative products.</li>
</ul>

The following is an in-depth review of the big three Japanese convenience store (CVS) players, Seven Eleven (Seven &amp; I Holdings (3382 JP)), Familymart (8028 JP) and Lawson Inc (2651 JP). This follows our review of the Japanese convenience store sector overall, which is best to read first.
The key operational and strategic themes relevant to investors regarding the Big Three in Japan:

Saturation has encouraged the top three operators to take over the remaining smaller chains while pushing into regions where they have fewer stores.
All are expanding new forms of retail:

Seven Eleven and Lawson have launched new e-commerce ventures that make the best use of their existing store networks and could reach national coverage quite soon.
Diversification: Familymart, in particular, is tying with all manner of partners to try and come up with a hit hybrid format to find new growth.


While competition from drugstores and discount food retailers is a threat, convenience stores will continue to find new growth from e-commerce, hybrid stores and innovative products.


Seven Eleven, Familymart and Lawson Find New Growth Strategies in Tighter Market

The following is an in-depth review of the Japanese convenience store (CVS) sector and, in particular, the top three players, Seven Eleven (<a href="https://www.smartkarma.com/entities/1041" target="_blank" data-smartkarma-citation="entities:1041:1">Seven &amp; I Holdings (3382 JP)</a>), <a href="https://www.smartkarma.com/entities/320" target="_blank" data-smartkarma-citation="entities:320:1">Familymart (8028 JP)</a> and <a href="https://www.smartkarma.com/entities/1040" target="_blank" data-smartkarma-citation="entities:1040:1">Lawson Inc (2651 JP)</a>. Also covered are the smaller firms like <a href="https://www.smartkarma.com/entities/1043" target="_blank" data-smartkarma-citation="entities:1043:1">Ministop Co Ltd (9946 JP)</a>, <a href="https://www.smartkarma.com/entities/5762" target="_blank" data-smartkarma-citation="entities:5762:1">Poplar Co Ltd (7601 JP)</a>, Daily Yamazaki, <a href="https://www.smartkarma.com/entities/19816" target="_blank" data-smartkarma-citation="entities:19816:1">Cvs Bay Area (2687 JP)</a>, <a href="https://www.smartkarma.com/entities/11801" target="_blank" data-smartkarma-citation="entities:11801:1">Three F Co Ltd (7544 JP)</a> and <a href="http://secoma.co.jp" target="_blank">Secoma</a> which are targets for the Big Three.
The key operational and strategic themes relevant to investors in CVS in Japan:
<ul class="">
<li>The Japanese convenience store sector may have reached saturation but this has just encouraged the top three operators to speed up their quest to take over the remaining smaller chains while pushing into regions where they have fewer stores.</li>
<li>At the same time, all are looking at new forms of retailing to expand further:
<ul>
<li>All of the top three had previously failed to come up with coherent e-commerce strategies, but this year Seven Eleven and Lawson have launched new ideas that make better use of their existing store networks and could reach national coverage quite soon.</li>
<li>Diversification is another strategy to overcome saturation, and Familymart, in particular, is tying with all manner of partners to try and come up with a hit hybrid format to find new growth.</li>
</ul>
</li>
<li>While competition from drugstores and discount food retailers is a threat, convenience stores will continue to find new sources of growth from e-commerce, hybrid stores and innovative products.</li>
</ul>
This first report reviews the sector overall and the main players, <a href="https://www.smartkarma.com/insights/seven-eleven-familymart-and-lawson-find-new-growth-strategies-in-tighter-market" target="_blank">while a second report looks at the big three CVS operators – which have a combined 91% share of the market – in detail</a>.

The following is an in-depth review of the Japanese convenience store (CVS) sector and, in particular, the top three players, Seven Eleven (Seven &amp; I Holdings (3382 JP)), Familymart (8028 JP) and Lawson Inc (2651 JP). Also covered are the smaller firms like Ministop Co Ltd (9946 JP), Poplar Co Ltd (7601 JP), Daily Yamazaki, Cvs Bay Area (2687 JP), Three F Co Ltd (7544 JP) and Secoma which are targets for the Big Three.
The key operational and strategic themes relevant to investors in CVS in Japan:

The Japanese convenience store sector may have reached saturation but this has just encouraged the top three operators to speed up their quest to take over the remaining smaller chains while pushing into regions where they have fewer stores.
At the same time, all are looking at new forms of retailing to expand further:

All of the top three had previously failed to come up with coherent e-commerce strategies, but this year Seven Eleven and Lawson have launched new ideas that make better use of their existing store networks and could reach national coverage quite soon.
Diversification is another strategy to overcome saturation, and Familymart, in particular, is tying with all manner of partners to try and come up with a hit hybrid format to find new growth.


While competition from drugstores and discount food retailers is a threat, convenience stores will continue to find new sources of growth from e-commerce, hybrid stores and innovative products.

This first report reviews the sector overall and the main players, while a second report looks at the big three CVS operators – which have a combined 91% share of the market – in detail.

Japan Convenience Stores Still Innovating in a Saturated Market

Leading Japanese retail chains across all the major formats had a strong 1H2018 with surprisingly few exceptions.
Although some saw operating profits fall, and most of those that did expect profits to be lower for the year as a whole, other results were particularly impressive given the difficult operating conditions this year due to weather and natural disasters.
The following is a quick snapshot of the state-of-play at major Japanese retailers.

Leading Japanese retail chains across all the major formats had a strong 1H2018 with surprisingly few exceptions.
Although some saw operating profits fall, and most of those that did expect profits to be lower for the year as a whole, other results were particularly impressive given the difficult operating conditions this year due to weather and natural disasters.
The following is a quick snapshot of the state-of-play at major Japanese retailers.

Japan Retail Review 1H2018: Top Retailers Outperform

Japan

Seven & i Holdings Co., Ltd. is a holding company which was established through the merger of Ito-Yokado Co., Seven Eleven Japan Co., and Denny's Japan. The Company plans, manages, and operates mainly convenience stores, supermarkets, and department stores.

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Seven & I Holdings (3382 JP)

Arcs, Valor and Retail Partners Form First Nationwide Supermarket Alliance

The supermarket sector is the most fragmented and uncompetitive of all retail sectors, a situation encouraged by major suppliers and not ideal for...

Michael Causton

ZOZO - Buying a Stairway to Heaven

ZOZO (3092 JP) ONWARD AND OUT - ZOZO (3092 JP), formerly Start Today, has been the sixth-most-traded large capitalisation stock over the last...

Campbell Gunn

Seven Eleven, Familymart and Lawson Find New Growth Strategies in Tighter Market

The following is an in-depth review of the big three Japanese convenience store (CVS) players, Seven Eleven (Seven & I Holdings (3382 JP)),...

Michael Causton

Japan Convenience Stores Still Innovating in a Saturated Market

The following is an in-depth review of the Japanese convenience store (CVS) sector and, in particular, the top three players, Seven Eleven (Seven...

Michael Causton

Japan Retail Review 1H2018: Top Retailers Outperform

Leading Japanese retail chains across all the major formats had a strong 1H2018 with surprisingly few exceptions. Although some saw operating...

Michael Causton

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