As the world’s third-largest economy falters again - with a stronger yen gnawing at overseas profits and domestic consumption sapping companies’ confidence to invest or sufficiently raise wages - firms that increased their prices in the hope of a sustained recovery are rethinking their strategy.
Many consumers, with little extra to go around, are opting for cheaper products - welcome news for the discount retailers who flourished during two decades of economic stagnation.
Housewife Yuko Narita, 48, says she is tightening the family purse strings and scouting around for sales on daily goods and clothing. “There’s a sense the economy is stalling and companies’ earnings are bad this year, so I’m holding off from spending on big items,” she said.
Nobuko Jin, a 75-year-old part-time worker who receives some pension, says she is cutting back and just buying necessities. “I get the feeling prices are creeping up. I wonder where the benefits of Abenomics are going. I’m trying to spend less,” she said.
Discount store operator Don Quijote Holdings, which sells everything from cosmetics and clothing to toilet paper, has seen business revive as the economy loses momentum. It expects operating profit to rise more than 4% in the year to next June. “Household spending won’t be strong. That’s when consumption centers on discount stores, so it’s a tailwind for us,” said Mitsuo Takahashi, the firm’s chief financial officer.
Restaurant chain operator Skylark Group has cut prices on some items and is offering more cheap lunch menus to lure family diners. And Fast Retailing Co, owner of the Uniqlo casual wear brand, reversed course this year after two years of price hikes hurt its clothing sales. Its latest quarterly operating profit rose 18.6%.
“We’ll continue with our (new) strategy and bring down prices this autumn and winter,” said Ken Okazaki, the company’s chief finance officer.
At discount furniture and home accessories retailer Nitori Holdings, chairman Akio Nitori said his company won’t raise prices. “Once you lose consumers to your competitors with price hikes, it’s hard to lure them back,” he said.