Japanese Retailing Through the 1990s: Retailer Performance in a Decade of Slow Growth
| Date | 01 March 2004 |
| Author | John Dawson,Roy Larke |
| DOI | http://doi.org/10.1111/j.1467-8551.2004.t01-1-00401.x |
| Published date | 01 March 2004 |
Japanese Retailing Through the 1990s:
Retailer Performance in a Decade of
Slow Growth
John Dawson and Roy Larke
University of Edinburgh Management School, 50 George Square, Edinburgh EH8 9JY UK and University of
Marketing & Distribution Sciences, 3-1 Gakuen Nishimachi, Nishi-ku, Kobe, 651-2188, Japan
email: John@retaildawson.com [Dawson]; roy@royzemi.com [Larke]
The development of Japanese retailing through the 1990s is used to illustrate the
applicability of a Europe-based growth model in a recessionary market. Through the
1990s the Japanese economy suffered low growth and periods of recession, after strong
growth through the 1980s. Retail sales in the 1990s increased only slightly whilst floor-
space developments begun in the 1980s and the result of retailer expansion strategies
generated increased retail capacity. Large retailers pursued strategies of opening more
stores in order to generate sales, but this proved disastrous and resulted in lower
productivity, high levels of debt, low levels of innovation and consequential need to
restructure. General merchandise and department-store retailers were slow to see the
need to restructure and innovate. In contrast, three groups of retailers obtained
competitive advantages from the recession, namely retailers who responded quickly to
emergent market segments, foreign retailers and e-retailers. The strategic responses to
recession and the reasons behind these responses are illustrated and suggestions made
on how the experiences of the 1990s will affect development in the early 2000s.
Implications of the retailers’ behaviour are indicated for retailer strategies, the
restructuring of the sector and for research on strategy and structural change.
‘Some people say there are just too many stores, but
the truth is that there are too many stores that are not
giving people what they want’. Toshifumi Suzuki,
Chief Executive Ito Yokado (Asahi Newspapers, 2001)
Introduction
1
The Japanese domestic economy grew rapidly in
the 1980s. Through the 1990s it was close to or in
recession. Whilst there were brief periods of slow
growth during the 1990s nonetheless, GDP was
lower in 1999 than in 1997 and increased by only
7.3% between 1992 and 1999.
2
Several substan-
tial fiscal interventions, through tax cuts, sought
to stimulate consumer demand but none had
more than a very short-term effect. Retailers, in
common with other consumer goods industries,
flourish in growth economies when there are
opportunities for expansion, consumer spending
is increasing and there is mild inflation. These
economic conditions provide the economic slack
that facilitates innovation (Noria and Gulati,
1996; Loasby, 1998). The application of innova-
tion to generate growth in sales is the major
strategic objective of retailers. A growth market
provides opportunities to implement new ideas
and to develop the retail firm. A recessionary
market closes these opportunities.
1
This research reports results from analyses of a wide
range of published data sources, governmental com-
mentaries, the reports from companies and a pro-
gramme of interviews with retailers, government
officials and advisors since the mid 1990s.
2
The contribution of retailing to GDP was lower, at
current and constant prices, in 1999 than in 1994.
British Journal of Management, Vol. 15, 73–94 (2004)
r2004 British Academy of Management
Retailer growth in a recession with deflation,
which is the Japanese situation, is difficult and
requires different strategic and operational abil-
ities to those used in periods of growth. Innova-
tion in recession is particularly difficult. The link
between innovationand sales growth as the engine
driving retail development has been advocated
elsewhere (Dawson, 2001) and the logic of the
relationships has been explained in respect of the
restructuring of retailing in Europe. The hypothe-
sized general process is summarized in Figure 1,
showing the processes and components of two cy-
cles that create growth. The importance of innova-
tion is highlighted and productivity has to be
interpreted as relating to all assets of the retailer
not only the traditionally measured one of sales-
space. Although the model has been explored in a
European context it is not clear if it is valid in an
Asian context and under conditions of recession.
This paper considers retailing in Japan during
the 1990s – a period of recession and deflation. The
paper has four objectives. One objective is
to consider the model outlined in Figure 1 applied
to a non-European economy with extended periods
of slow or no growth in retail sales. A second
objective is to analyse the changes in Japanese
retailing through the 1990s and provide a new
interpretation of the performance of key retail
sectors through the period. A third objective is to
consider the strategies of retailers and how selected
groups of retailers have coped, or failed to cope,
with a long period of low growth in spending. A
final objective is to provide suggestions on how the
experience of the 1990s may influence Japanese
retailing through the first half of the 2000s.
The literature on retail change
in recession
Literature on the Japanese distribution system is
extensive in volume, but rather limited in scope.
Japanese sources have taken pains to show that
the distribution system in Japan has significant
Productivity growth
Increased
customer service
Retailer control of
channels
Increased retail
sales
Technology
Innovation
Managerial
ideas and
knowledge
Globalization
Power and
trust
Consumer literacy
and confidence
Marketing paradigm
Figure1. The cycles of channel control and customer service that link innovation to sales growth in the retail system
Source: Adapted from Dawson (2001).
74 J. Dawson and R. Larke
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