Why “PB” store brand products are cheap and getting cheaper

Over the past few years, supermarkets like Aeon and Ito-Yokado (and convenience stores like 7-11) have placed ever greater numbers of “private-branded” products on their shelves. Americans will be more familiar with the term “store brand” as symbolized by the suspiciously labeled cereals often with off-putting imitations of the Trix rabbit. In Japan they are simply known as “PB” (ピービー or プライベートブランド another example of marketing lingo making its way into everyday Japanese). According to Wikipedia, reforms of the supply chain behind private brands (moving production from smaller manufacturers to more sophisticated larger firms) in the middle of this decade has led to a “boom” of higher quality private-branded items starting around 2006. In this recession, the PB goods are reportedly boosting their market shares as Japanese people give up on traditional brands.

 02_px250A light-hearted economic piece from Tokyo Walker c/o Yahoo News Japan notes that some PB products, specifically those from Aeon’s “Best Price by Top Value” (what a mouthful!), are getting even cheaper than before. For example, they have started to offer “tissue refills” aka tissues without any cardboard boxes or extra packaging.  Other no-frills products include laundry detergent with no plastic spoon and instant ramen with the powder already mixed in instead of coming in separate plastic pouches.

In Japan, the private-branded stuff tends to be of shockingly high quality to the point that there is little reason to pay extra for the fancy packaging of brand names. I haven’t lived in the US for about three years now, but I grew up calling store-brand food the “third world” version (the poor families drank “third world soda” and so on). However, that may be changing – A blog post at FT.com seems to show that the US is moving closer to the Japanese model, or at least Japan-owned 7-Eleven hopes so: 

Interestingly, Jeff Schenck, the head of franchising for 7-Eleven in the US says [consumption of store brand goods] is more driven by distribution patterns. Big consumer goods companies such as Procter and Gamble have a greater influence over supermarket supply chains in the US than in Europe.

They are often allowed to stock the shelves in supermarkets, in return for incentive payments (known as slotting fees) to retailers, and to control the way products are displayed.

Mr Schenk said 7-Eleven’s steady development of its own supply chain was one reason why it was now confident in the potential of 7-Select products, such as its own line of potato crisps. “We call it taking our stores back,” he said.

As well as rolling out more private label goods, 7-Eleven is developing a new franchising model, which involves persuading owners of existng corner stores to convert to the brand in return for giving 7-11 a share of the revenues.

This is a less capital intensive model than its traditional practice of acquiring leases or building stores itself, before getting local franchisees to run them.

(Photo courtesy Nikkei BP)

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Recaldent-branded teeth cleaning milk

I feel the need to record the extreme case of the jibblies that this news brought on:

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In about two weeks, Meiji Dairies Corporation plans to release a teeth-cleaning milk called “Milk de Recaldent.”

Basically, this is nothing more than a new type of milk with tooth-fortifying “recaldent,” a product of the Cadbury company which they explain is “an effective ingredient that rebuilds the tooth by replacing the minerals where cavities can begin to form and leaves teeth more resistant to plaque acids.”

But in Japan, the brand “Recaldent” is almost inextricably linked with sugar-free gum, so I can’t help but think they are making trying to make my milk taste like minty gum for the added dental benefits, thanks to commercials like this one:

The release explains that the milk’s flavor won’t change, but by the time I saw that I was already jibblied out.

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Check the #0066cc;">Adamukun blog for Adamu’s shared articles and recommended links.

Cheap vending machines date back to 2003

1本50円も!?“激安自販機”が都内に急増

Tokyo Walker has an interesting tidbit on “merchant-owned” vending machines. For decades, the vending machine business was restricted to direct operation by the drink manufacturers, but in 2003 was opened up to small owner-operators. This development has been the driver of the growing number of machines offering very cheap canned coffee and other drinks. According to today’s article, some offer items for as cheap as 50 yen apiece.

How do they do it? Apparently by selling drinks that are “close to their expiration dates” or bear discontinued labels, options not available to the manufacturer-run machines.

(Bonus vending machine fact: As of 2007, there were 5.4053 million vending machines in Japan (48.8% of which were drink machines), by far the most per capita in the world)

Bloomberg on Pachinko

Great article from Bloomberg on the Pachinko industry:

Japan’s Pachinko Parlors Beat Vegas as Gamblers Defy Recession

As Japan’s economy shrank at an annual 12.1 percent pace in the last quarter and revenue slumped at Las Vegas casino companies like MGM Mirage and Las Vegas Sands Corp., the 23 trillion-yen pachinko industry is on a roll. Sales from the machines, which resemble upright pinball games, rebounded 0.5 percent in last quarter, reversing a six-year decline, and rose 0.9 percent in January, according to government statistics.

Kyoto-based Maruhan Corp., the biggest pachinko-hall operator by sales, forecast net income will rise 11 percent to 20 billion yen in the fiscal year ending today, according to a statement on its Web site. Operators aren’t publicly traded and typically don’t provide financial information.

Casino gambling revenue in Las Vegas fell the most on record last year and dropped 15 percent in January as the U.S. recession curbed spending on travel and betting. Shares of MGM Mirage and Las Vegas Sands fell more than 95 percent in the 12 months through March 27.

Introduced in the 1920s, pachinko is played by about 13 percent of Japan’s population, who fed 23 trillion yen into the machines in 2007, according to the Japan Productivity Center for Socio-Economic Development.

Numbers are down from 16 percent of the population and 29.6 trillion yen in 2003, a drop that was caused by a regulatory crackdown on types of machines that encouraged heavy gambling, according to a February 2007 report by CLSA Asia-Pacific Markets.

13,000 Parlors

Japan’s 13,000 pachinko halls — more than one for every 10,000 residents — are located throughout the country around train stations, along highways and in entertainment areas.

Pachinko players seek to amass piles of small steel balls that can be exchanged for prizes. Because casinos are illegal in Japan, cash can’t be paid out on the premises. Prizes can usually be exchanged for money at a nearby booth.

Operators are luring customers with new high-stakes machines that yield bigger profit margins, while lowering fees for others to 1 yen per ball from 4 yen.

“Parlors are thinking more carefully about which machines customers like, which machines are the most profitable,” S&P analyst Miyuki Onchi said. “Sales have come up bit by bit.”

Lower-fee machines have widened the customer base at Maruhan, the company said in an e-mail. Founded in 1957, Maruhan said it has 242 parlors, up from 225 a year ago, and about 12,000 workers.

Spending by Japanese households dropped 5.9 percent in January from a year earlier, the most in more than two years, the government said last month.

“It’s an industry that in the past, when the economy has slumped, it has improved,” Kobayashi said. “But this time we don’t know how bad the recession will be.”

That’s a whopping 13,000 parlors, compared to:

For some reason the article doesn’t mention that part of the new attraction of these “new high stakes machines” is the aggressive advertising and licensing deals. Recent titles have included EvangelionSpace Battle Ship YamatoKorean drama Winter Sonata, and even Tensai Bakabon. There is also a difference between pure pachinko and pachinko-slots (“pachi-slo”) that I still don’t really understand.

Did Japanese watch their baseball team beating Korea on mobile “websites”?

UPDATE: Could have been “a special WBC page set up on the Asahi shimbun’s web site”. Thanks to commenter ST

In an otherwise vividly descriptive article on Japan’s World Baseball Classic victory, it seems like the Wall Street Journal reporters may have made a slight error (emphasis mine):

Even workers who couldn’t watch the game live on television kept an eye on the contest. In Tokyo, three Japanese businessmen who were waiting for the subway huddled together staring at a mobile phone screen, tracking every pitch from a Web site.

I am pretty sure they must have been watching “1seg,” a mobile TV signal that’s become fairly common in Japan over the past three years or so. Scenes of strangers watching mobile TV together have become somewhat common in Japan, a sort of modern-day version of businessmen stopping to watch the sample TVs at the Sakuraya in front of Shimbashi Station. During pivotal sports games (Asia Cup soccer, Red Sox in the World Series, etc.), people seem willing to share their mobile TVs with onlookers. Maybe they don’t have much choice unless they want to be a jerk and turn it off, but all the same it’s a new and somewhat rare expression of community with strangers in this city.

(DISCLAIMER: This is not an essentialist statement about Japanese culture! I found Washington DC to be full of similarly detached and unfriendly strangers, as perhaps it should be to a certain extent).

The ANA-Shinsei theme music continuum

If you spend enough time in Japan with consumption habits like mine, you will eventually discover that All Nippon Airways and Shinsei Bank have very similar corporate theme songs. This is because both songs were composed and performed by Taro Hakase, a Japanese violinist who sports a generous afro, a skilled bow and a sizable repertoire of corporate contracts.

Here’s the ANA music, “Another Sky,” as presented in their employee tribute video which plays while an ANA flight deplanes. They also play it as hold music on their reservations line and as boarding music on international flights.

And the slightly sadder Shinsei theme song, “Color Your Life,” as performed live by Mr. Hakase. Unlike ANA, Shinsei doesn’t have an opportunity to force-feed this one to every customer, although you can easily get a whiff of it as the hold music on their customer service line. “Color Your Life” is also the company’s retail banking slogan, to tie in with its offering of cash cards in every color.

This is why being on hold with Shinsei gets me in the mood to take a flight somewhere.

The origins of Nanaca Crash

One of our more popular posts continues to be Roy’s link back in 2005 to addictive flash game “Nanaca Crash” in which you try to control how far a young man bounces after being run into by an anime Japanese schoolgirl on a bicycle. Give it a try!

Four years later, I am only now learning of the game’s hentai origins:

Cross Channel (officially spelled CROSS†CHANNEL) is an eroge for the Windows and PlayStation 2 platforms. The Windows version was released on September 26, 2003, and the PS2 version (CROSS†CHANNEL~to all people~) on March 18, 2004.

Story

Gunjo Gakuen (Deep Blue School) is a facility designed to gather and isolate those students who got a high score on an adaptation exam (Scoring high on this exam indicates that the student is less likely to be able to be adapted to the society) mandated by the government.

After a failed summer vacation with other members of the school’s broadcasting club, Taichi Kurosu and some of the other club members return to the city, only to find that all living creatures within it except for the club members have completely vanished. In order to confirm the status of the outside world, Taichi decides to gather other club members to help Misato Miyasumi, the president of the broadcasting club, who is trying to set up a broadcasting antenna to contact any possible survivors. However, Taichi soon discovers that the world is actually repeating the week after they found the others vanished…

Nanaca Crash!! (officially spelled NANACA†CRASH!!) is an online spin off game featuring characters from Cross Channel. The object of the game is to click, hold and release the mouse button to determine the angle and velocity of Nanaka crashing her bicycle towards Taichi, sending him flying across the screen. Your score is determined by the distance of his flight. Certain characters he crashes into will greatly affect his velocity.

New Kindle model – not yet

Ever since the first Amazon Kindle came out, I was extremely excited by the opportunity to use electronic ink technology to read PDFs, online books, and even the news without having to choose between staring at a backlit computer screen or print out hundreds of pages. The major features all sounded very convenient, and I could even envision using the device as a glare-free translation display. It would almost be worth shelling out $360 if only it weren’t such a new and untested technology.

So now that the next edition is out, things are looking better, sayeth the New York Times:

The Kindle 2 has several incremental improvements over its predecessor, which went on sale in 2007. Amazon said the upgraded device has seven times the memory of the original version, turns pages faster and has a sharper display.

It also features a new design with round keys and a short, joysticklike controller — a departure from the earlier design, which some buyers had criticized as awkward. The device will ship Feb. 24. The price remains at $359.

CNET:

The Kindle 2 is much skinnier than its predecessor, slimming down to 0.36 inches in thickness from 0.7, but it’s only a tenth of an ounce lighter. The storage capacity has jumped from 256MB to 2GB, or about 200 to 1,500 books, and the electronic ink display has improved from a 4-shade to 16-shade grayscale.

The layout of some of the buttons has been restructured, and the new Kindle also has a text-to-speech reader.

But there are still some serious drawbacks that force me to wait until they make further improvements. The Kindle 1’s current blurb about how to read your personal files doesn’t look very attractive:

Personal Files
Eliminating the need to print, Kindle makes it easy to take your personal documents with you. Each Kindle has a unique and customizable e-mail address. You can set your unique email address on your Manage Your Kindle page. This allows you and your contacts to e-mail Word documents and pictures wirelessly to your Kindle for only $.10. Kindle supports wireless delivery of unprotected Microsoft Word, HTML, TXT, JPEG, GIF, PNG, BMP, PRC and MOBI files.
PDF conversion is experimental. The experimental category represents the features we are working on to enhance the Kindle experience even further. You can email your PDFs wirelessly to your Kindle. Due to PDF’s fixed layout format, some complex PDF files might not format correctly on your Kindle.
If you are not in a wireless area or would like to avoid the $.10 fee for wireless delivery, you can send attachments to “name”@free.kindle.com to be converted and e-mailed to your computer at the e-mail address associated with your Amazon.com account login. You can then transfer the document to your Kindle using your USB connection. For example, if your Kindle email address is Jay@Kindle.com, send your attachments to Jay@free.kindle.com.

And who wants to pay 99 cents a month to read blogs?

Blogs
Unlike reading blogs on your PC, Kindle blogs are downloaded onto Kindle so you can read them even when you’re not wirelessly connected. And unlike RSS readers which often only provide headlines, blogs on Kindle give you full text content and images, and are updated wirelessly throughout the day. Get blogs wirelessly delivered to your Kindle for as little as $.99 per month.

This system appears not to have changed with the new version. Basically, you need to convert any file into a proprietary Kindle format before it can be read on the device. But instead of offering an offline tool, they require you to send all files to the Amazon service first to either wirelessly transfer to the Kindle (for a 10 cent fee) or sent to a PC email address so you can use a USB connection to transfer files (converted into Kindle format) from your PC to the Kindle for free. I am guessing they intentionally make this a little cumbersome in order to direct customers to the fee-based services. This library blogger apparently had a relatively easy time of it. Still, as the over-demanding consumer, at this price it just doesn’t seem worth it. When the time comes, however, I am sure I will make full use of user-created guides like this one.

UPDATE: I should mention that this product has never been rolled out for an official Japan release (though the Kindle 2 may be changing this soon), and from what I have heard it does not work properly in the country. So my visions of owning a Kindle are contingent on me either living in the US or the product becoming usable within Japan.

Big retail winners in Japan’s downturn

Here is my list of some of the few companies that have found success during the recent economic downturn. Note their domestic orientation and low-priced offerings:

Disneyland – Multiple upward earnings revisions. Popular as alternative to international travel.

Nintendo – Record earnings. Gaming as substitute for an expensive social life. Their strategy to expand the pie of gamers through educational titles and the like has paid off enormously.

McDonald’s – Record earnings. 100 yen burgers for high school girls who want a place to chat and penny-pinching single salarymen who don’t cook for themselves

Fast Retailing – operators of cheap apparel seller Uniqlo, offering reasonably fashionable cheap clothes, plus a popular line of ultra-warm “Heat Tech” thermal underwear.

Nitori – cheap imported furniture, many convenient locations and no IKEA-style assembly requirements, no-pressure shopping experience (contrast with expensive, high-pressure Otsuka Kagu).

Tsutaya – is reporting surging new membership in their Internet rental service (similar to Netflix) is surging, while rentals-plus-online numbers have posted a sixth straight record year. People apparently spend their vacations watching the entire Sex and the City series instead of traveling to Hawaii.

Anecdotally, some of the supposedly high-end shops, such as the Caldee line of imported food stores, seem to be pretty popular. For one, the yen is strong, and for two, even relatively expensive items,  are still cheap compared to the overseas trip you’ve decided to skip this year.

Writing in INSIGHT NOW!, small-business M&A consultant Shin Satake identifies four lines of business that do well in economic downturns:

 1. Education services (people who have lost their jobs turn to retraining to make them more competitive)

2. Medical services (stress is a killer!)

3. Repair/maintenance (people decide to get stuff fixed rather than buy a replacement)

4. “Escapism” businesses – (the desire to escape everyday existence is a self-defense mechanism. Includes entertainment, etc.)

$20 laptop in the near future?

From Financial Times:

FT: India To Follow $2,000 Car With $20 Laptop

India is planning to produce a laptop computer for the knockdown price of about $20, having come up with the Tata Nano, the world’s cheapest car at about $2,000.

India’s “Sakshat” laptop is intended to boost distance learning to help India fulfil its overwhelming educational needs… However, some analysts are sceptical that a $20 laptop would be commercially sustainable and the project has yet to attract a commercial partner.

A prototype will go on show at a National Mission on Education launch in Tirupati, Andhra Pradesh, tomorrow… the laptop has 2Gb Ram capacity and wireless connectivity.

R.P. Agrawal, secretary of secondary and higher education, said last week that the cost of the laptop was about $20 a unit, but he expected that to fall. He also said he expected the units to be commercially available in six months.

We will have to wait and see this prototype, but I am also pretty skeptical, especially considering the lack of details at this point. You have to wonder what features it could have for $20.