With the world's top two retailers faltering in the tough Japanese market, local retail chains are refining their approach to the budget-conscious and discerning Japanese consumer.
Despite the novelty of the megastore most Japanese still prefer frequent shopping at smaller local shops rather than weekly one-stop shopping to stock up their small refrigerators and pantries.
And fashion-conscious young Japanese are more likely to buy clothing at upscale department stores or less expensive specialty shops like GAP, Uniqlo and Muji, rather than the megastore.
"I sometimes buy clothes [at a megastore] for my child and some casual wear for myself, but not clothes for going out," said Miyuki Osaku, a 31-year-old housewife in Tokyo.
Kimiharu Oba, 28, an office worker, and his wife Satomi, 25, said they can't find their style of clothing at megastores and prefer to shop at department stores.
"The only clothing I buy at a big supermarket store is stockings. Their clothes are not cool at all," said a young female shopper strolling in Tokyo's posh Ginza district, home to every brand name in the world.
The nation's top retailers in the megastore or general merchandising category are also struggling to lure shoppers to their food sections.
"I go to smaller shops in the old shopping arcades where you can often find cheaper and fresher food and good quality clothes," said Daisuke Odagiri, 33, who lives near a Seiyu store in central Tokyo.
Carrefour SA of France, the world's second-largest retailer, has pulled out of Japan after four years in the red, selling all of its eight megastores to Japan's biggest retail group, Aeon Co Ltd.
Wal-Mart Stores Inc, the largest retailer in the world, has seen its "everyday low price" philosophy flop with Japanese shoppers who demand a wider range of higher quality goods to choose from.
Wal-Mart holds a 37.8 percent stake in the medium-sized supermarket chain Seiyu, which has posted net losses in the past two years of Wal-Mart style merchandising in Japan, the world's second-largest consumer market.
Responding to consumer's preferences, Japanese retailer Ito-Yokado has set up a research center to create new brands and merchandising, headed by the legendary Yukio Fujimaki, known for his successful purchasing strategy at the upscale department store Isetan.
Ito-Yokado, Japan's second-largest retailer, started in 1920 as a small shop in downtown Tokyo selling western attire and has grown into a group that includes 180 superstores in Japan and China, the Seven-11 convenience store chain and a bank.
"In the past it was said that Japanese [stores] needed lower-priced merchandise, modeling the success of discount outlets in the US," said Toshifumi Suzuki, chairman and chief executive officer of Ito-Yokado group.
"But emulating the US style will not lead to success in Japan due to the totally different economic structures in the two countries," he said.
The current front-runner, Aeon, began in 1758 selling kimono fabric and accessories and now operates over 300 JUSCO stores in Japan, China, Thailand and Malaysia.
It remains in expansionist mode with its takeover of Carrefour's hypermarkets, the term for general merchandizing which combines its supermarkets with department stores.
But Aeon is also responding to calls for improved quality.
"We will concentrate more on malls, and in merchandizing policy we will pursue quality as well as low prices," said Manabu Ohshima, an Aeon spokesman.
There are on average 91 grocery stores, supermarkets or convenience stores for every 10,000 people in Japan, far above the 54.8 in the US, 52.2 in Britain and 62.3 in France, according to trade ministry data.
Easing deflation and an increase in jobs in Japan would seem to bode well for consumer spending, but major retailers operating general merchandise or megastores have been struggling to achieve stable profits.
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