Daily Archives: 2011年3月7日

The World Is Flat – Wal-Mart and Seiyu

When I read this part, I felt strange feeling. The case of Seiyu and Wal-Mart is known to be a fiasco in Japan.
They tried to introduce EDLP (Every Day Low Price) strategy into Seiyu but resulted in a big failure. It was said to be because of three points:

  1. In Japan, still many people decide which supermarket to go by looking at the flyer delivered with the newspaper every morning. Seiyu abolished the flyer saying no ad is necessary for EDLP strategy, but that was not accepted by Japanese consumers.
  2. The price of Seiyu was actually not so much cheaper than others, at least not overwhelmingly cheaper. This was mainly because the supply chain optimization did not work well in Seiyu, even with the help from Wal-Mart.
  3. Several private brand products of Wal-Mart were introduced at cheap price. However, they did not meet the quality standard of Japanese consumers.

Wal-Mart and Seiyu started partnership in 2003 and until 2006 they struggled to enforce EDLP strategy into Seiyu. However, every year until 2008 Seiyu reported operation loss.

After 2007, Seiyu temporarily tried to get away from EDLP and concentrated on supply chain improvement. Recently they are trying to restart the EDLP, but with several modifications. It seems to be going well, at least much better than the one during 2003-2006.

The differences are as follows:

  1. They call the strategy “Kakaku Yasuku” in Japanese, instead of English word “EDLP” (lol).
  2. They started to assure the customers the cheapest price competing with flyer. If a customer brings a flyer with a price cheaper than Seiyu, Seiyu discounts to match it.
  3. Now some of the PB products are low price with satisfactory quality, thanks to the big purchasing power and supply chain by Wal-Mart

What can we learn from here?

Of course the cultural difference with flyer ad was one of the reason. However, I think the most crucial point is that we need to consider what is the actual core value of “hedgehog concept” before enforcing it. EDLP strategy works for Wal-Mart because consumers can bet the price is actually the lowest at Wal-Mart. EDLP strategy did not work in Japan until the flyer match system started to assure the lowest price, and also until Seiyu improve the supply chain to make the price actually low.
Trying to imitate the concept without actual core value can even be dangerous.

Another important implication of this story is, yes, even Wal-Mart can sometimes fail. However, at the same time, it seems they are getting back to success by applying the true core value of their hedgehog concept.