When you think of friends or relatives who “power shop,” what’s the first image that comes to mind? I think of a mall, with brightly lit, gleaming floors, well-spaced displays, and elegant architectural design. An exciting parade on Thanksgiving and New Year’s to celebrate the American-ness of the department store. In my mind, department stores carry a uniquely American identity. Free market economics and consumer choice at its best. Well, that’s how I felt until yesterday, anyway.
Can you guess how long department stores have been around?
When you think of the big department stores in the U.S., names like Marshall Field and Macy’s come to mind. The three biggest department stores in the mid-1960s, both in sales volume and physical size, were Macy’s, Hudson’s, and Marshall Field, in that order. Hudson’s had 25 stories, 16 of them selling floors. Two of its four below-ground floors were basement stores, where 60 departments did up to 25 percent of the store’s business.
But if you think Americans like Marshall Field invented department stores, you’re wrong. And if you think they were “invented” in the 1960s, you’re way off. Like nearly 300 years. Because department stores were around before America existed.
Mitsukoshi, still a dominant force in retailing in Japan today, dates back to 1673, when they were the first merchant to fix a price for kimonos, rather than selling each independently for a negotiated fee.
In fact, if you think branding itself (Mitsukoshi still holds a sparkling reputation for selling the beautiful kimonos—if you want the best, buy a Mitsukoshi kimono) is a new, or innovative, American concept, think again. Many Japanese brands we recognize today have been around for centuries. Kikkoman, for example, first started branding soy sauce in 1661. The Japanese people first practiced branding as a natural way of showing quality and pride in workmanship about 60 years after the death of Queen Elizabeth I.
We visited Ginza Mitsukoshi yesterday. Like many department stores in Tokyo, the basement and first floors sell food. And, as Randy said, “This place makes the best Whole Foods in Denver look like a trailer park!” No offense to our favorite Whole Foods store (I love you, Whole Foods!) but as you walk around these floors (never mind the other 16 floors that sell anything you could ever dream you wanted), you see food and wine from all over the world (but the largest selection comes right from Japan).If you want to learn a little about branding in Japan (which I do, I do!), take 7-11 Japan as an example. This company relentlessly pursues quality and innovation in product offerings. In fact, 7-11 Japan introduces an average of 100 new products in stores each week, and sells 2,500 to 3,000 items in an average store size of 100 meters. Approximately 70 percent of products sold go away each year in favor of new, emerging products.
Utilizing product development teams that include suppliers, vendors, manufacturers and logistics experts, 7-11 employs a rigorous new product development process that results in Japan sales of roughly $30 billion US per year. The company has a “house” brand, but not all products developed carry it. If a product enjoys strong brand awareness (like Kirin beer, for example) 7-11 simply asks the company to produce a size, label or bottle especially for 7-11, and retain the brand identity.
Further, not a single fresh product in the cooler, from sandwiches to rice balls, contains a preservative ingredient. Instead of focusing R&D on increasing shelf life, 7-11 Japan focused on the logistics of getting fresh food to consumers, developing a rigorous delivery process. (Stay tuned for an upcoming post that discusses what factors, including freshness, mean the most to Japanese consumers.)
Each 7-11 store receives:
- Sandwiches, deli foods and dairy products, rice balls, bento boxes and fresh bread three times daily
- Ice cream and frozen foods three to seven times a week, depending on turnover
- Soft drinks, dry instant noodles and snacks seven times a week
- Books, magazines six times a week (you won’t wait long for a new issue)
Additionally, fresh products like lettuce never see temps warmer than 5 C (41 F), from field to consumer, to maintain crispness.
Make no mistake, 7-11 isn’t alone in innovation, or pursuit of quality. In fact, Japan might be the best place in the world today to find reasonably priced, high-quality products. Instead of figuring out what to add to packaging or product to allow it to stay on shelves longer, Japanese business focuses on getting products there faster, fresher and in season. Which, in turn, develops a market environment ripe for branding that effectively differentiates products. The Japanese people want to know which brand means fresher, higher-quality, more nutritional. Commodity marketing as we know it may not provide enough product differentiation for this population in the future. We need to move toward brands to prove our quality, our freshness and to tell our story.
This is a challenge for U.S. beef, especially, since I believe American meat companies generally try give international markets what sells well at home. But the Japanese consumer is fundamentally different than a U.S. consumer, and demands different things than American consumers–at least today. My crystal ball says American consumers will move rapidly in this direction, demanding higher quality, fresher, more “natural” products (with a story behind them), and American companies would do well to take a lesson from the Japanese market, to get ahead of our domestic consumer demand.
Many thanks to the expert marketing staffs at agencies Dentsu and Tokyo, as well as Professor Hiroshi Tanaka with the Graduate School of Strategic Management, Chou University for helpful information and instruction.
Best meal of the day award: