Home Centers
Japan Top 10 Home Centers -- 40% + of Market Richard May
Home Centers In Japan: Adjusting store format for urban dwellers
The Japan home center (HC) store movement started in 1972 with a single store. Along with the home electronics retail store, the drug store, the convenience store, and the department store formats, home centers have grown into a major store format in Japan. The Japan-format HC is a combined home improvement store, pet store, car accessories, and general merchandise store. The boom years for HC's were 1990 to 1997 when Japanese consumers began to think about fixing up and repairing their homes and condominiums. This was further boosted by a pick-up in interest of outdoor activities. But, a slowdown for the stores in the late 90s put the brakes on sales and new store growth. More recently, the outlook has improved.
Annual sales of Yen 4 trillion ($33 billion)
In the 2005 fiscal year ending March 2006, the Japan DIY Association reports that sales for association members came close to $33.33 billion (Y3.988 trillion). Still, that level of sales is up only 1% over 2005. In a bid to boost sales, last year, three leading home centers chains -- Kahma, Daiki, and Homac -- combined to form DCM Holding Corporation. Combined sales of the new group exceeded Yen 400 billion ($3.33 billion) making it the new goliath of the HC store market.
HC industry miscalculated needs of urban dwellers
In a search for growth and a way out of the sales stagnation of the late 1990's, the HC industry began opening new stores in more densely-populated urban areas. This represented a move away from HC's traditional suburban, roadside location format. This made sense in terms of finding a new customer base of affluent home-owners looking for ways to improve their homes and living surroundings.
However, HC purchasing managers and store managers failed to take into account the differences in tastes and needs of the urban resident. On the one hand, urban dwellers have greater disposable income. However due to the much higher cost of land in Japan's key urban areas, the average metro home has just half the floor space of suburban and countryside homes. The HC's initially failed to find the right combination of higher quality goods and sizes appropriate for the smaller urban dweller's "mansion."
HC's in metro areas ended up with higher rents for their urban stores. Meanwhile their sales have failed to meet expectations due to store managers stocking the same goods sold to suburban and rural home owners. Good news for the home center sales came this year in the form of the record number of "baby boomer" generation workers that are starting to retire. given the retirees free time and savings stash built up over the years, home centers expect they will be able to put idle hands to work on home-building projects, gardening, hobby, and outdoor activities.
In the 12-month period ending March 2006, the average Japanese household spent an estimated Yen 3.6 million ($31,000) of which the single largest portion, some Yen 320,000 ($2,800), went to buying goods in the home center category.
