TOKYO -- Japanese retailers are expanding their range of health products and delivery services as the coronavirus crisis continues to plague the world.
Although the government lifted the state of emergency in the greater Tokyo area in late March, the outlook for retail remains uncertain as Tokyo, Kyoto and Okinawa prefectures will impose stronger anti-COVID-19 measures on April 12 amid surging infections.
Japan's biggest retail group Aeon on Friday posted a net loss of 71 billion yen ($647 million) for the fiscal year ended February 2021. This was Aeon's biggest loss since its listing in the mid-1970s and its first since fiscal year ended February 2009 when its business was hit by the global financial crisis.
Although its supermarket business has seen a rise in demand, its core general merchandise stores and commercial rentals have been hammered by the pandemic. Aeon has not revealed its expectations for net income for fiscal 2021.
In an earning conference on Friday, Akio Yoshida, Aeon president, said demand for health care products is increasing amid the pandemic, especially those thought to improve immunity. The retailer will focus on offering those services and products, he said.
The company also announced a fresh strategy to target sales to the elderly and single-person households in Japan, and to also look to increase market share in other parts of Asia, which as a region is expected to see its population ballooning to 5 billion people in the future, Yoshida said. By 2025, the retailer aims to double its operating income in Asia from fiscal 2019.
Aeon Mall, a subsidiary of Aeon reported a net loss of 1.8 billion yen for the fiscal year ended February 2021. Japan's largest retailer fell into its first loss since listing in 2002. Sales have declined largely due to business slowdowns as coronavirus cases rose, despite prevention efforts at its malls. For fiscal 2022, it expects net earnings of 31 billion yen but is banking on foreign markets such as China and Vietnam to cushion losses.
Seven and i Holdings' convenience store business in Japan has struggled amid COVID-19. (Photo by Masaru Shioyama)
Meanwhile, rival retailer Seven & i Holdings posted net income of 179.2 billion yen for fiscal 2021, down 17.8% from a year earlier, the company said on Thursday. Its supermarkets have performed well while its convenience stores have struggled. Overall sales fell 13.2% to 5.7 trillion yen. The leading convenience store chain refrained from announcing its fiscal 2021 forecast.
As social distancing measures continue in major cities, Seven & i aims to have 1,000 stores providing delivery services this year. The chain will also offer more alcoholic beverages for stay-at-home drinkers as the government continues to ask restaurants and bars to reduce operating hours.
"It was a tough year," said Sadanobu Takemasu of convenience store giant Lawson in an earnings conference on Thursday. The chain reported 666 billion yen in sales for fiscal 2020, down 8.8% from the previous year. Net income plummeted 56.8% to 8.6 billion yen, reflecting fewer customers as more locals work from home, especially for convenience stores located in business districts.
"Expanding food products to capture home demand can be appreciated by consumers," said Kiyokazu Shibukawa, a partner at EY Japan, a branch of the global accountancy firm. He stressed that one of the advantages of convenience stores is "closeness" and that they help consumers avoid crowded places. But convenience stores still need to offer more products and ensure the freshness of food, he added.
Lawson is now focusing on delivering food and daily items as it strengthens its tie-up with home delivery provider Uber Eats. Stores offering delivery have skyrocketed from a dozen to about 1,500. Some even deliver over-the-counter medicine.
The Lawson convenience store chain will shift its focus to food, daily items and delivery.
© Lawson/Kyodo By focusing on food items and delivery the company expects full-year net income of 13.5 billion yen, up 55.4% from the previous year for fiscal 2021. "It's important to respond to the demand for three meals and daily necessities," as people continue to spend more time around home, he said. "There is still room for opening stores in the suburbs. From fiscal 2020, we've been focusing on the suburbs and other residential areas."
Lawson will expand its business in China, which has been recovering earlier than other countries. The chain plans to increase the number of stores in the country to 10,000 stores by 2025 from the current 3,000. In 2020, the company's China business saw its first operating income surplus since entering the market in 1996.
While shopping mall operators and convenience stores are struggling, supermarkets have seen solid gains. Life Corp. in late March revised up its net income forecast to 17.5 billion yen for 2020, more than double from a year ago. However, better food menus from convenience stores will likely challenge the supermarket business. Drugstores are also becoming players as they begin to offer more low-cost food products.
EY's Shibukawa said supermarkets have an edge in terms of freshness and quantity. They need to improve customer experience by offering a wider variety of products and expanding services, he added.
