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Walmart unit Seiyu streamlines deliveries for online shoppers

Japanese supermarket chain mirrors parent's strategy with automated warehouse

Seiyu has faced inventory shortages at individual superstores from the surge in online orders. (Photo from Seiyu's Twitter account)

TOKYO -- Japanese supermarket chain Seiyu will expand its capacity to meet surging online orders, debuting an automated fulfillment center early next year in emulating the digital strategy of parent Walmart.

The 50,000-sq.-meter site in Yokohama will have triple the shipping capacity of an existing facility in Chiba Prefecture, Seiyu President Lionel Desclee told Nikkei. The new center also will slash employee work by 60%.

Seiyu intends to use the fulfillment center for delivering products directly to customers, and for expanding in-store pickup. Product pickup and transport within the facility will be automated. Domestic e-tailer Rakuten, which is Seiyu's partner in the online shopping business, will share operation of the center.

Normally, an item ordered on Seiyu's web portal is retrieved at the company's nearest superstore by an employee who delivers the product to the address.

Seiyu's online sales have climbed nearly 30% on the year since March due to stay-at-home demand. The growth caused inventory shortages at individual superstores, forcing Seiyu to halt orders temporarily. Direct deliveries from the new fulfillment center will help resolve the bottleneck.

In-store pickup, introduced in a pilot at one store each in the Tokyo-area prefectures of Chiba and Saitama, has received positive reviews from users, since they do not have to wait at home for deliveries.

Seiyu's automated warehouse and in-store pickup will take cues from Walmart. The parent company delivers online orders from both its stores and automated warehouses. The U.S. group marshaled its nationwide network of outlets for in-store pickups as well. The online operation put in place drove Walmart's 79% jump in net profit to $6.4 billion for the May-July period.

Seiyu and parent Walmart registered big jumps in online retailing this year. (Photo by Yu Tanaka)

In Japan, Seiyu is handling more local fresh produce and processed goods. The group's headquarters used to determine product lineups for the whole country. But in April, stores in the southwestern Kyushu region were empowered to pick their own products. Nagano and other regions soon will make their own choices as well.

The domestic market for home deliveries of food and local produce totaled 1.7 trillion yen ($16.1 billion) in 2019, up 40% from 2014, Tokyo research firm Fuji Keizai says. The scale is projected to grow to nearly 2 trillion yen next year.

Seiyu also plans to expand offerings of private-brand products from Walmart and other group companies. The pair entered into a capital tie-up in 2002, then Walmart converted Seiyu into a full subsidiary in 2008. The Japanese chain leveraged the parent's vast procurement capabilities to burnish its own low-prices image.

Japanese demand for internet supermarkets has the potential to grow dramatically due to the coronavirus, Desclee said.

Seiyu is bolstering its delivery capacity to compete against powerful rivals. Amazon Japan has paired with supermarket operator Life to launch a digital retail platform in Tokyo to deliver fresh produce. The operation has expanded to Osaka since July.

Aeon, Japan's largest supermarket group, will start a fulfillment center for its online supermarket business in 2023, in a partnership with British online grocery chain Ocado.

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