Japan’s leading appliance retailer getting knocked out of China

Japan’s leading appliance retailer getting knocked out of China

June 12, 2013

By TOKUHIKO SAITO/ Correspondent

NANJING–Tensions over the Senkaku Islands, “obstructive behavior” by rival companies and fierce price wars forced Japan’s leading electric appliance retailer to leave Nanjing only a year after opening a retail shop there.

Yamada Denki Co. had planned to use its store in the southern Chinese city as a starting point to advance into nearby Shanghai, one of the country’s largest cities.“To prepare for the future foray into central China (including Beijing and Shanghai), we should first accumulate experience in local areas,” Noboru Yamada, company chairman, had said.

But the company announced in April that it would shutter the 20,000-square-meter electric appliance shop at the end of May, later postponing the closure for two weeks to offer after-sale services to those who had shopped there.

The store, which opened in March last year, was Yamada Denki’s third in China, following those in Shenyang and Tianjin. Yamada Denki said June 6 it would also close its Tianjin store at the end of June.

The company was confident that its trademark style of service–which has enabled it to take customers from rivals such as Bic Camera Inc. and Yodobashi Camera Co. in Japan’s Shinjuku and Ikebukuro shopping districts–would serve it well at the Nanjing store.

But a series of miscalculations undermined the company’s strategy.

The choice of location proved especially disadvantageous. In Nanjing, the site of the 1937 Nanking Massacre, anti-Japanese sentiment is stirred up more easily than in other parts of China.

“I have not felt like shopping here since September last year (when Japan acquired three of the Senkaku Islands from private ownership),” said a 45-year-old Chinese man who visited the shop in early May for a close-out sale.

Additionally, China’s five major retailers, including the nation’s number one and number two companies, have stores within a few dozen meters of the Yamada Denki shop. When Yamada Denki offered a “price-matching” service there as it does in Japan, it only found itself involved in a fierce price-cutting war.

Yamada Denki also tried to make its store stand out from others in Nanjing. Though most stores in China display appliances according to their makers, Yamada Denki exhibited items according to the kind of products. It also made lights in its sales spaces brighter and staffed employees familiar with each item in their respective sections.

But China’s largest retailer, Suning Commerce Group Co., took a cue from its Japanese partner when it opened its own 30,000-square-meter flagship store nearby at the end of last year.

“Regarding our shop’s design and arrangement of items, we referred to those of Japan’s Laox Co., which we have made our subsidiary,” said an official of the Nanjing-based Suning Commerce Group.

In the television section on the second floor of the Suning store, shoppers can find a wide variety of TVs from nearly 20 makers based in Japan, China, South Korea and European countries.

In contrast, Yamada Denki had difficulty stocking products made by Chinese manufacturers.

“There were, of course, obstructive behaviors by companies with large volumes of sales in the local area,” Jun Okamoto, a vice president of Yamada Denki, told a news conference in early May, indicating Chinese retailers have prevented Yamada Denki from purchasing Chinese makers’ products.

Many foreign retailers have faced equal difficulty breaking into the world’s largest market.

Leading U.S. retailer Best Buy gave up selling its own brand goods in China in 2011, and withdrew from the country with the exception of a joint venture. In March this year, German company Media Markt, the largest appliance retailer in Europe, also pulled out of the country.

Competition in the Chinese market, including online shopping markets, is becoming harsher, driving companies there to engage in a war of attrition.