Japanese discount stores
Another group of risk-taking retailers is the discounters. These include Aoyama Trading for mens' suits and Bic in electronics. These firms operate in a manner completely different from other Japanese retailers. Discounters provide little customer service, no displays, no exchanges and no free service. The only consolation is prices nearly 30 percent off manufacturer's suggested retail prices.
Thirty percent off suggested retail may not seem like much in America, but in Japan it is very uncommon - and the manufacturers don't like it one bit. But the discounters don't need to bow to the manufacturers because they have developed their inventory control and sales forecasting methods to the point where they don't need to send goods back to the manufacturer.
Manufacturers have tried to protect their prices by cutting off supplies to the discounters. But somehow the discounters manage to get products anyway. The current recession also has helped the discounters. People don't want to pay full price, and the discounters can obtain distressed goods from full-price retailers that have gone out of business.
The discounters are rewarded handsomely for their skilled risk-taking. Aoyama Trading has a return on sales of 20 percent. Also in the current recession, while conventional department stores are seeing sales drops of eight percent, the discounters are seeing their sales increase nine percent annually. And the discounters still have plenty of room to grow because they hold only 3 percent of the one trillion dollar Japanese retail market.