---
title: "Understanding China's Opportunities Through Japan's Consumer Past and Future"
description: "This article explores the evolution of retail in Japan and China, highlighting how China's offline retail lags behind Japan by 20 years, and what Chinese retailers can learn from Japanese models like discount stores, convenience stores, and drugstores. It also discusses opportunities in lower-tier markets and the potential for channel brands."
author: "张晓军"
publisher: "New Distribution"
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published: "2019-04-14"
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# Understanding China's Opportunities Through Japan's Consumer Past and Future

> This article explores the evolution of retail in Japan and China, highlighting how China's offline retail lags behind Japan by 20 years, and what Chinese retailers can learn from Japanese models like discount stores, convenience stores, and drugstores. It also discusses opportunities in lower-tier markets and the potential for channel brands.

Source: Yecao New Consumption (ID: yecaoxxf), Author: Zhang Xiaojun. This article is reproduced with permission; for reprint authorization, please contact the original source.

New retail has arguably been one of the most controversial topics in recent years. The focus of online traffic segmentation, capital, giants, and entrepreneurs has rapidly shifted offline, exploring emerging consumption scenarios and service opportunities. **For a time, new offline formats such as community stores, convenience stores, and discount stores emerged one after another.**

Compared to China's burgeoning offline retail, Japan, with a similar demographic structure, experienced decades of economic takeoff and has fully gone through several important stages of retail format development. In some segments like convenience stores, Japan even leads China by 20 years.

To some extent, in-depth research on Japanese retail is like taking a time machine to see the future of Chinese retail. **However, combined with China's complex specific context, many business forms actually require deeper thinking to find the underlying fit.**

After a decade of e-commerce baptism, how should we view the current stage of Chinese retail? What exactly should we learn from Japanese retail? From discount stores, convenience stores, to channel brands, what inspiration do benchmark Japanese companies like Daiso, Don Quijote, 7-Eleven, and Matsumoto Kiyoshi offer for China's current retail? In the future, what opportunities exist for Sino-Japanese retail collaboration?

Around these questions that may be of most concern, Yecao New Consumption recently interviewed Fang Jiayi, an expert in the Japanese consumer field. A graduate of Waseda University, he previously worked at J.P. Morgan Japan and Nomura Research Institute, and is currently engaged in consumer investment in China. His years of work and study in Japan give him deep insights into the consumer retail markets of both countries. **In this interview, he also systematically shares his thoughts on Sino-Japanese consumption.**

**I. China's Offline Retail Still Lags Behind Japan by 20 Years**

There are many countries in the world that can serve as references; with one more dimension, we get closer to the precise solution at the bottom of the business model. The United States and Japan are the most commonly used benchmarks. **Although the attributes of various variables differ greatly from China, from a qualitative perspective, they can indeed provide a guiding direction for the future development of Chinese business.**

After graduating from high school, I chose to study in Japan. Influenced by my family business, I was exposed to retail from a young age, so I enjoyed observing offline retail formats in Japan.

1. Why is Japan's offline retail 20 years ahead of China?

It was 2011, WeChat had just come out, and the commercial application of China's mobile internet was still relatively low, let alone the online-offline integration of retail scenarios. Japan was similar; although it was the birthplace of the mobile internet, its commercial application space had never been truly opened, due to various internal and external reasons. But looking solely at offline retail, Japan is at least 20 years ahead of China.

**Why 20 years? Let me first give my reasoning logic:**

The emergence and evolution of offline retail channels/formats are closely related to the level of social infrastructure development. After the founding of the People's Republic of China in 1949, the Chinese economy recovered to pre-war levels by the mid-1950s.

However, due to a series of radical production movements, the Three Years of Natural Disasters, and the ten-year Cultural Revolution, China's economy was greatly damaged (during the Cultural Revolution decade, national income alone lost 500 billion yuan, equivalent to 80% of all capital construction investment in the first 30 years of the People's Republic, exceeding the total fixed assets of the first 30 years).

**After the reform and opening up in 1978, China's development policy shifted from class struggle to a 100-year focus on economic construction.**

Compared to China's early focus on class struggle, Japan was much better off. From the end of World War II to the first oil crisis, Japan's social infrastructure investment cycle was in a boom period. Due to the outbreak of the Korean War, the United States placed its military manufacturing base in Japan and exported a large amount of technology to Japan.

At that time, many Japanese manufacturing companies exported equipment to the U.S. military according to military standards. This allowed Japan to quickly absorb the technological advantages accumulated by the United States in previous technological revolutions, laying a solid foundation for subsequent independent innovation in electrical and automotive technology.

From 1950 to 1971, Japan experienced three major boom periods. Industrial upgrading accelerated urbanization, rapidly increasing national income and population, directly driving the development of the retail industry.

**So China basically began to develop its social infrastructure only after Japan had already entered the era of differentiated consumption upgrading, which directly affected the development of China's offline retail formats. Therefore, I believe this may be one of the reasons for the 20-year development gap between China and Japan in this area.**

2. Why is the momentum of e-commerce development in Japan relatively weak?

Japan's retail industry, including Japanese society as a whole, is actually very rational in its approach to the innovative application of internet technology in business.

Japan places great emphasis on research and innovation, but Japan's VC is not hot, and this is not contradictory. The supply side of innovation in Japan is mainly concentrated in large conglomerates, manufacturing, and TMT giants, who invest heavily in R&D annually and form monopolies in upstream and downstream resources.

**Therefore, Japanese young people are more willing to try business innovation and realize their ambitions within companies rather than starting their own businesses.** However, Japan's PE industry is developing well.

Due to the emphasis on service awareness and the early entry of many traditional industries into a buyer's market, Japanese consumers, when faced with changes in consumption habits brought by immature innovation and the ultimate consumption experience brought by mature models, usually choose the latter.

**Specifically, why is e-commerce relatively weak in Japan?**

First, after e-commerce appeared in Japan, the penetration rate of smartphones was not high, especially among the elderly;

Second, the shopping timeliness experience of e-commerce cannot compare with convenience stores; although prices bypass middlemen, compared to many Japanese formats that have achieved end-to-end supply chain integration, there is no advantage;

Third, e-commerce delivery logistics must face Japan's increasingly high labor costs.

**Therefore, e-commerce did not play the same role and influence in Japan as it did in China, especially in the early stages, but it laid a good foundation for later omni-channel development.**

3. The impact of China's e-commerce rise on offline retail

Compared to China's focus on mobile internet innovation, Japan's current innovation is more focused on energy development, AI robots, etc. Compared to better commercial monetization of innovation, Japan is indeed more strategic in vision. Many Japanese companies bear social responsibility and are thinking about how to solve the core pain points of Japan's social development in the next big era, doing great things.

In terms of China's retail development stage, after the 1980s, China's retail infrastructure construction was still in a very early stage. Around the 1990s, many foreign retail enterprises entered China, and China also began to become the world's manufacturing center. **Therefore, for China before 2000, the most important thing was how to absorb the business and technology of developed countries, polish the infrastructure, and prepare for the next wave of independent innovation.**

But with the emergence of e-commerce, at a time when China's chain department stores and supermarket retail had not yet taken shape, both were on the rise and highly homogeneous in the goods and services they provided, so online and offline were in a competitive state.

Optimizing cost efficiency allowed e-commerce to come up with many innovative stories to negate the old offline retail business. Moreover, the online business model, which could ignore some geographical and infrastructure factors, had too strong an explosive power in China with a population of 1.3 billion.

So in the following decade or so, except for formats like convenience stores and community stores that meet immediate convenience needs, other chain formats that honestly polished their supply chains and offline people-goods-place operations were suppressed to some extent by the rapid development of e-commerce.

**This is certainly a Chinese characteristic, but looking back today, you will find that the two should not be in a hostile state, but rather a state of integration, which may be more beneficial for realizing the future omni-channel vision.**

So you see that Chinese and Japanese retail companies are ultimately doing the same thing: horizontal and vertical integration of online and offline. It's just that one goes from online to offline, and the other from offline to online. But I think Japan will be faster in realizing the ultimate omni-channel vision.

**But if we only look at offline retail, as China moves forward, what 7-Eleven and Daiso took 40 years to do may only take ten or twenty years in China.** China's momentum from front-end explosive power is too strong.

**II. What Exactly Should We Learn from Japanese Retail?**

1. The mapping of Japan's consumption changes in Chinese cities at various tiers

What should we learn from the horizontal and vertical comparison between China and Japan now? According to the evolution of Japanese retail formats and Masayoshi Son's time machine theory, the specific points can be placed on a chart I drew.

First, there must be regional and social class differences for a time machine to exist. Japan itself does not have large regional differences; most people are concentrated in Kansai and Kanto. **Moreover, in the 1970s, it reached a 90% middle-class level, making it a particularly non-folded society.**

Excluding the internet, based on variables such as urbanization level, per capita income, population density, and age structure, offline retail formats will show certain patterns as they evolve horizontally. With major macro cycles, some formats may appear faster or slower.

If applied to China, from first- and second-tier cities to rural areas, there is a clear variable difference between each level. Because China is indeed a particularly folded society, first-tier cities are about ten years ahead of second-tier cities in variables like population density and per capita income (estimated).

**When the values of different variables reach a certain level, many retail formats will emerge, but they may not look exactly like Japan's.** Moreover, cultural differences between regions in China are relatively small, and after the internet appeared, information asymmetry was basically eliminated, which means that whether it's consumption upgrading or downgrading, the evolution to the next stage will be faster.

So there is a phenomenon where third-tier cities are more willing to imitate second-tier cities, and second-tier cities are more willing to imitate first-tier cities. This is similar to Japan's phenomenon where higher-class differentiation and imitation between classes eventually formed a "one hundred million middle class."

For some wealthy people in lower-tier cities, they are eager for consumption upgrading. But locally, due to the lack of goods and services matching their spending power, if they choose not to cross regional development differences, internet services are a good channel to satisfy their consumption upgrading.

**If they choose to cross, it will produce consumption migration, which will also boost certain service industries. This is the same logic as everyone's previous shopping sprees in Japan.**

2. The entry logic for the sinking market

Now people often talk about consumption downgrading in the sinking market. In fact, the sinking market is just a product of regional and class differentiation.

China is still far from the consumption downgrading of Japan's oil crisis and bubble economy collapse. It's just that at first, everyone focused on consumption upgrading because money was indeed easy to make in first- and second-tier cities. After the dividend disappeared, the industrial structure began to adjust, and now we are in an adjustment period.

It is worth noting that although the per capita income in China's lower-tier markets is one-third of that in first- and second-tier cities, the population is three times that of first- and second-tier cities, and disposable income including consumption desire is not weak. Calculating this way, the consumption capacity of lower-tier markets is still very strong. This is actually an overlooked market.

**Including the recent rise of Pinduoduo, it's not because of consumption downgrading. What it does is first reach these people in the sinking market by selling surplus goods.**

So, Pinduoduo entered with the logic of consumption downgrading, initially selling low-priced goods. Low prices can ignore economic cycles, regional and population differences, quickly accumulating users, and then doing the concept of consumption upgrading. This approach is very correct. Now Pinduoduo also occupies a large share of the entire sinking market.

I believe that to seize the opportunity in the sinking market, you must first reach these people, so it depends on how you can cut in. If you must refer to Japanese companies, it's the formats that play the logic of consumption downgrading, such as discount stores, 100-yen shops, and SPA formats, like Don Quijote, Daiso, and Uniqlo.

**Their common feature is that they were all born during the consumption downgrading period of the oil crisis, initially relying on selling surplus goods, accumulating a certain user base with cheap and cost-effective products, and then upgrading their consumption.**

It's just that like Don Quijote, selling surplus goods can also be done in a fancy way, turning waste into treasure, and then extending the business model. For example, applying it to selling commercial real estate, doing investment and M&A, and turning it into value investment.

Now many new formats targeting the sinking market in China appear online. The development of e-commerce over the years has boosted logistics, and it can indeed sink down while ensuring delivery timeliness experience. But formats like Don Quijote and Daiso have more advantages offline.

**Because the offline venue empowers selling surplus goods more. Online, people focus too much on the price and quality of surplus goods, and also consider logistics and other costs, and the unit price is already low.** Unless you do group buying, but you also need enough front-end traffic to not lose money. Now the cost of online traffic acquisition is so high, this is not a high-ROI business.

And like Don Quijote, it creates an entertaining shopping experience offline. When selling surplus goods, it doesn't let consumers focus on the price and quality of the goods, but through entertainment marketing, such as compressed displays, putting some goods together without a clue, giving you a treasure-hunting experience.

**Including human interaction and the peace of mind of holding surplus goods in hand to confirm purchase, compared to online venues, these are huge advantages.**

Combining these points, you will find that in China's offline, especially in the sinking market, from a qualitative analysis, there are still many opportunities.

**III. Comparing Daiso and Don Quijote, Opportunities in China's Sinking Market**

What should be noted at the tactical level in the sinking market?

First, market capacity. China has more than 1,500 counties. Each county is divided by urban areas, with one small commercial center in each of the east, west, south, north, and middle, totaling 5 small business districts. Discount stores/100-yen shops/SPA format enterprises are all high-volume, low-margin businesses, typically large stores that need strong offline front-end traffic support. Site selection generally prioritizes the core locations of these commercial centers. **So overall, these three different formats can support more than 7,000 chain stores.**

From a per capita capital perspective, referring to Japan's 100-yen shop format, a population of 100 million supports more than 6,000 stores, or 16,000 people per store. In China, with a county population of 150 million, the capacity would be around 9,000. Checking both sides, it's roughly estimated to be a business that can open nearly 10,000 stores.

Currently, in China's offline, there are indeed many five-yuan and ten-yuan discount stores, but they are very scattered. How can such stores succeed?

**Certainly, you can't always rely on selling surplus goods. First, the entire market doesn't have that much surplus goods for you to collect; second, if you get bigger, surplus goods are particularly difficult to manage.**

To do well in this format, it actually requires extremely high organizational and supply chain capabilities, as well as the push of the times and capital.

**First, organizational management capability.** Surplus goods are particularly difficult to manage, and there are two models: shallow inventory and deep inventory. Japan's Daikokuya is shallow inventory, but expansion is slow, opening only 20-plus stores in over 100 years.

Don Quijote's method is to go from shallow to deep. Facing massive SKUs, store managers can't manage them one by one, but it uses a method of delegating company power: one clerk is responsible for a 2-3 square meter area with several hundred SKUs, handling purchasing, inventory management, marketing, and pricing themselves, turning big into small and complex into simple.

**Second, supply chain upgrading and supply chain management integration capability.** We see that Daiso has been around for nearly 50 years, with over 5,000 stores worldwide and over 3,000 in Japan, mostly directly operated. It started by selling surplus goods, began making private labels 20 years ago, and now 99% of its products are OEM.

Now Daiso has 70,000 SKUs. Generally, like Miniso, including Japan's Seria, they only have a few thousand SKUs. Daiso places orders of 100,000 units per item to the supply chain, and some annual production capacity is directly contracted. To achieve low prices, there is an extremely high requirement for supply chain scale effects, requiring continuous integration and upgrading.

**Third, opportunities from era changes.** Don Quijote has over 400 stores in Japan with sales of over 50 billion yen. Its journey from offline to its current scale is closely related to Japan's several economic crises.

In China, selling extremely low-priced/cost-effective goods generally matches the demand of the sinking market, but when can it match first- and second-tier cities? When the economy is bad, especially when first-tier cities are in a period of significant economic downturn, this format will develop particularly fast. So, I believe its momentum in China is actually greater.

**Fourth, the push of capital.** Compared to Japan, China's capital market is more open and has more say. These formats are actually very capital-intensive, but once they run and make money, cash flow is very good. Japan's 100-yen shops and discount stores did not have capital support at the beginning. Daiso took over 40 years to have only 5,000 stores, while Miniso's speed is much faster.

**Many investors have previously lived in first-tier cities or abroad, unable to observe the needs and consumer attributes of lower-tier cities, making it difficult to understand and deduce the next explosive opportunity.** This particularly requires getting down to earth and deeply rooting in the industry to discover these opportunities.

**IV. Through the Development Path of 7-Eleven, Look at the Future of Chinese Convenience Stores**

1. Be an enabler, not a disruptor

In addition to the discount store opportunities mentioned above, the hottest topics in Chinese retail recently are fresh food community stores and convenience stores. Bianlifeng, as a new species favored by capital, is a topic often discussed with relish. But **personally, I think that compared to directly copying Japan's 7-Eleven 2.0 store format/supply chain approach, Chinese convenience stores actually have a more suitable way to play.**

From the development path of Japan's 7-Eleven, after it was introduced from the United States, what it initially wanted to do was how to integrate and empower those offline retailers that had been hit hard by chain formats, that is, S2B2C.

In China now, if you really want to do "convenience stores," then at least one of the conveniences of time and distance, and the convenience of goods and services, must be present in the early stage.

To achieve convenience in time and distance, besides 24-hour operation, you also need high-density coverage. 7-Eleven gave up direct operation from the beginning and directly franchised. Now its direct operation ratio in Japan is less than 5%.

Its core is not expansion, so the logic in China should become: **I open stores not to use 7-Eleven's 2.0 store format to attack others in various dimensions, making it impossible for anyone within a few kilometers to survive, but to help small and medium retailers transform.**

Therefore, I think China's convenience stores should appear as revolutionaries of the new retail infrastructure, not confront everyone. The Chinese market can accommodate at least one million convenience stores; Japan now has over 50,000. So adjust your posture, and the space is enormous.

For many Chinese community retail entrepreneurs, they may not need to think that far. Developing according to 7-Eleven's logic is relatively healthy. That is, in the early stage, through empowerment, unite offline retailers to achieve physical store density, and then on this basis, do S2B2C, accumulate stronger mid- and back-office capabilities, and serve small B.

The further you go, the more you find that what small B is doesn't matter, and how small B connects to C doesn't matter. What matters is what value you can provide to small B? **How to serve them? Just like the capabilities in supply and distribution, product development, and store management that 7-Eleven has accumulated over the years.**

2. The key thing to learn is store management and control methods

Now, many convenience stores in China may continuously learn and imitate to get closer to 7-Eleven in the first stage. The key thing to learn here is how to manage and control franchise stores? Compared to the management model of domestic convenience stores, 7-Eleven's control direction is OFC.

OFC is equivalent to a community store manager, who visits 7-Eleven stores weekly and reports the store's situation to headquarters. That is, the headquarters' control over franchise stores is not very tight, but it provides you with many business consultations. Among them, the core is to control information and data, know what consumers need and think, not to control the store.

**So, for convenience stores in China, the first stage should still be like 7-Eleven to achieve scale, but in the second and third stages, it's likely to be different.**

7-Eleven's 3.0, due to the lingering shadow of Japan's economic crisis and the particularly serious aging and single-person issues, has become a one-stop life service and emotional connection center, gradually moving away from traditional retail. What Chinese consumers want now may not necessarily be these things, or they may be satisfied by this convenience store model.

**V. From Matsumoto Kiyoshi's Strong Channel, Discover the Possibility of Chinese Channel Brands**

1. Channel brands need to build long-term consumer trust

Upstream of the channel are consumer goods, which are now being focused on by entrepreneurs and capital in China. The strong-weak relationship between channels and brands often derives different era opportunities.

When studying Japan, you will find that its channel discourse power is very strong. When mentioning drugstores, the first thing that comes to mind may not be Shiseido (brand), but Matsumoto Kiyoshi (channel). **Because Japan is more enthusiastic about word-of-mouth marketing, compared to brands, they are more willing to trust channels.**

When Matsumoto Kiyoshi started in the 1930s, the owner was the mayor of Chiba City. Through government and pharmaceutical endorsement, the entire brand was made famous, but Matsumoto Kiyoshi's marketing expenses are less than 1%. You can feel how strong Japan's channel discourse power is.

In Japan, channels mainly play a trust endorsement role. Matsumoto Kiyoshi's franchise stores, when getting goods, basically negotiate through Matsumoto Kiyoshi's headquarters with Japanese trading companies to get good prices.

**Including when Japanese consumers shop, they also focus on which channel your brand is placed in. If even Matsumoto Kiyoshi's channel thinks this brand is good, and even if it's on the Cosme awards, then I'll buy your stuff.** So, Japan's channel brands are also particularly well done. For example, 7-Eleven's private brands account for more than 50%, and Matsumoto Kiyoshi's private brands have achieved the first reputation in Japan.

The important role of this channel is that it gathers many high-quality brands, and Japan particularly values credit. Many channels in China themselves do not do well in credit endorsement, making it difficult to build long-term trust with consumers. So, when doing channel brands in China, the most important thing at this stage is still to focus on the goods and services themselves.

2. Can channel brands emerge on online social traffic platforms?

Online, an important channel now is social e-commerce, but this does not mean they have a great advantage in channel brands. The model of social e-commerce pulling people in easily shifts the seller's focus from the goods to the model itself.

For example, early WeChat merchants chose products with particularly high gross margins. The top people don't care whether the bottom people have a good product experience, only how much money they collect from it. This has little to do with the goods and services themselves, and it damages the channel. This is not retail.

**In the entire environment of consumption upgrading and information explosion, people's desire for new things and differentiated experiences will be amplified, thresholds will become higher and higher, and attention and patience will become increasingly scarce.**

There is a term called "multiple selves," which can explain many viral phenomena. So, for any "same self" under "multiple selves," you can rely on corresponding content to form a small traffic island, where people with the same humanity or viewpoints gather. Then, under the diversity of "multiple selves," new islands will continue to appear, some islands will become larger and larger, and some will disappear.

Of course, once such an island is formed, commercialization can actually be done. But it's unstable. To prevent people on the island from leaving, besides constantly having things that attract their attention, you also need to formulate corresponding rules, make people follow the rules, and generate stickiness and habits towards the platform.

You will find that once the rules of many platforms change, people leave, such as the previous Yunji. **So mature rules are necessary, and through a heavier model, the rules must be matched and bound, so they won't be subverted. It's almost impossible for China to recreate a JD or Taobao.**

Specifically, these large e-commerce traffic platforms are building their differentiated S (large supply chain platform) to empower small B and finally serve C. In the long run, S will become a strong barrier and the reason why many small B and C attach themselves to it.

Now a batch of sufficiently good S platforms with renewed capabilities has emerged, but if you simply play traffic monetization, it's hard to last long. Of course, this doesn't prevent capital from favoring them; everyone likes high explosiveness and high returns.

So to some extent, the landscape of today's large e-commerce and traffic platforms is almost determined, and in some aspects, they are unshakable. **Unless the people you cut into and the infrastructure that determines your competitive advantage change, the rules of the game will change, and a new battlefield will appear.**

**VI. The Mainstream Business of Japan's Future Retail and Its Implications for China**

1. Facing an aging society, the "drugstore + convenience store" model will become the mainstream format

Japan's retail development over the past decades has many values that need deep excavation and learning. **But it is also updating and iterating, facing some important new opportunities: one is online-offline integration, and the other is drugstores.**

Previously, the positioning of Japanese drugstores was very different from convenience stores. Like Matsumoto Kiyoshi, it saw far ahead from the beginning. Before 2000, it had been running drugstores (initially just pharmacies) for 70-80 years, only in the Kanto region, not going elsewhere without certain density and foundation.

**Matsumoto Kiyoshi recognized that the aging problem would be very serious in Japan in the future, so what are the benefits of selling medicine from the beginning?**

First, obtaining qualifications; second, having strong regional monopoly; third, drug gross margins are higher. When competing with other formats, once drugstores introduce other categories like food and prepared foods, they can give up part of the gross margin and sell cheaper than convenience stores.

This leads to the fact that although convenience stores now do better in terms of location and some life services than drugstores, drugstores, relying on long-term accumulated store opening strategies, are not inferior to convenience stores in location density.

**Especially since the elderly have a high demand for drugstore products, which convenience stores cannot sell, but drugstores can also sell various convenience store goods. Therefore, drugstores are becoming the fastest-growing format in Japan's offline retail.**

We will see that in the community 3.0 stage, convenience stores focus on life service centers, while Matsumoto Kiyoshi focuses on health consultation centers. It has created many new formats, such as entering to buy drugstore products, doing online consultations, and physical examinations, making you feel it's a life service store with health consultation. In the future, the tendency for the integration of convenience stores and drugstores will become stronger and stronger.

Currently, opening drugstores in China is still very difficult. First, medicine and pharmacy are not separated, but some non-prescription drugs can be done.

Why do Alibaba and Tencent now value the Watsons channel? Because China has entered an aging society. In retail, formats like drugstores and convenience stores are on this trend, and the service industry will also rise. Japan entered an aging society around the 1990s, and channels like Matsumoto Kiyoshi grew rapidly.

In the future, playing the drugstore category will become more frequent and rigid demand. **But personally, I think Watsons' current format positioning has some problems. If Tencent and Alibaba buy Watsons in the future, they can make more adjustments in store format, categories, and prices.**

Matsumoto Kiyoshi's initial channel positioning was to be the cheapest drugstore in Japan, more civilian, smaller in format, and closer to people's lives.

2. What Chinese retail especially needs to learn is Japanese entrepreneurship

For Japan now, its entire social development is in step, facing problems like aging and energy shortages. So Japan's political and business circles have a particularly strong sense of crisis. Business models are built around what problems to solve in the next 50 to 100 years and how to invest to build the next generation of infrastructure.

You will find that looking 20 years ahead, Japan, such a well-organized country, will run faster and faster, and the social penetration rate of advanced technologies like AI and robots will become higher and higher.

**In China, the seamless online-offline integration scenario of new retail is limited to certain areas in first-tier cities. In the long run, there is still a long way to go.**

Why does Japan have so many century-old companies (more than 20,000)? Aside from the fact that the Japanese market itself has a certain degree of closure, what Chinese retail enterprises especially need to learn is Japanese entrepreneurship.

Take Daiso as an example. As a company that has long occupied the top position in Japan's 100-yen shop market, it has been the number one in Japan since the 1990s, but it has never gone public.

At that time, the founder said a sentence: **"After we go public, besides the financial report data being seen by competitors, another important point is that I don't want this to become 'serving anyone who holds my stock.' We are here to serve consumers."** This trait is that the founder is not for short-term interests, but looks at problems from a very long-term perspective.

In fact, the United States and Japan respectively represent the success of "letting go" and "restraint" styles in business. The United States advocates short, flat, and fast, rapid iteration, while Japan chooses the right direction and persists long-term. China is more or less biased towards the American style, but I think using Japanese-style "restraint" for doing things + American-style "letting go" for being a person may be more suitable for China.

China used to particularly like commercial small inventions because they could immediately turn into money, but it's hard to produce great things from this. **Great things don't have strong commercial value at the beginning and won't be affirmed by many people at first. Japanese entrepreneurs walk this path particularly firmly.**

**Omni-channel or going overseas, what are the opportunities for Sino-Japanese consumption cooperation?**

In addition to what can be learned from Japanese retail, the development differences between China and Japan are also generating important cooperation opportunities. Both China and Japan are now at a time of structural change. What problems and opportunities do Japanese consumer companies face now?

**First, doing omni-channel.** Japan's population has been declining for the past 10 years, which is a headache for any Japanese consumer company. That's why 7-Eleven wants to do omni-channel. One of its logics is that although the consumers it serves may be decreasing, it can increase the number of touchpoints to offset this.

**Second, Japanese small and medium consumer brands going overseas.** Japan's consumer goods market is very saturated, and channel discourse power is strong, making it difficult for new products to stand out. But Japan has many good small brands because R&D and design have always been Japan's strengths. However, many large Japanese channels look down on them, and such brands are actually quite suitable for going overseas to China.

So, CITIC and Itochu set up an industrial M&A fund, including brand management companies like Gaolang, doing Japanese brands + Chinese market. Among them, personal care, beauty, and health products are more common, which is more in line with social trends.

**It is worth noting that the positioning of many Japanese companies in China, like MUJI, has problems in the current industrial structure transformation period in China.**

Its positioning is the same as Miniso entering Southeast Asia and South America. Because my supply chain capability, design capability, and product cost-effectiveness can completely beat the local, I can enter with a consumption upgrading posture, make higher gross margins, and earn money from people with higher consumption capacity locally.

In recent years, a problem has emerged in China: the capabilities of Chinese suppliers trained by companies like MUJI have risen. As long as a company like Miniso that knows how to integrate the supply chain appears, it will pose a strong threat to formats like MUJI. So you will find that MUJI has been cutting prices in first- and second-tier cities.

Including Daiso opening stores in China, there are problems with site selection, such as opening in the basement, because Daiso initially used Japan's site selection rules. **That is to say, Japanese companies currently have significant problems with their positioning in China, and they also don't understand many Chinese marketing tactics. They are eager to transform.**

In addition, after the rise of Chinese manufacturing, it may counterattack the Japanese market. Many manufacturing brands are already attacking the Japanese market. But how can Chinese brands stand firm in the Japanese market? First, you must understand what Japanese consumers need.

What is the most famous Chinese food brand in the Japanese market now? It's Sichuan cuisine Mapo Tofu, Twice-Cooked Pork, etc. But their Twice-Cooked Pork tastes completely different, actually sweet and sour. Japanese chili peppers basically serve as coloring, with big differences.

**In this area, you must particularly understand Japanese tastes; they are very picky. The logic of Japanese companies making products is also completely from the consumer's perspective.** Because Japan's retail and catering industries had already shifted from a seller's market to a buyer's market in the 1970s, and current consumers are still hard to please.

So entering the Japanese market, you must first do particularly well in goods and services, with a craftsman spirit, polishing details to the extreme. This is the bottom line in Japan, not a plus. **There's no need to spend a lot of money on brand promotion, because word-of-mouth promotion in Japan is often more effective and efficient. Once someone recognizes you, basically a long line can form in front of your door.**

**In-depth research on industry and culture will open a new door for Sino-Japanese consumption**

Now many Chinese retail companies and entrepreneurs are learning from Japan. Books on consumer society research like "The Fourth Consumption Era" are particularly sought after. Perhaps because there is very little material in this area, once it comes out, everyone treats it as a textbook to learn from.

Japan itself likes to hide, and they particularly like studying China, but China has very little research on Japan. In this area, many people previously studied macroeconomics, primary and secondary markets, benchmarking Japan's demographic structure and urbanization level to see China's big opportunities. Few people go deep into Japanese consumers, culture, enterprises, and other levels, and look at problems through time. **After "The Fourth Consumption Era" came out, it happened that China was in a stage of structural consumption change, so it was quite popular.**

The author of this book, Miura Atsushi, as a sociologist, you will find that there is not much macro and enterprise perspective, but more from the consumer perspective and thinking about business from the perspective of human nature insight. So many of its conclusions are not accurate.

For example: Before the 1970s, Japan was protected by the Bretton Woods system, maintaining more than ten years of asymmetric trade with the United States. **After the oil crisis, many Japanese companies went bankrupt, and for the next ten years, it was in a stage of consumption downgrading.**

Daiso and Don Quijote also appeared at this timing, and the founders also started by selling surplus goods. But these formats were mediocre in the 1980s. It was after the economic bubble burst in the 1990s and Japan's consumption tax was raised that they truly took off, and the pattern of 100-yen shops was determined at that time.

**So, if everyone follows the book's 1970s consumption upgrading thinking to understand these formats, there will be a big misunderstanding, and you won't get the idea of how to cut into China's sinking market.**

China's research in this area is very lacking, because even the cognition of the most basic facts has problems. For China's future, Japan's major consumption tracks, like retail and services, have strong reference significance. So personally, I really want to build this up.

Japan's cultural industrialization and industrial culturalization were basically born in the 1970s and 1980s. China's Forbidden City and a large number of other cultural IPs are also rapidly emerging. So in the future, China will definitely have many professional cultural research institutes, and the combination of industry and culture is also a big trend.

**I think compared to the United States, Japan's reference significance is stronger. When you look at the United States, you may see more possibilities, but how to turn this into your own and how to modernize it, Japan gives a good answer.**

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