Editorial
Rampant price wars a boon to penny-pinching consumers, but hold unseen dangers
There is an ongoing price-slashing war now being waged, triggered by consumers' recent penny-pinching tendencies.
The fiscal year ending in February 2010 marked the first time that retail giant Aeon Co. has recorded a drop in revenue since it began publicly disclosing its consolidated financial results. Other major supermarkets across the board also experienced steep drops in revenue.
The five major convenience store chains were no exception to this trend. "People are under the impression that convenience stores are expensive," says Lawson Inc. President and CEO Takeshi Niinami. "Our customers were plucked away by other types of businesses."
The economy has continued to show signs of recovery, and some say that people are tired of cutting corners to save money. Still, projecting the image of offering low prices appears crucial in attracting consumers. A typical example of this is the gyudon (beef bowl) price battle currently being fought.
Major gyudon chain Yoshinoya Co. recorded a consolidated net loss of 8.9 billion yen for the fiscal year ending in February 2010, which far surpassed the 700 million yen deficit it saw five years ago in the midst of the mad cow disease scare that forced the chain to stop selling its signature beef bowls.
Sluggish sales at steakhouses that are operated by a subsidiary of Yoshinoya no doubt contributed to the loss. More significantly, however, price-slashing by gyudon competitors Matsuya and Sukiya have diminished Yoshinoya's appeal to money-conscious customers, thereby reducing the company's gyudon-related sales overall.
Perhaps in an attempt at a comeback, this month Yoshinoya launched a limited-time-only price cut. Its rivals reacted swiftly, however, with Matsuya offering standard-sized beef bowls for 250 yen -- 20 yen cheaper than Yoshinoya's special offer.
Sukiya also retaliated by offering their standard-sized beef bowls for 250 yen in select urban outlets. And while Yoshinoya's term for the limited offer ended on Tuesday, Matsuya's continues until April 23 and Sukiya's, April 21.
Such price battles are bound to spread to other restaurant chains. Already, cheaper packaged bento lunches are enjoying increased sales, and many eateries are offering lunches for the price of one coin, or 500 yen.
With falling incomes and bleak employment circumstances, many undoubtedly welcome the falling prices of eating out and boxed take-out meals. If consumers spend the money saved from buying cheaper meals elsewhere, then such price cuts won't necessarily lead to further deflation.
However, someone must suffer the brunt of any price reduction. What is worrisome is the possibility that such markdowns will result in dropping quality or unfair labor conditions such as unpaid overtime wages.
Yes, we appear to have come out of the worst of the economic crisis and are on the road to recovery. But these price-slashing wars are taking place even while expenses -- including the cost of oil and other resources -- continue to rise. Who is going to pick up the slack?
We hope that businesses engage not only in competition to bring prices down, but in competition to provide services and quality products that will entice consumers to spend money.
Click here for the original Japanese story
(Mainichi Japan) April 16, 2010