By Shigeo Kodama
TOKYO (MNI) – Tired of paying low prices for low-quality goods in a
protracted deflationary economy, Japanese shoppers are seeking better
clothes and shoes, and supporting a gradual move toward steady gains in
consumer prices in the process.
Prices of clothing and footwear, which account for a little over 4%
of Japan’s core CPI, are now moving out of a deflationary phase,
according to Japanese manufacturers.
The price wars in clothing and footwear triggered by the economic
slump that followed the 2008 collapse of Lehman Brothers appear to have
ended, with quality now returning to the forefront of shoppers’ demands.
“Consumers will buy clothing with relatively high prices if they
see quality in it,” said Daisuke Hase, a spokesman for First Retailing,
the holding company of Uniqlo. His company is becoming a global brand
name for reasonably priced casual clothing with new features like Heat
Tech.
A spokesman at Uny Co, the third largest chain store in Japan,
agreed, saying, “Consumers seem to be more sensitive to quality rather
than prices recently.”
Shigeyuki Tsuchiya, a spokesman for Konaka Co, a major supplier of
men’s clothing, said, “Consumers have become less responsive to flyers
advertizing a 50% price cut.”
Such changes in consumers’ stance are reflected in the recent
improvement in consumer confidence. The closely watched index stood at
40.3 in March, the highest reading since February 2011, when the index
was at 41.2 and up from 39.9 in February, according to the Cabinet
Office.
Responding to the change in consumer taste, the industry has
altered its sales strategies.
Konaka has decreased sales promotions for major price cuts but its
sales per customer have been rising, Tsuchiya said.
Hitoshi Ichijo, a spokesman for Chiyoda Co, the largest shoes
supplier in Japan, said, “We previously lowered prices of our products
in the first quarter of 2010, when deflationary fears peaked, as we
thought at the time that we would lose to our competitors without a
price cut.”
But the price-busting tactics have failed to raise overall sales of
the company, resulting in narrower profit margins.
“We now have normalized our price-setting since May 2010,” Ichijo
said, adding that sales per customer have been rising.
Meanwhile, after the rush purchases of flat-screen digital TVs last
July, when Japan terminated analogue broadcasting, households have
allocated more to their clothing budgets. Demand for other appliances
has also waned since the government ended subsidies for buying greener
home electronics in March 2011.
“That gave us a tailwind,” said Konaka’s Tsuchiya.
Those industry voices are in line with the recent developments in
prices of clothing and footwear.
In CPI, prices of clothing and footwear rose 0.3% on year in March,
after +0.8% in February, which was the highest y/y gain since +0.8% in
January 2008. The prices have either posted gains or showed no change
for the ninth straight month.
Moreover, the 12-month moving average of clothing and footwear
prices stood at 99.9 (against 100.0 for the 2005 base year) in February
and March, moving up from the recent bottom at 99.6 in June 2011. The
moving average hit a recent peak of 102.1 in December 2008.
The weighting of clothing and footwear is 405, against 9,604 for
national core CPI. This indicates that a 1% rise in clothing and
footwear prices would push up core CPI by 0.04 percentage point.
Japan’s core consumer prices posted a second straight year-on-year
rise in March and the pace of increase slightly picked up from February,
thanks to higher electricity charges and retail gasoline prices.
The core reading, which excludes perishables but includes energy,
rose 0.2% in March from a year earlier after a 0.1% rise in February.
In the whole of fiscal 2011, the average core CPI was unchanged
from the previous year, snapping a second straight annual fall of -0.8%
in fiscal 2010.
The Ministry of Internal Affairs and Communications will release
the April national CPI data on May 25.
skodama@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4838 **
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