Asia: Japan’s retailer AEON’s sales is declining

In order to attract thrifty Japanese consumers, Japanese convenience stores, drugstores and supermarkets have been fiercely competing through price reductions. Similarly, Aeon Co., Japan’s largest retailer in sales, have also been struggling to keep customers through price reductions. In August this year, its General Merchandise Stores (GMS) cut prices on more than 100 grocery items across 2,800 stores.

Aeon’s GMS business began its decline when the rise of discount stores and product specialists in clothing and electronics drew customers away. Despite so, Aeon announced a higher full-year earnings forecast by 2.6% earlier this October after restructuring in its GMS business. Aeon claims that there has been an improvement in the GMS business and has seen a 17.5% rise in its operating profits since August.

According to RFi Group data, consumer sentiment in spending less in the next 12 months have improved slightly over the course of one year, from 27% of consumers indicating to spend less in 16H1 to 25% in 17H1. Although the restructuring boost gave Aeon confidence in raising its profits forecast, should the consumer sentiment in spending continue to improve, Aeon’s forecast will definitely become more achievable (Japan Retail Banking Council, H1 2017).

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