Japan’s Supermarket Future Part I: Fresh foods and sustainability strategies a must to mitigate COVID-19 and e-commerce risks

15-Mar-2021 - Last updated on 15-Mar-2021 at 02:45 GMT

Japan’s supermarkets need to offer a better range of fresh foods and embrace business sustainability in their operations in order to avoid becoming obsolete. ©Getty Images

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Japan’s supermarkets need to offer a better range of fresh foods and embrace business sustainability in their operations in order to avoid becoming obsolete in the face of challenges posed by COVID-19 and e-commerce, insist experts at the National Supermarket Association of Japan (NSAJ).

NSAJ has just released its 2021 Supermarket White Paper, touted as the ‘most important issue yet’ considering the impacts of COVID-19 on the country’s supermarket industry and consumer choices, with a good part of the report dedicated to the discussion of ways local supermarkets need to adapt moving forward.

“The business environment for supermarkets is becoming harsher and more severe locally, [not only due to] the COVID-19 pandemic but also changes in social environment such as population decline, an ageing population, the entry of e-commerce sites, and economic regression,” the association said via the report.

“The recent spread of COVID-19 especially has led to a behavioural change in consumers due to the great threat it poses to society – [under these circumstances], supermarkets need to identify your strengths, opportunities and establish new competitive strategies so as to not get left behind.”

The first competitive strategy suggested was to target the current trend of eating at home, where fresh food sections have a distinct competitive advantage due to the ability to provide consumers with direct and immediate choice.

“Time spent at home has increased due to COVID-19, and accordingly the opportunities to eat at home have increased too – for example, there is much less chance to go have a drink with colleagues after work but instead more opportunities for a family to cook and eat together, this more opportunities to purchase ingredients and prepared foods at the supermarket,” said NSAJ.

“Here, research has shown that e-commerce sales of fresh foods have not progressed by much so far as consumers want to choose such foods with their own eyes, as even subtle differences between different products of the same type can have a great influence on purchasing decisions.”

For example, in a supermarket consumers will be able to choose their own fruits and have the option to not select ones which are bruised or discoloured – an option not available to them via e-commerce.

“Consumers make their own choices in order to maximise their expectations and satisfaction, [and the] probability of obtaining satisfaction is unstable for these foods compared to non-fresh foods – [so] supermarkets must learn to maximise this advantage by offering more, better product choice.”

NSAJ also highlighted the importance of improving the quality and prices of side dishes (ready-to-eat dishes) and bento boxes, both big businesses for supermarkets in Japan which are now also at risk alongside fresh foods.

“Drugstores and convenience stores have now started to diversity and expand into fields such as fresh foods and side dishes and are emerging as rising competitors for supermarkets too,” said the association.

“Although supermarkets still have the power in terms of freshness, it needs to be remembered that if [these stores can reach] equal to or higher quality than that of supermarkets and the price can be lower, their comparative advantage is inevitably going to increase.

“It is possible for supermarkets to step up though – strategies such as adjusting prices, ensuring deliciousness, providing that handmade feeling, and even adding good beverage products can all help, and perhaps even providing a home delivery service may be effective.”

That said, the industry was also warned to not engage in price wars but ensure high product quality, as well as to ensure localised services.

“Rather than engaging in price reduction competitions with others, supermarkets will find the provision of detailed services closely related and tailored for the region they are in to be the more sustainable and superior strategy,” said NSAJ.

“Based on our research, when choosing the stores they shop at, consumers find it ‘very important’ the location/access is good (57.8%), that prices are reasonable (56.1%), that product quality is good (51.2%) and that there is a good assortment of choices (45.8%) [so] it is imperative that supermarkets differentiate themselves in these ways to stand out.”

Supermarket Good Action Initiatives

Based on joint research between NSAJ and Shukutoku University, the report also called for supermarkets to adopt ‘Good Action Initiatives’, which are essentially a set of sustainable business objectives adapted for the supermarket industry.

“We propose that supermarkets consider following the Supermarket Good Action Initiatives as a new strategy, [as these have been designed] to target the ‘experience value’ and ‘social value’ they can bring [and will help with demonstrating] companies’ sustainable and stable management,” said NSAJ.

“Here, we are proposing concrete goals such as enabling consumers to purchase products with confidence, building good partnerships with business partners, solving problems in the community, demonstrating stable business continuity and so on.

“Related efforts would span initiatives such as shop construction, community contributions, disaster response, support for reconstruction, in-store COVID-19 countermeasures etc. We urge supermarkets to consider these as a new form of healthy competition [and strategic growth].”