Pragmatic, low-cost products remain popular in Japan

A fever of "price discounts" swept Japan after the bursting of "bubble economy" in the early 1990s. Consumers sought for cheap products as their salaried income declined and real estate prices plunged. "Big discount" became a buzzword of the time. Back then, newspapers were awash with stories about a tobacco retailer in Osaka that gave away a can of beer for purchase of a carton of cigarette, to increase sales by 10 folds, and about a men’s suit franchise store, which sold a suit for 2500 yen (22 dollars), a markdown of 80 percent to 90 percent, to see brisk sales. Supermarkets, restaurants, bars and moving companies joined the race to cut costs and income, and participated in the discount boom.

Consumption trend changed a bit since the mid-1990s. Consumers who would previously open up their wallet to buy cheap items started to go after "quality." As a result, Japan ushered in an era when companies that cut down prices excessively at their own costs started collapsing, while "sustainable, low-priced products" survived.

MacDonald Japan lowered the price of its hamburger in July 1998 from 130 yen (1.14 dollars) to 65 yen (5.7 dollars). Critics criticized the company saying that it could go out of business, but the result of a two-month trial was amazing. Hamburgers whose price was cut in half sold 9.6 times more year-on-year. The strategy of "low price, high volume" thus worked. The halved-price hamburger was also a kind of bait for consumers. When consumers bought a hamburger, they often bought beverage and French fries as well, enabling the restaurant to earn more profit.

More companies have survived despite sharply cutting prices of their products. As a result of prolonged economic recession in Japan, 100 Yen Shop, Uniqlo, and Yoshinoya, a restaurant serving low-price bowls of rice served with toppings, and 1,000 (8.8 dollars) Yen beauty parlor are "hit products." They would be called "pragmatic performance" products given that they were considered low cost but competitive in quality.

"For successful 'pragmatic performance' products, compression of production costs, international procurement of raw materials and intermediate parts, cost cutting, bait-based marketing, and pricing in consideration of consumers are prerequisites," say marketing experts.

도쿄=서영아특파원 sya@donga.com