Japan's Retailers Expand Private-Label Products to Combat Inflation

Table of Contents

1. Key Highlights
2. Introduction
3. The Rise of Private-Label Products
4. Consumer Behavior and Market Trends
5. Implications for Retail and Future Developments
6. Conclusion
7. FAQ

Key Highlights

• Retail giants Aeon and Ito-Yokado are increasing their lines of private-label products to attract cost-conscious consumers amidst rising food prices.
• Aeon has introduced affordable frozen meals and reduced prices on core items, while Ito-Yokado has added gyoza and dashi soup stock to its lineup.
• The trend shows a growing consumer shift towards private-label goods, driven by economic pressures and expectations for lower prices.

Introduction

In a time of economic uncertainty characterized by soaring prices, Japanese consumers are increasingly turning towards private-label products as a more affordable alternative to name-brand items. According to Teikoku Databank, prices for over 4,200 food and beverage products are set to rise in April 2025, pushing retailers to rethink their strategies. This shift is not just about savings; it reflects changing consumer preferences and creates an opportunity for retailers to attract a larger market share by offering budget-friendly options.

With major retailers like Aeon and Ito-Yokado leading the charge, private-label products are becoming household staples, allowing consumers to maintain their purchasing habits amidst inflation. This article examines how these retailers are adapting to consumer demand by expanding their private-label offerings and what this means for the future of retail in Japan.

The Rise of Private-Label Products

Private-label products, developed in collaboration with manufacturers, offer retailers a significant advantage—lower advertising and promotion costs that allow them to sell at prices significantly less than those of name-brand products. This strategy becomes increasingly important in an inflationary environment where consumers are actively looking for ways to economize.

Aeon’s New Offerings

Aeon, one of Japan's largest retail groups, has recently launched a series of frozen bento meals priced at ¥321 (approximately $2.20). These meals include options like peperoncino pasta paired with hamburger steak in tomato sauce, targeting those looking for convenience without straining their budgets.

Moreover, Aeon is reducing prices on 75 items in its Topvalu private-brand range, offering reductions of between 4% and 21%. For instance, the cost of its 900-gram bottled cooking oil has decreased from ¥257 to ¥246, which could significantly appeal to consumers over time as inflation continues.

Ito-Yokado’s Strategy

Similarly, Ito-Yokado is doubling down on its private-label strategy by increasing its “Seven the Price” product line by 10%. Among these new offerings is a package of 20 gyoza (dumplings made with leftover cabbage) priced at ¥321. The retailer has also simplified the packaging of its 750g dashi soup stock, bringing the price down to ¥645 without compromising on quality.

An Ito-Yokado official stated that their private-label products are generally 10% to 20% cheaper than brand-name alternatives, making them highly attractive to price-sensitive consumers.

Consumer Behavior and Market Trends

The push for private-label products comes as research shows that as consumer price indices rise, the proportion of private-label goods purchased increases. A Lawson representative noted that expectations for these items are only growing. Known for its own-brand products, Lawson recently revamped its series after five years, introducing newly designed packaging for items such as onigiri rice balls and desserts to better compete against name brands.

This shift in strategy showcases a timely response to consumer needs, as shoppers increasingly sacrifice brand loyalty for affordability.

Historical Context of Branding in Japan

The phenomenon of retailers investing in private-label products isn't entirely new in Japan, but it has gained prominence over the past decade as economic pressures have mounted. Historically, Japanese consumers placed a high value on brand trust, especially regarding food products. However, the recent economic climate, worsened by the COVID-19 pandemic and global supply chain disruptions, has reshaped consumer priorities, swaying them toward value-driven purchasing. This trend traces back to the early 2000s when major retailers began to explore private-label offerings significantly, but it has accelerated in response to current inflationary pressures.

Implications for Retail and Future Developments

As retailers like Aeon and Ito-Yokado continue to solidify their positions in the private-label market, several implications emerge not just for these companies, but for the retail landscape in Japan as a whole.

1. Increased Competition Among Retailers: With retailers focusing on private-label products, competition is likely to escalate. This may lead to a price war where companies undercut each other to capture a larger share of the price-sensitive market.

2. Changing Consumer Expectations: As consumers grow accustomed to the variety and affordability of private-label goods, their expectations for quality will also rise. Retailers will need to invest in product development to ensure that private-label items meet or exceed the quality of name-brand equivalents.

3. Innovation in Marketing and Branding: The reduced focus on traditional advertising for private-label goods may compel retailers to explore alternative marketing strategies, such as digital engagement and in-store promotions, that drive customer awareness and loyalty without the high costs associated with traditional campaigns.

4. Long-term Retail Strategies: As inflation persists, the growth of private-label products may alter long-term retail strategies, with companies potentially reallocating resources to bolster their own brands rather than relying on third-party suppliers.

5. Evaluation of Cost Management: Success in this domain requires effective cost management strategies, compelling retailers to streamline operations and supply chains to maintain profitability while offering lower prices.

Case Studies of Successful Strategies

To better illustrate the significance of these strategies, consider the example of 7-Eleven Japan, which has long excelled in developing a comprehensive private-label strategy. Over the years, 7-Eleven has embraced a model where its in-house products not only match but often exceed the quality of name-brand alternatives. For instance, their “Seven Premium” range offers a vast suite of products from snacks to household essentials, consistently attracting budget-conscious consumers and reinforcing brand loyalty.

By studying 7-Eleven's success, Aeon and Ito-Yokado can glean insights into efficient inventory management and responsive product development that allows them to adapt quickly to shifts in consumer taste.

Conclusion

The current trend among Japanese retailers to expand their private-label offerings is not merely a response to inflation but a reflection of shifting consumer behavior and preferences. With retailers like Aeon and Ito-Yokado leading the way, the market is poised for transformation, one where affordability and quality coexist.

As the landscape evolves, the focus will likely remain on delivering value to consumers while navigating the challenges posed by inflation. Retailers that successfully leverage their private-brand strategies will emerge stronger, adapting not only to financial constraints but also to a new era of consumer expectations.

FAQ

What are private-label products?
Private-label products are items branded by a retailer but produced by another company, allowing retailers to sell them at lower prices compared to national brands.

Why are private-label products becoming popular in Japan?
Amid rising prices, consumers are seeking more affordable alternatives, leading to increased purchases of private-label products.

How do private-label prices compare to brand-name products?
Private-label products are generally 10% to 20% cheaper than their brand-name counterparts, making them appealing during times of economic hardship.

What strategies are retailers using to promote private-label products?
Retailers are introducing new product lines, reducing prices, and redesigning packaging to enhance visibility and consumer appeal.

What future developments can we expect in the private-label market?
Retailers are likely to increase competition, enhance product quality and marketing efforts, and adapt their brand strategies in response to evolving consumer expectations.