With today's difficult economic environment, a lot of Japanese consumers have been pinching pennies more than ever before (well, pinching yen anyway). As a result, major Japanese supermarket chains have been slashing prices, and this has put a lot of pressure on smaller operators who lack the same economies of scale and bargaining power with suppliers.
But a couple of smaller chains have stopped wringing their hands, and have been fighting back with a clever approach: subsidized price cuts.
Here's how it works:
Let's say a supermarket chain wants draw people into stores with an outrageous sale on certain items (TODAY ONLY! 90% OFF!). In order to subsidize the promotion, which is going to mean a significant loss on every sale item sold, the company finds another retailer who wants to reach their customers with non-competing goods. In exchange for promotional fees, the second firm gets to have its mini ads, coupons or promotional announcements placed directly on the supermarket's sale item packaging (using stickers), as well as on merchandising tools like POP. So every time a shopper buys, he or she encounters the second retailer as well.
It's a situation where everyone can win: supermarkets draw more consumers, consumers get super-inexpensive sale items and special deals on secondary products, and the partner retailer taps into a new customer base.
