Special Feature 1 Earnings Expansion：Providing new value while staying attuned to customer needs and addressing changes
Sumitomo Corporation's Retail Strategy
Japan's consumer market is considered to be quite mature in comparison to those of rapidly growing emerging countries. However, Japan's consumer market, valued at approximately ¥135 trillion, still remains one of the world's largest and most robust markets.
Sumitomo Corporation considers retail a strategic business in the fertile ground that is the Japanese market. We have developed and cultivated a broad range of retail businesses, including supermarket, drugstore, luxury brand, TV shopping, and cable TV businesses. Our retail operations also include cellular phone sales and household goods e-commerce.
In our retail businesses, Sumitomo Corporation is currently pursuing a multi-channel retail strategy. This strategy is designed to maximize earnings opportuni- ties by providing products and services to individual consumers through various channels, including brick-and-mortar retailers, TV, the Internet and mobile phones. Furthermore, under this unique strategy, Sumitomo Corporation has developed a distinctive business model among general trading companies. Our operating companies are industry-leading businesses in their respective fields of media, IT and retail, while collaborating and combining their strengths across business sector boundaries to create and provide new forms of value.
Going forward, Sumitomo Corporation will continue working to enlarge its retail business in the Japanese market. At the same time, we have begun extending our successful business models developed in Japan to overseas markets, with a view to enhancing our future earnings base.
Cultivating Businesses in Japan: TV Shopping by Jupiter Shop Channel
Jupiter Shop Channel Co., Ltd. (SHOP) is a TV shopping company, with a top share of the Japanese TV shopping market. As such, SHOP is an operating company central to Sumitomo Corporation's multi-channel retail strategy. Sumitomo Corporation launched SHOP together with U.S. partner companies in an effort to bring the U.S.-developed TV shopping business model to Japan. Thereafter, Sumitomo Corporation continued to support SHOP by actively utilizing the Sumitomo Corporation Group's various capabilities, such as logistics, media and IT, in addition to allocating resources such as capital and personnel.
Although it has achieved an industry-leading position today, initially SHOP faced a process of continual trial and error. During this phase, SHOP was guided by an intense curiosity to uncover fascinating products and enjoyable programs that would delight customers. SHOP implemented a range of measures, such as developing its own unique lineup of products, which closely matched the preferences of Japanese consumers, and expanding live broadcasting hours. In addition, by leveraging its own TV studio and dedicated call center, SHOP could structure programs and replace products according to trends in product sales. Another initiative was to produce programs featuring on-air communication between the program host and customers.
Through these and other initiatives, SHOP established a solid growth path. Thereafter, SHOP has continuously refined its services to match customer needs through a range of initiatives, including the start of 24-hour live broadcasting, the expansion of its call center, the introduction of new customer service systems, and the start of operations at a state-of-the-art logistics center. Other measures include enhancing product planning and quality assurance and the start of Internet-based sales.
As with SHOP, Sumitomo Corporation guides its businesses to growth by becoming deeply involved in operations and leveraging extensive expertise in retail operations and capabilities as a trading company. In particular, our expertise in retail comes from a broad range of operations, including product planning, marketing, and brand building skills, while our capabilities as a trading company include product procurement, inventory management and logistics operations. By leveraging these existing capabilities, we make them better, and the expertise gained through this turns into new strengths. The capabilities and strengths that Sumitomo Corporation has cultivated through its businesses become the driving force behind developing future business and the creation of a strong foundation in retail business.
MARKET (Sales Amount)
Notes:1. TV shopping market figures are from FUJI KEIZAI CO., LTD.'s “Mail Order and e-Commerce Business Status and Outlook 2011-2012 Market Edition”
2. Jupiter Shop Channel's figures included sales via the Internet and others, in addition to TV shopping sales
Extending Our Ability to Cultivate Businesses in Emerging Countries
In China and other emerging countries across Asia, where rapid economic development is under way, consumer markets have expanded rapidly in step with growth in middle-income consumers. Looking towards the establishment of a future earnings base, Sumitomo Corporation will extend its ability to cultivate businesses, which were acquired through experience with retail operations in Japan, across these emerging countries, with the aim of achieving further growth.
In the TV shopping business, we aim to capitalize on trends shaping the markets of emerging countries, such as growing populations, improving income levels, and increasingly diverse consumption activity. Eyeing prominent local companies as possible business partners, we will conduct specific discussions aimed at developing overseas business operations.
In the household goods e-commerce business, Sumitomo Corporation established Sumisho E-commerce Shanghai Ltd. and PT Sumisho E-commerce Indonesia in fiscal 2011, with the aim of expanding business in China and Indonesia. In addition to network technology and IT knowledge, we aim to harness our trading company capabilities and expertise developed through our e-commerce business in Japan to expand e-commerce operations to other regions worldwide, primarily in Asia. Our goal is to increase our earnings base on a global level.
In the drugstore business, Sumitomo Corporation has established a joint venture with Mercuries & Associates, Ltd., a leading Taiwanese company, and has agreed to open a drugstore in Taipei. Mercuries & Associates operates a broad range of retail businesses, such as department stores and supermarkets, in Taiwan and China. This agreement will bring together this partner's local capabilities in logistics and product procurement and Sumitomo Corporation's strengths developed in Japan, such as the product lineup and store layout of Tomod's drugstores, along with sales promotion expertise. This will allow us to create and offer distinctive added value to customers in Taiwan.
Looking ahead, we will continue to explore the development of overseas business operations in other business fields, as we develop a future earnings base that will drive medium-term growth.
Markets being considered for overseas expansion