Business practice by Japanese Consumer Co-operatives

1. Business practice by Japanese Consumer Co-operatives Conference on Strategic Business Alliances among Co-operatives 5-6September 2011 Japanese Consumers’ Co-operative Union

2. Contents 1. Rapid Change of Japanese Society 2. Co-op Business Outline 3. Business Federations 4. Conclusion

3. Rapid change of Japanese society *Japanese population is deacreasing and fast-aging while world population increases, resulting in quantitative reduction of markets *More than half of the households consist of one or two members *Increase of dual-income households and advancement of women’s participation in the society *Increase of low income households

4. Demographic change in the world The world population will increase to more than 2.5 billion by 2050. *Increase of World population In twenty-five years from 2000, The world population is expected to gain an additional 1.8 billion (04 demographic shifts by UN) *Decrease of Japanese population • The advancement of aging society • Rural migrant to cities

5. Changes in Japanese population In 2005, Japanese population started to decline

6. Changes in family composition By 2010, about 50% households became a family of one or two (Unit:10,000 households) • Others • One person household • Only husband & wife • Single mother/father • Standard family

7. Changes in aging ratio By 2050 the percentage of senior citizen will be 35.9 being the highest in the world

8. Distribution & Retailing Situation of retailing in Japan Business to sell commodities or goods purchased from producers (or wholesalers) directly to consumers Family-owned shop Fish store, greengrocery Supermarket Stores mainly sell food Convenience store Department store CO・OP (Store, Home Delivery) Home center Specialty store Cloth, electronics, camera Drugstore Superstore * All business types consist of self-service style stores, except family owned shops

9. Brief history of the retail industry • Late 1970s-1980s • Rise of GM stores & first open of CVS Seven-Eleven(1974) • 1990s • Bankruptcy of some established GMS companies • Slow down of economic growth • Retail industry entered the competitive age • Rise in consumption tax from 3% to 5% (1997) • Japanese retailers expanded business overseas • Large scale stores opened in the suburb (expansion of SC) • 2000s • Intensive business maneuvering & development of new types • of business • Number of CVS stores exceeded 10 thousand • Foreign retailers vigorously entered Japan.

10. Foreign retailers in Japan Toysrus (toys), the US, entered in 1993 Costco (wholesale for members), the US, in 1999 Wal-Mart (supermarket), the US, entered in 2002 Metro (wholesale for members), Germany, in 2002 Tesco (supermarket), the UK, entered in 2003 IKEA (furniture), Sweden, entered in 2006

11. Japanese Big Players USD64bln USD63bln USD41.9bln Co-op Market Share: 5.2%(Food) *Food retail (Source: The Food Journal) 2008 data

12. Co-op values & mission • Our values and principles drive the • way co-op do business • We do business to enrich members • life and create a mutually beneficial • society

13. Co-op values & mission • We offer products that lead to • solutions of various issues centering • around food and daily life • We promote mutual understanding • between producers and co-op • members

14. Co-op values & mission • We aim to build a society that is • friendly to the environment and to • the community on the basis of • mutual support • We provide full information services • that serve as tips for reasonable and • healthy lifestyle

15. ▼Co-op Social & Environmental Activities 震災１ • Social Activities • pursuing food safety • dietary education • disaster aid support • consumer problems • 2. Environmental Activities • environmental preservation • activities tackling climate change • “my bag campaign”

16. Co-op members • Co-op members’ three major roles to play • Investing (share capital) • Patronizing (using co-op facilities) • Participating (in management and co-op activities) • *Restriction on consumer co-ops by co-op law • Japanese consumer co-ops can do business only with co-op members.

17. Outline of Consumer Co-op Number of JCCU member co-ops 596 co-ops (Community retail co-op: 151) Total membership 26.31 million (Community retail: 19.03mil.) Total business amount US$41.53bil. (Community retail: $31.49bil.) *Market share in Food 5.2%

18. 経 年 比 較 Who is Co-op Member?　　　～from Co-op member attitude survey～ ①Increasing of pension generation（more senior） ②Slower growth of household income（decrease）

19. Child raising38% Senior 56% Child raising 64% Senior 35% Adverse change: senior and child raising Who is Co-op Member?

20. Changes in average share capital & monthly purchase per member

21. Co-op Stores Home Delivery Service Business Outline • Retailing • Catalogue & Internet Business Clothes, Furniture, Household, Gifts, others • Welfare Business Nursing-care service, Medical service • Co-op Insurance Medical, Life, Fire 7.1 million policyholders • Others Housing, Travel, Funeral service, etc.

22. Co-op Store overview Co-op Kanagawa Co-op Kanagawa Toyota Co-op Osaka Izumi Co-op

23. Home delivery business • Merit: • household budgeting becomes easier • impulsive shopping is kept to a • minimum since members must plan • their purchases ahead of time

24. Retail Sales: community retail co-op

25. National Business FederationJ.C.C.U. JCCU develops / provides • CO・OPbrand products • Catalogue marketing • Internet infrastructure • Logistics network • Management guidance • Training & Education

26. CO・OP brand products

27. Co-op tele-shopping(retailing through catalogue &internet) • Domain: • 1. Clothing • 2. Household appliances • Number co-ops engaged: 115 • Mode of distribution: home delivery • Supply to 7.3 million members at • one delivery • Turnover: 84.8 billion yen (2010)

28. Co-op tele-shopping (retailing through catalogue &internet) • Domain: • 3. Gift Items • Number co-ops engaged: 17 • Mode of distribution: • home delivery & store • Supply to 2.1 million members • through home delivery • For store delivery: supply 190,000 • Turnover: 7.5 billion yen (2010)

29. Distribution channel Information flow Member co-ops Suppliers Supply report CEC Order Placement JCCU DC Each DC of JCCU delivers the products to the member co-ops CEC: ordering, account & payment confirmation function

30. Logistics network

31. Logistics network ～ JCCU Distribution Centers～ Tohoku 1 Kansai・Chugoku2 Kanto 7 Tokai5 Kyushu 4

32. Regional business federations Sapporo Kobe SUN NET COOP NET Hokuriku CS NET TO KAI Pal system U-COOP KINKI KYU-SHU

33. Regional Business Federation

34. Business Federation Advantage of business federation: 1)Reduce operational & management cost 2) Share facilities 3)Develop co-op products to be used by all members 4) Cost reduction by volume efficiency 5) Share information in case of accident 6)Promotion of effective logistics

35. Challenges in Co-op Business 1) Assuring product safety 2) Improve quality of integration within each business federation 3) Acceleration of cost reduction in all the business alliance 4) Competitive store operation 5) Building supply chain management structure 6) New Marketing strategy to meet the changing society

36. Thank you for your attentionhttp://jccu.coop/eng/