Japan’s packaging industry and their brand owner customer – the FMCG (fast moving consumer goods manufacturer) – are being forced to dramatically change their formats, portion sizes and deploy new technologies such as light-weighting and downsizing their product offerings in order to secure a place on the retail shelves of the world’s second largest consumer market.

According to Stuart Hoggard, author of "Zen & the Technology of Packaging in Japan," a new market trends report from Singapore-based Asian packaging publisher EP Resources Pte Ltd, this has to do with the evolving retail landscape in the country that has changed consumer shopping patterns.

The weekly consumer-shopping trip is now uncommon in Japan. Driven by the rapid incursion of convenience stores into the suburbs, today’s Japanese consumer prefers to spread purchases across the week, dropping in to their neighbourhood convenience store to pick up a few items on the way to or from work, often more than once a day.

“For more than a decade, big city centre department stores and supermarkets have been losing market share,” says Hoggard. “The ‘big three’ retailers, FamilyMart, Lawsons and Seven &I (7-Eleven), have been investing in opening convenience stores – konbinis, as they are known in Japan – with an average floor area of less than 100 square meters (1,076 sq ft).

The revolution of smaller format stores

“By 2020, most urban Japanese will live no further than 200 meters from a convenience store operated by one of the three operators.”

Japanese consumers are developing an increasing preference for shopping in smaller volumes and closer to home. Before the Tsunami of 2011, the main retail chains operated a total of 41,663 convenience stores. In 2012, that increased by 13.4% to 48,139; another 3,700 new stores opened by 2013, bringing the total number of convenience stores in Japan to 56,820.

This revolution in smaller format stores means less shelf-space. Yet for a convenience store to be really convenient, it has to carry a wide product range but fewer SKUs. Retailers are aggressively deploying Just-In-Time (JIT) supply chain management and exerting pressure on their suppliers for smaller product shipments that can be unpacked faster, are easily stacked and displayed, and generate less in-store packaging waste which has to be disposed of.

Hoggard explains, “Konbinis operate a computer modelling system known as TPO: Time Place Occasion - basically predictive technology that operates in real time.

“The TPO system is fundamental to the expansion of these mega retail chains. This means delivering the correct product to the consumer at the correct place to match the specific occasion when the right problem is solved at the right time with a well-thought-out package in the exact outlet where it is needed.”

Stores are serviced by delivery-vans several times a day, bringing stock for each customer profiles: the early morning salaryman on the way to work, school children on their lunch break, housewives popping in for ingredients for the evening meal etc.

“Each neighbourhood store location is minutely demographically profiled and since the cash-registers are hooked up to a central system, adjustments to deliveries can be made throughout the day, with shelf stock often being turned over two or three times to suit the next wave of customers, ” says Hoggard.

What this means for the packaging industry is a demand for product in smaller packages. “Limited shelf-space means limited linear, or horizontal, product display space. Therefore packs typically taller but with a narrower footprint,” says Hoggard.

“Getting the TPO marketing mix right in Japan means that gaining consumer ‘delight’ and brand loyalty are logical results. But as many Western product manufacturers and retailers have discovered, misunderstanding the system means that the entire TPO platform strategy fails – this may be something as simple as attempting to sell a larger portion detergent in a convenience store where shoppers are looking for small packets that are easy to carry home. “

Logistics challenge

Changes in secondary transport packaging are also subject to the new retail environment, according to Hoggard: “With several deliveries throughout the day, and little or no in-store storage space, retailers require smaller cartons.

“As a retail chain, they are still ordering the same total product volume, but with streamlined logistics chain and multiple daily deliveries per store, they now require product to be packed in smaller, store-size units for onward distribution through their logistics chain.

“With no space to store empty corrugated cartons, retailers are demanding attractively printed shelf-ready packaging, where the whole carton top and front can easily be tugged off, and the product placed on the shelf still in its carton - saving staff time replenishing shelf stock, and space since there are no empty brown corrugated boxes to be flattened and stored somewhere till the next delivery truck can take them away,” he added.

The impact of this evolving retail landscape on the packaging industry is analysed in detail in the forthcoming 280-page report, "Zen & The Technology of Japanese Packaging Design."