The 100-Yen Shop

When the Japanese "bubble economy" burst dramatically at the end of the 1980s, a business writer noted that 100 yen (roughly $1) could no longer buy what it used to.

Japan is well-known for its high cost of living. Land on the Ginza, generally considered to be the most expensive shopping real estate in the world, was assessed at 13.76 million yen per square meter in 2003 (more than a 50 percent decline from its high in 1992), and the grounds of the Imperial Palace are rumored to be worth more than all the real estate in California. Amid such economic rarities, the economic crash spelled disaster for the average shopper, whose paycheck and annual bonus shrank, if one kept his or her job at all. The unemployment rate soared to a record 5.5 percent, the highest since the end of World War II.

Department stores and supermarkets, where the nouveau riche shopped during the boom years, fell on hard times. Seibu, a major player, closed several stores and Daiei, a once popular outlet for quality goods at reasonable prices, is in the news every day as it battles insolvency. Its president, Kunio Takagi, recently resigned after failing to find support at a government agency to help Daiei restructure its way to profitability. In the next few months, as many as 27,000 people could lose their jobs.

In the face of this economic carnage, one slice of the retail sector stands out: the hyaku-en shop (100-yen shop), the Japanese equivalent of the dollar store.

Entrepreneurs with the foresight to spot this niche have gone where no department store has recently gone: the glorified realm of profitability. The five largest hyaku-en companies have seen gross revenues of 500 billion yen ($50 million) and a 22 percent increase in profit when compared to the previous year.

Before the boom, the press depicted hyaku-en shops as itinerant businesses with unsavory aspects, scavenging up their merchandise from reputable companies that had gone bankrupt. Finding a good buy at the expense of someone who had lost his or her job, however, was not exactly the shopping experience customers were striving for, and most shoppers, driven by brand loyalty, steered clear.

But the press has gotten friendlier in recent years, and today no shopper feels guilty about finding a good buy. Some hyaku-en shops have their own line of goods. Seira, a hyaku-en shop leader with headquarters in Gaki, Gifu prefecture, is listed on the JASDAQ and has 2,400 stores.

On display in the typical hyaku-en shop is an eye-popping array of merchandise, which makes one wonder why department stores charge so much for similar items. The shops stock everything from women's underwear and lipstick, to USB cords and electric toothbrushes, to ping-pong paddles and pedometers. Plastic buckets and shelves, plates, cups and glasses, along with everyday kitchen necessities, towels and detergents are the big sellers. Snacks (such as candies, instant soups and canned drinks) produce little profit but are necessary to attract customers.

In the beginning of the hyaku-en shop boom, most were located in high traffic areas — near train stations or in sheltered pedestrian malls — but they have begun to pop up in the suburbs and along busy highways, tucked next to car dealers and the ubiquitous pachinko parlor. The merchandise has also evolved, with food — canned meats, dried soups, noodles, candies, and spices — taking up shelf space.

Where seedy characters once went to find bargains, there are now business people on a budget, shopping for notebooks, pens, and pencils or snacks for the office staff. The merchandise is all attractively displayed, not piled up in cardboard boxes or strewn down the aisle. Shoppers do have to bag their own prizes, wrapping up things like plates and saucers in newspapers.

Once-arrogant department store executives who had it good when money was plentiful have learned from the competition, setting up hyaku-en shops within their stores in an attempt to lure back customers.

And in another mark of imitation and competitive fervor, 95 and 99 yen shops have begun to sprout up, selling fresh vegetables and eggs. These latest upstarts make the once-shadowy hyaku-en shop appear mainstream — almost traditional — in comparison.

— James Roth (j dot roth dot mail at gmail dot com)