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No. 359, August 1999

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American Companies in Japan


MERCHANDISING

BLOCKBUSTER INC. might be synonymous with video rentals in the United States, but the company found Japan tough going. Eight years after moving into the market, the VIACOM INC. unit has called it quits. In that time, it opened just 40 of 1,000 planned stores and lost money in 1998 on revenues of roughly $25 million. Blockbuster sold its half interest in the company running the chain to partner FUJITA & CO., LTD., which also is a part owner of MCDONALD'S CO. (JAPAN) LTD. Analysts partly blame Blockbuster's failure to expand as rapidly as it had planned to its preference for opening large stores in prime commercial districts.

One American superstore operator has concluded that the big-box retailing concept is not the most appropriate for Japan, where prime commercial space in major cities is extraordinarily expensive. For the time being at least, OFFICE DEPOT, INC., which took over its subsidiary this past spring (see Japan-U.S. Business Report No. 355, April 1999, p. 19), plans to open discount office supply stores that have roughly 5,400 square feet of selling space rather than multiples of this figure. Three stores that recently were opened in central Tokyo fall into that new size class. Their location in busy business areas of the capital also reflects a decision by the world's largest seller of office products to limit its expansion to the Tokyo metropolitan area.

The 83rd TOYS "R" US INC. store in Japan, located in Sakai, Osaka prefecture, has opened its doors. Like other recent additions to the chain, this 21,500-square-foot facility has a different floor plan than older stores, one intended to make it easier for customers to find specific products. Similarly, the Sakai outlet houses a Babies "R" Us section. At the same time as it opens new stores, Toys"R" Us's subsidiary is starting to renovate some of its oldest locations. For certain stores, like two in Kyoto prefecture, that process includes converting about 20 percent to 25 percent of the selling space to the Babies "R" Us format.

An exchange rate of ¥120=$1.00 was used in this report.aaaaaa

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