Ten thousand words to explain Lopia: Japan's version of Costco, single-store revenue exceeds 600 million, how did the king of Japan's meat discount supermarkets come into being?

Starting out as a butcher shop, Lopia has become the king of discount meat supermarkets in Japan through continuous transformation and innovation. This article analyzes in detail the strategic adjustments made by Lopia at different stages of development, including how it transformed from a traditional butcher shop to a comprehensive fresh food supermarket, and then to a discount fresh food supermarket, as well as its unique approach to supply chain management, cost control, brand building and marketing strategy.

Have you ever wondered why, in county towns, there is a snack shop every few steps, and there are more and more discounts on snacks, but there are no successful supermarket discount brands in the meat and fresh food categories with higher customer unit prices, more rigid needs, and higher frequency? What is the reason?

First of all, they are facing the impact of online shopping. E-commerce giants are all planning to develop fresh food. Meituan is relying on big data to develop Xiaoxiang Supermarket, Duoduo is relying on the traffic of its main site to develop the sinking market, and JD.com relies on the model of offline supermarkets + self-operated forward warehouses + e-commerce platforms. With its strong scale supply chain advantages and powerful logistics system, JD.com has achieved the goal of providing fresh food with both low prices and fast delivery.

In addition, offline community fresh food stores have successfully attracted a large number of loyal customers by virtue of their proximity to the community, accessibility within five minutes, and convenient selection.

Under such circumstances, traditional fresh food supermarkets and shopping malls have fallen into a dilemma of being squeezed from both sides by e-commerce and community fresh food. Even Yonghui Supermarket, the "No. 1 fresh food stock", has been losing money year after year and has fallen into an operational dilemma. Even though Pang Donglai, a model student of hard discounts, has provided discount guidance some time ago, the effect is not very ideal. Even though Miniso, whose business model is similar to Japanese discount brands Daiso and Seria, acquired a stake in Yonghui in September 2014, the market is still waiting to see whether Ye Guofu can successfully transform Yonghui.

However, in the current situation where all industries, including food, home furnishings, and home appliances, are being discounted, the transformation towards discounts seems to be an inevitable path for China's fresh food supermarket industry. On the one hand, the uncertainty of the economic environment has made consumers more sensitive to prices, and everyone is pursuing a more cost-effective shopping experience; on the other hand, through the transformation towards discounts, fresh food supermarkets can optimize their cost structure and improve operational efficiency, thereby revitalizing the already dying traditional supermarket industry.

However, even Pang Donglai, who personally guided Yonghui's discount transformation, gave up halfway. Is the discount transformation of fresh food supermarkets a false proposition?

Can they follow the example of snack shops and transform into discount stores? What are the difficulties and key points of fresh food supermarkets’ transformation into discount stores?

In fact, in the fresh food sector in Japan, there is a Lopia supermarket, which is a model of the discount transformation of Chinese fresh food supermarkets.

Since the first year of transformation, Lopia has maintained a strong growth momentum. Its year-on-year growth in fresh food has ranked first in the country for five consecutive years. Its turnover has increased from RMB 1.8 billion in 2009 to RMB 17 billion in 2023, with a compound annual growth rate of 21%. It is one of the few Japanese retail companies that can maintain rapid growth and profitability. The average annual sales of a single store can reach RMB 230 million. Each employee can contribute about RMB 10 million in sales revenue each year, and the labor efficiency is twice the average level of the Japanese retail industry.

As a model of discount fresh food in Japan, Lopia's success is definitely not accidental. How did it succeed in the Japanese market with infinite involution? What is the significance of Lopia's development history and business strategy for the transformation of Chinese fresh food supermarkets into discount supermarkets?

Today we continue our series on "Crossing the River by Feeling the Way in Japan". By analyzing the successful path of Lopia's discount transformation, especially the problems encountered and solutions at each key stage, we will provide some transformation experiences and business inspirations that can be used as reference for China's traditional retail industry, especially supermarkets and stores that mainly sell fresh food.

Through the 54-year and three-stage development history of Lopia, we can see how it developed from a butcher shop to the king of fresh produce in Japan.

Lopia 54 years, three stages of development

Phase One: (1971 – 1994) Starting from a butcher shop and entering the fresh food retail market!

In the early 1970s, Japan's economy was in a golden period of rapid development, and per capita income rose rapidly. According to statistics from the Japanese Cabinet Office, the per capita income of Japanese people was US$1,940 in 1970. By 1990, it had grown to US$25,430, an increase of more than 10 times in just 20 years. The rapid rise in income has led to a significant change in consumer demand for food. In these 20 years, the Japanese have gone from satisfying basic food and clothing to pursuing a higher quality of life.

The most obvious sign of high-quality life is the public's increasing demand for fresh meat and the increasing frequency of purchases.

In such a market environment, in 1971, a young man named Hideo Takagi opened a butcher shop called "Niku no Takaraya" in Fujisawa City, Kanagawa Prefecture, focusing on the business of meat products.

However, as a new entrant into the market, "Meat Treasure House" faced competition from traditional butcher shops as soon as it opened. Japan is a country that is both innovative and conservative. There are nearly 40,000 century-old companies in Japan, accounting for 51.2% of the world's total, making it the country with the most century-old companies in the world. At that time, there were many traditional small butcher shops in Japan that had been in business for many years and had a fixed customer base. They maintained a certain market share by relying on their geographical advantages, the purchasing habits of old customers, and customer relationships; in addition, they faced competition from comprehensive supermarkets. These newly opened large-scale comprehensive supermarkets took advantage of their scale effect and diversified operations to include meat sales as one of their categories in their business scope, and attracted consumers with the help of overall brand power and rich product categories. Under such circumstances, the newly opened "Meat Treasure House" did not have as good customer relationships as traditional butcher shops, and its product richness was not as good as supermarkets that could purchase vegetables, meat, seafood, and daily chemicals in one stop.

Under their pressure, what kind of strategies did the "Meat House" rely on to grow and become stronger step by step in this gap?

Upgrade products according to the needs of consumption upgrades and differentiate from traditional butcher shops

The newly opened Meat Treasure House is completely unable to compete with comprehensive supermarkets to meet consumers' one-stop shopping needs. The first competitor that Hideo Takata locked on was the traditional butcher shop. These shops mainly meet the meat needs of residents in the surrounding communities, but since they are called traditional butcher shops, they are relatively conservative and have little market awareness. At that time, Japan's economy was developing rapidly, and per capita income increased significantly. The increase in income made the public need higher quality meat. Just like us, when our income is average, we buy farmed pork, but when our income increases, we want to buy some higher quality local pork or mountain black pigs. When traditional community butcher shops were still providing ordinary meat, Hideo Takagi, as a new entrant, keenly perceived the trend of consumer upgrading. He wanted to meet the needs that traditional butcher shops could not meet, and differentiate himself from traditional butcher shops, preparing to provide high-quality meat products.

At that time, traditional butcher shops were all delivered by suppliers. In order to ensure the high quality of the meat sold, Hideo Takagi visited ranches and meat suppliers from all over the country from the source, and gained an in-depth understanding of their breeding methods, feed quality, slaughtering and processing procedures, and other aspects. Through field visits, Rou De Bao Wu established its own set of meat screening standards. He purchased from the source and selected a group of ranches that adopted natural grazing and scientific feeding methods. Although the beef from these ranches is more expensive, the meat is more tender, the texture is clearer, and the fat-to-lean ratio is better. Compared with the beef from traditional butcher shops, it tastes better. These products have been well received as soon as they were launched.

Provide differentiated meat cutting services based on consumer demand

It is not enough to simply provide high-quality meat products. It is difficult to stand out from the competition. You also need some competitive advantages that are different from other stores.

Hideo Takagi observed that after consumers bought meat, they had to go home and process it again according to the food they were going to make. At that time, both butcher shops and comprehensive supermarkets in Japan only provided simple cutting. After seeing this, Hideo Takagi equipped the store with professional butchers. These butchers can provide precise and detailed cutting services according to the different cooking needs of customers. For example, for customers who like to eat hot pot, butchers can cut beef into thin slices of uniform thickness and appropriate size to facilitate customers to cook; for pork that needs to be stewed, it can be cut into blocks according to customer requirements, and appropriate meat cutting suggestions can be given according to different cooking methods of different dishes. This professional service greatly enhances the customer's shopping experience and allows customers to feel the professionalism and thoughtfulness that are different from traditional butcher shops and comprehensive supermarkets. By providing value-added services for meat processing, "Meat Treasure House" has gradually accumulated a good reputation in the local area.

Later, relying on the reputation it had accumulated locally, "Niku no Treasure House" gradually opened more than 10 branches and established a firm foothold in the local meat market.

In the first phase of its growth, Niku no Treasure House mainly targeted traditional butcher shops. As the saying goes, "pick the weak first". Niku no Treasure House relied on higher quality products and more considerate services to target traditional butcher shops with only one or two stores. However, it is impossible for a company to stay in the comfort zone created in the early stage. The only constant in the world is constant change. However, with the changes in Japan's economic environment and changes in consumer lifestyles, "Niku no Treasure House" had to transform, which also ushered in the second key stage of LOPIA.

The second stage: 1994-2009, the transition from a single butcher shop to a comprehensive fresh food supermarket

Around 1990, the proportion of people engaged in the tertiary industry in Japan reached 60%. Let me briefly explain what the tertiary industry means here. The prerequisites for the tertiary industry are the primary and secondary industries. The primary industry is agriculture, the secondary industry is industry, and the tertiary industry is the service industry. For example, if you go to the store to buy a piece of beef, the cattle breeder belongs to the primary industry, the slaughterhouse belongs to the secondary industry, and the butcher shop that sells meat belongs to the tertiary industry. Usually, the higher the proportion of the tertiary industry, the more developed the country's economy. In 2024, China's tertiary industry accounted for 54.37%, Japan's was 72.9%, and the United States' was 81.89%. The rapid economic development in the 1990s led to the rapid development of Japan's tertiary industry, and the continuous expansion of tertiary industry practitioners, such as white-collar workers and blue-collar workers in the service industry. They are busy with work, get off work late, have dinner after get off work, and go home late. For example, if I am a single person and want to cook my own meals, I need to go to the butcher shop to buy meat, the vegetable shop to buy vegetables, the fish shop to buy fish, and the rice shop to buy rice. To prepare all the ingredients for a meal, I need to go to four stores. For consumers, this is not time-efficient and purchasing-efficient either.

The fast pace of work has made consumers have higher requirements for the convenience of buying fresh food. During this period, comprehensive fresh food supermarkets were popular with consumers for their rich variety of goods. Chicken, duck, fish, rice, noodles, oil, daily chemicals, clothing, etc. can all be purchased in a one-stop shop in a comprehensive supermarket. Moreover, since comprehensive supermarkets purchase on a large scale, the unit price of products can be lower than that of butcher shops. Comprehensive supermarkets at this stage rose rapidly and replaced traditional farmers' markets and small butcher shops, becoming the mainstream trend of the market at that time. According to reports, when Japanese residents bought fresh food at that time, more than 70% preferred comprehensive fresh food supermarkets that could provide one-stop shopping to reduce shopping time and costs.

In contrast, the product variety of "Meat Treasure House" is too single and cannot meet the one-stop shopping needs of consumers. Compared with comprehensive fresh supermarkets, due to the limited scale of procurement, it is unable to obtain more competitive procurement prices, which directly leads to the lack of advantages in the price of its products. In addition, in terms of product standardization and quality control, although "Meat Treasure House" has a certain guarantee on the quality of meat, due to its small size and insufficient voice, it is difficult to ensure that each batch of goods can meet stable high-quality standards, which to a certain extent affects consumers' purchasing decisions and loyalty. Takagi Hideo realized that the fresh food industry is in the stage of transformation from traditional single-depth operation to comprehensive and convenient operation. If "Meat Treasure House" cannot adapt to market changes, it faces the risk of being eliminated.

Therefore, since 1994, "Meat Treasure House" has gradually added vegetables, fruits, cooked food, seafood and other categories on the basis of meat products, transformed into a comprehensive fresh food supermarket, and changed its name to "YUTAKARAYA", which means: a treasure house of abundance.

But as soon as the transformation began, Hideo Takagi soon encountered new problems.

Insufficient experience in category management

Different categories of fresh products have their own unique characteristics and management requirements. For example, for fruits, apples can be stored for more than a week without affecting sales, but strawberries cannot be sold if they are stored for more than two days. Another example is vegetables. Radishes can be placed for a week without affecting sales, but the leaves of green leafy vegetables may wilt after three days at room temperature. It’s just that the storage time and temperature of each product have different requirements for the preservation of fruits and vegetables. If a store has 20 kinds of vegetables, it will require 20 different preservation methods. If there are seafood, the preservation requirements are higher. There are requirements for temperature and humidity during storage and transportation. For example, marine fish generally have to be stored at a specific temperature, and the tasting period of freshwater fish may only be a few hours; cooked food involves management issues such as processing, shelf life and food safety. Takagi Hideo previously focused on meat operations for a long time and lacked management experience in other categories, which made it difficult to ensure the stable quality, continuity of supply and rationality of inventory of various products in the early stage, and often encountered problems such as out-of-stock or excessive loss of goods.

Difficulty in supply chain integration

In order to support the sales of multiple categories, it is necessary to establish cooperative relationships with different types of suppliers and integrate multiple supply chains. This means coordinating the work of many suppliers in multiple links such as procurement, distribution, and quality control, and facing many problems such as complex supplier management and inefficient logistics distribution. For example, when cooperating with vegetable and fruit wholesalers, seasonal changes may lead to unstable supply. For example, heavy rain in summer may interrupt the supply of vegetables in some areas; when cooperating with seafood distributors, it is necessary to solve the problem of poor cold chain transportation connection. If the temperature of the cold chain fluctuates during transportation, the freshness and quality of the seafood will be affected. These have brought considerable challenges to the operation of "Fengsheng's Treasure Pavilion".

In order to quickly and smoothly transform into a comprehensive fresh food supermarket and learn relevant management experience, Hideo Takagi adopted the strategy of inviting individual business owners such as vegetable and fruit wholesalers, seafood distributors and cooked food processors to settle in and operate.

These self-employed individuals have rich supply chain experience and mature sales experience in their respective fields. Their entry quickly enriched the product line of Fengsheng Treasures. For example, by inviting local fruit and vegetable wholesalers with a good reputation, they can provide fresh, diverse fruits and vegetables that meet the tastes of local consumers with their understanding of the origin, seasons and market demand; seafood distributors can use their own procurement network and professional fresh-keeping and transportation methods to ensure the freshness and quality of seafood products. Through this cooperation model, "Fengsheng Treasure Pavilion" quickly made up for its shortcomings and enriched its product categories in a short period of time. At the same time, in the process of cooperation with these self-employed individuals, it gradually learned their business management experience. After the transformation, Fengsheng's Treasure House has achieved remarkable results. Customers who used to only buy meat at "Meat Treasure House" have now become more loyal customers because they can buy other fresh products they need in the same supermarket; at the same time, the new categories have also attracted consumers who used to buy fruits, vegetables, seafood and other products elsewhere. As a result, sales have increased significantly, the customer base has continued to expand, and the variety of goods has become increasingly rich. It has also made an important step for "Fengsheng's Treasure House" to successfully transform from a simple meat specialty store to a comprehensive fresh supermarket.

Although this model quickly helped Fengsheng Treasure House achieve transformation in the short term, it also has drawbacks in the long run:

Increased management complexity

Fresh food supermarkets need to manage both existing fixed suppliers and a large number of individual business products. The lack of unified standards increases the complexity and cost of management.

Product quality is difficult to control

Each individual business has different standards for product quality. In order to ensure that customers can buy reliable products, Takata Hideo invested a lot of resources to monitor and inspect the goods provided by the individual businesses. Although a lot of manpower and material resources were spent, the effect was not outstanding. It was difficult for the individual businesses to fully implement the standards of the supermarket.

Brand image maintenance

The entry of individual businesses has brought diverse business styles, but also uneven service standards. In order to unify the standards, Hideo Takada's team needs to spend a lot of energy and time to maintain the brand image and positioning.

Therefore, after mastering the management of all product categories, Hideo Takagi weighed the pros and cons and began to take back the management rights of all categories. He changed the model of ordinary food, vegetables, cooked food and seafood from a settled in store to a direct sales model, and implemented them completely according to his own standards.

And build its own core competitiveness by optimizing the supply chain and logistics distribution system.

For example, in the procurement of vegetables, they replicate the experience of meat, purchase directly from the source, cooperate directly with large-scale planting bases, and select fruits and vegetables according to their own quality control standards.

For seafood, communicate the standards in advance, and cooperate with qualified fishing fleets and professional aquaculture suppliers to ensure the freshness and stability of the supply.

Logistics providers should establish their own logistics and distribution teams, improve logistics and distribution efficiency by rationally planning distribution routes, and ensure that all kinds of fresh products can be delivered to stores in a timely and fresh manner.

The implementation of this set of measures has reduced waste and risks in the middle links by directly connecting with upstream suppliers and optimizing distribution processes, improved overall operational results, better met consumers' demands for freshness and timeliness of fresh products, and enhanced the company's competitiveness.

With these measures, Takagi Hideo successfully transformed himself from a single butcher shop to a comprehensive fresh food supermarket; the company's performance is booming;

In 2007, there were about 21 stores of Fengsheng's Treasure House with annual sales of 18 billion yen.

At this time, "Fengsheng Treasure Pavilion" seemed to be in a prosperous period, but subsequent changes in the market environment gradually brought it to the brink of elimination, forcing it to transform in order to survive.

The third stage: 2011 to present, the transition from comprehensive fresh food supermarket to discount fresh food supermarket

2011 was a critical turning point for Lopia.

Since the Japanese real estate bubble, the Japanese economy has been in a long-term stagnation. According to data from the Ministry of Economy, Trade and Industry of Japan, from 1995 to 2010, the growth rate of real GDP per capita in Japan was low or even negative for a long time, and the growth of household income was almost stagnant, and consumers faced huge economic pressure. In this economic environment, people have become sensitive to the price of fresh food. Consumers are more cautious when shopping, and will carefully compare the prices between different stores. They tend to choose more affordable channels to buy, and people begin to reduce consumption of expensive channels or expensive fresh products. Taking beef as an example, affected by the economy, the annual consumption of beef in Japan has dropped from 8 kilograms per person in 2000 to 6 kilograms in 2011. Just the consumption of beef has decreased by 25%. You may not have a concept of the number of 25%. For example, the per capita consumption of the Chinese catering market in 2023 is 42.6 yuan, and the per capita consumption in 2024 will drop to 42.1 yuan, a drop of 1.2%. Friends who have been in the catering industry for 24 years have already felt a deep chill. But 25% is twenty times of 1.2%. You can imagine how cruel the Japanese market environment was at that time.

On the other hand, the competition landscape of the retail industry has undergone profound changes during this period. The emergence of discount formats such as OK Supermarket and Don Quijote, which use low-price strategies as their core competitiveness, has attracted a large number of price-sensitive consumers. Convenience stores such as 7-11 and Lawson, with their store locations all over the streets and alleys, 24-hour service models, and rich supply of instant food and daily necessities, meet consumers' shopping needs in emergency situations, further diverting customers from traditional supermarkets. With the increasing number of fresh food supermarkets on the market, industry competition has become increasingly fierce, and large fresh food supermarkets have also begun to fight each other. In order to compete for limited market share, supermarkets mainly compete for customers through frequent price wars and various promotional activities, which has led to the continuous compression of the profit margins of the entire industry.

Although "Fengsheng Treasure Pavilion" has become a comprehensive fresh food supermarket at this time, it is once again facing the situation of being eliminated due to changes in the market environment.

First, compared with the high-turnover and low-profit business model of Don Quijote and OK Supermarket, the business model of comprehensive fresh food supermarkets is difficult to meet consumers' pursuit of cost-effectiveness.

Second, as the competition environment becomes fierce, there is a serious phenomenon of product homogeneity among fresh food supermarkets of different brands, and there is a lack of differentiated competitive advantages.

So, how is it solved?

The core is to seize the vacant niche in the discount industry and build a discount supermarket focusing on fresh meat;

In order to change this situation at that time, Hideo Takagi devoted a lot of energy to market research. He found that although the overall per capita purchase of beef was declining, the purchase of beef by a certain group of people was increasing. These consumers were roughly between 20 and 50 years old, and most of them had families with elementary, middle and high school students. They still had a great demand for fresh meat.

On the one hand, these families need to meet the daily dietary needs of family members, and on the other hand, they need to consider the nutritional needs of students.

As we Chinese often say, no matter how hard life is, we should not let children suffer. Children need more high-quality protein to supplement their nutrition than adults during their growth stage. However, under economic pressure, they pay more attention to the price and quality of products, hoping to buy meat products that are both economical, affordable, high-quality and safe.

Traditional fresh food supermarkets on the market pursue rich product categories. Although they also have meat and fresh food, they are relatively single. The discount supermarket formats that have successfully transformed, such as OK Supermarket, have a much larger fresh food area than traditional supermarkets, but they target the entire population and do not develop products focusing on the needs of this group.

Therefore, in 2011, "Fengsheng's Treasure House" established a strategy of focusing on people aged 20 to 50 and middle-class families with primary, secondary and high school students, providing them with high-quality and low-priced fresh meat, transforming into a discount fresh supermarket, and competing with other fresh supermarkets in a differentiated manner. It was renamed "LOPIA", which means low-price utopia. This move successfully made "LOPIA" stand out from a bunch of discount supermarkets.

However, Lopia faced a series of problems when it first started to transition to a fresh food discount model.

Cost control problem

In order to achieve low-price sales and ensure product quality, cost control has become a key issue. On the one hand, the procurement cost of fresh products is greatly affected by factors such as market supply and demand and seasonal changes, and it is difficult to control stably; on the other hand, the logistics, warehousing, manpower and other costs in the operation process also need to be carefully managed. On the premise of ensuring the freshness, quality and store service level of fresh products, how to reduce various costs while ensuring that the company has a reasonable profit margin is one of the main challenges facing Lopia. For example, how to reduce the loss of fresh products during transportation and how to optimize the staffing of stores all require in-depth thinking and solutions. From the perspective of cost management theory, companies need to conduct a comprehensive analysis, budget, control and assessment of costs in order to effectively reduce costs.

The problem of quickly establishing the perception of high quality and low price in the minds of consumers

Many fresh food supermarkets in the market are undergoing a discount transformation. How to quickly gain the perception of high quality and low price in the minds of consumers is another problem that Lopia faces. Consumers often have doubts about the newly launched fresh food discount model. They worry whether the low price means a decline in product quality, and are skeptical about whether the low price and high quality claimed by Lopia can really be achieved. How to convince consumers that he provides truly cost-effective fresh food products, establish a good brand image, and win the trust of consumers have become key issues that need to be addressed. This involves brand building and consumer psychology. When consumers make purchasing decisions, brand image and word of mouth will have an important impact on them. Only by eliminating consumer doubts can they be prompted to choose to buy.

First of all, how does Lopia solve the problem of cost control?

The first step is to take over loss-making stores and open stores far away to reduce rental costs.

Lopia stores are generally located in old properties far from the city center. After other supermarkets have withdrawn from stores at a loss, they have entered with low rents by relying on their strong customer attraction advantage. For example, the Hiraijima Tadashi Holmes store opened by Lopia in Koto-ku, Tokyo, was converted from the 4th floor parking lot of a home center, and the Matsudo store in Matsudo City, Chiba Prefecture, was built on the site of the old Isetan near Matsudo Station. This method allows Lopia to reduce rental costs to about 3%. What does 3% mean? For example, Japan's leading comprehensive retailer, AEON, with sales exceeding 400 billion in 2023, has a rental expense rate of about 6%, but the profit attributable to the parent company is 0.2%. Rental expense rates of 3% and 6%, at certain levels, will affect the capital market's rating of companies and its imagination of the future.

Second, reduce the cost of product processing and display through large packaging

As we all know, in the retail industry, retail giants including Sam's Club, Costco, Metro, etc. are using large packaging for sales. This is because large packaging can not only bring consumers a sense of affordability, but also better realize inventory concentration, greatly reduce the work of commodity processing and display, improve efficiency, and help reduce the cost of merchants in commodity packaging, transportation, retail and other links. The lower the cost, the more merchants can give back to consumers and provide consumers with cost-effective and high-quality goods. Therefore, Lopia's products are almost all large packages of about 1kg.

However, looking at the entire Japanese discount retail industry, whether it is low-rent entry or large-package sales, the cost reduction brought about is limited and can easily be imitated by competitors. Ultimately, low prices must be achieved by reducing supply chain costs.

In order to truly reduce costs, Lopia made three innovations in its early operations to reduce costs.

Create a purchasing model of "whole purchase" with cash payment

In order to simplify operations, ordinary fresh food supermarkets in Japan purchase beef and pork in various parts, and then cut and sell them in the back-end factory or store. However, Lopia usually buys a whole cow and then cuts it up on its own. Since suppliers reduce the cost of cutting, they are willing to sell Lopia at a lower price. It is understood that Lopia's meat procurement cost is 15% lower than its peers. In addition, Lopia mainly purchases in cash and does not press the payment period, so many suppliers are willing to give Lopia a few more points of space. According to statistics, Lopia's meat prices are about 10% to 50% cheaper than its competitors.

The same applies to us. For example, if we go to wholesale a whole chicken, it may be 4-5 yuan per pound, but if we wholesale chicken wings, it may be 10 yuan per pound. The premium part is the sum of the labor, cleaning, machine wear and tear of the factory's cutting.

Transform the back-end factory into a product development center

At that time, the function of the meat back-end factory of Japanese fresh supermarkets was similar to a "sorting center". For example, after the pigs slaughtered by suppliers were transported to the factory, the back-end factory decided which ones were used for fresh cutting, which ones were frozen for storage, and then sent to the stores. However, Lopia turned the back-end factory into a product development center. For example, after a cow was transported to Lopia's back-end factory, Lopia would cut the cow into different products according to the products needed by the terminal stores, such as beef made into steaks with a higher sense of value, beef bones made into rib soup, and scraps processed into sausages and hams, and even some scraps that other supermarkets didn't want, such as meat tendons and membranes. Lopia would also purchase them and make them into hamburger meat, croquettes and other products in the back-end factory and distribute them to terminal stores for sale. The price of these processed meat products can be more than 30% cheaper than that of competitors' products, but the gross profit is much higher than other products. For example, the gross profit of Lopia's own sausage products can reach more than 50%, and the gross profit margin of some pickled and seasoned meat products can reach up to 80%, becoming the source of Lopia's meat profits.

Moreover, because they can independently control the product segmentation process, the same type of pork can be made into dozens of products. The number of SKUs of meat products in Lopia is three times that of other fresh food supermarkets of the same size. As soon as consumers enter Lopia, they know that it is a fresh food supermarket that mainly sells meat. Therefore, Lopia has a well-known name in the Japanese retail industry - "the killer store of the meat category."

Create the Amoeba model of the smallest store unit

When we analyzed Don Quijote before, we said that in the stock market, the stores are fighting each other in a hand-to-hand fight. Only by killing other nearby formats or winning in the competition with other formats can they survive. Therefore, many stores in Japan adopt the Amoeba business model. By delegating power to terminal stores, terminal stores have more autonomy, and can flexibly adjust product structure and price according to the regional competition environment at any time to break through the competition. Terminal stores such as Don Quijote, 711, and Daiso all adopt this model. Their terminal stores can be regarded as a small company, which is responsible for its own profits and losses.

LOPIA has done a more detailed job in this regard. He has turned several commodity departments within the enterprise into small companies. Meat is one company, fish is another company, and vegetables are another company. The buyers of each category are the small bosses of this category and need to be responsible for the profit and loss of the category. This flexible operation model has greatly improved the timeliness and accuracy of decision-making and enhanced the market competitiveness of the store.

Under this model, Lopia has also formed a "personalized store". Each store has its own unique store layout, product variety, in-store hot items and product prices. I will not elaborate on this point. Friends who are interested can watch the previous video about Don Quixote, which has a detailed introduction to the thousands of stores and a detailed analysis of the creation path and operation strategy.

In addition to working hard to improve internal strength and enhance corporate competitiveness, Lopia has also taken a series of marketing actions to quickly establish a brand recognition of high quality and low price in the minds of consumers;

01 Sell high-priced products at low prices to establish a brand image of high cost-effectiveness.

This involves a concept, the price anchor principle. The price anchor principle means that when people make decisions, they will over-rely on the first information they come into contact with (i.e., the "anchor") to make judgments.

Take beef as an example. In Lopia, the price of high-quality beef is 20 to 25 yuan per 100 grams, and a steak with snow-frost texture only costs about 50 yuan. It is half the price of department stores and nearly 30% cheaper than other food supermarkets. For example, 350 grams of Wagyu beef only costs 90 yuan, which is one-seventh of the price of 7-11. By using low-priced and high-quality beef as the price anchor, consumers will use this as a reference to measure the prices of other products when they see that high-quality beef can be bought at a super low price. They will feel that it is more affordable overall, and will have a good impression of the overall price level and product quality of the supermarket, which will increase the possibility of purchasing other products in the store.

For example, Lopia's freshly baked sausage and bacon pizza only costs 27 yuan. The quality and taste are the same as those of professional pizza brands, but the price is less than half of theirs. Lopia has quickly established the perception of high quality and low price among its target population by making products that are generally perceived as medium to high prices low.

02 Continue to create "meat products" promotion activities to further deepen consumers' mental perception of high-quality and low-price supermarkets.

In terms of sales model, Lopia has promotions for specific meat products every day except weekends. During the promotion, the prices of different meat products will be reduced to the lowest price in the region. Attract consumers to come and purchase. Further deepen the mental cognition of meat discount supermarkets. In Japan, people habitually buy meat and vegetables at Lopia, and then buy daily necessities at OK Supermarket, Gyomu Super or other supermarkets. Going to Lopia to buy meat products has become the first mind of Japanese consumers. There is a concept involved here, "consumer first mind" means that a certain category occupies the first and most easily remembered position in the minds of consumers. For example, when it comes to herbal tea, the first thing that comes to mind is Wanglaoji, and when it comes to natural water, the first thing that comes to your mind is Nongfu Spring.

Lopia successfully transformed from a comprehensive fresh food supermarket to a discount fresh food supermarket by innovating its business model, ushering in a new round of expansion and growth. In 2014, as competition in the discount fresh food supermarket market intensified, Lopia began to build a brand moat in order to consolidate its leading position in the industry.

For meat products, we will develop a full industry chain layout

Take LOPIA's beef products as an example. LOPIA has realized the layout of the entire industry chain from cattle breeding, beef cutting, beef product processing to sales. Therefore, LOPIA is also called "sixth industry" in Japan. "It is to combine the planting and breeding industries of the primary industry, the manufacturing industry of the secondary industry and the retail industry of the tertiary industry together and call it the "sixth industry." In this way, companies can establish brand barriers, achieve total cost leadership, and make it difficult for competitors to imitate.

Focusing on the meat category, developing self-operated products to build a brand moat

Since meat products can form a strong connection with sauces, kimchi, wine, beverages, etc., lopia began to build products that can form joints with meat into self-operated products. Since 2014, lopia has begun to acquire companies that can be linked to meat products, such as the "Maru Yue Brewery" that produces its own brand seasonings for LOPIA, the food trade import company "Eurus" that imports wine, olive oil, pasta, etc. for LOPIA, as well as soy sauce companies, food companies, etc.

Moreover, the prices of these self-operated products can be very expensive. For example, LOPIA's refried meat seasoning can be sold for 98 yen and meat sauce can be sold for 298 yen, which is higher than that of similar products. By combining with "profit products" with high profits, the price of meat products can be further reduced, making it difficult for competitors to imitate.

Our current discount stores in China now sell everything at low prices, but LOPIA just makes meat very cheap, but the profits of meat derivatives are very high. This also gives domestic discount snacks an inspiration. Discount stores do not need to sell all the goods very cheaply, but should be layered based on category logic and establish our own category system according to customers' purchasing habits. Combining them with their own product profit model.

25 years will definitely be the first year to subvert China's retail industry, because all retailers are seeking low prices. If you don't reform and when others transform successfully, you have almost no chance of survival. I hope that through the successful practice of fresh meat in Japan, Lopia discount supermarkets in Japan will provide some reference-based solutions to the fresh food supermarkets that are transforming into retail discounts.

Author: Zhang Chao, Dayu Planner

WeChat official account: Dayu Planner Zhang Chao (ID: 1099416)