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Industry Update from the Japan DIY Industry Association

Information provided by the Japan DIY Industry Association shows remarkable development in the sales and number of DIY stores/home centers in Japan since the first DIY store was opened in the country over 40 years ago. There are now over 4,500 DIY stores/home centers in Japan with the annual general proceeds reaching 3.95 trillion yen.

According to the annual report by the Diamond Home Center (September 2015), in 2015, the Japanese DIY market size reached the second largest ever. The sales growth was affected by the consumption tax increase with growth for existing stores being sluggish. However, there were strong sales for new companies making breakthrough to the market.

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Foreign tourists purchasing large amounts of products (“BAKUGAI” in Japanese) also contributed to the sales increase. Sales to tourists can account for 10-20% of the total sales of a store if the store’s location is suitable for sightseeing trips. Moreover, tax-free shopping is now available for tourists, with stores participating in the global consumption tax refund program. Although the situation differs greatly given the store’s location and commodity composition, inbound consumption can’t be ignored in the Capital area going towards 2020. (References: Diamond Home Center / September, 2015)

The Japan DIY Industry Association was established on July 18, 1977 as a voluntary organization dedicated to promoting the DIY spirit and developing related industries. On May 19, 1980, the organization was granted permission by the Japanese Ministry of International Trade and Industry (now Ministry of Economy, Trade and Industry), to become incorporated as “Japan DIY Industry Association”. The association has 61 retail member companies, which have more than 4,500 home center stores in total, throughout Japan.

The key event for the DIY industry in Japan, the JAPAN DIY HOMECENTER SHOW, is organized annually by the Japan DIY Industry Association. Established in 1978, JAPAN DIY HOMECENTER SHOW will be presenting the 52th edition in 2016. The 2015 show featured 469 exhibitors from Japan and overseas exhibiting in 1,046 booths and attracting 106,000 visitors.

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The 2016 Japan DIY Homecenter Show takes place at the MAKUHARI MESSE Hall in Chiba, Japan, on August 25-27.  More information is available on the show’s website.

 

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Ocean

Asia to U.S.A. – Spot Rates Increase

The International Housewares Shippers Association (IHSA) has been closely monitoring freight rates in the Asia to United States market. The carriers have made eight attempts to increase freight rates in this market since May 2015. Every attempt failed until July 2016. The biggest obstacle to the previous attempted increases was simple economics. The amount of capacity in the trade far exceeded demand.

The carriers have shown repeatedly over the last thirty years that they lack the discipline necessary to increase rates when overcapacity is prevalent in the market. Instead, the carriers usually react by slashing rates in hopes of gaining market share. This strategy never worked in the past and it certainly did not work over the last twelve months. The only strategy that worked consistently over the years was a concentrated effort by the carriers to remove excess capacity from the trade. Carriers have been threatening to remove capacity since December 2015 unless freight rates rebounded. The rebound never materialized, so carriers slowly but systematically began removing capacity. The capacity reductions had the desired impact the carriers wanted in the market. Space tightened considerably in July causing an increase in freight rates heading into the busiest shipping period.

For example, shippers were paying $700 per container a month ago on the spot market for cargo moving from Shanghai to USWC. That same cargo is currently moving at $1300 per container assuming space is available. The carriers have announced additional increases between $400-$600 per container scheduled to go into effect during August 2016. The carriers are bullish that the additional increases will hold in the market.

Over the last decade, the one consistent factor in the Asia to United States market is how quickly the freight rates can change. IHSA freight contracts are structured so that members are not impacted by these large fluctuations in rates. The rate increases that were implemented in July did not impact IHSA members. The same will hold true for the proposed August increases should they hold in the market.

Freight rates that were $700 in June, nearly doubled in July and could approach $1700 in August 2016. Due to this volatility, IHSA has elected not to participate in the spot rate market. IHSA negotiates freight rates that are fixed for the term of the contract allowing members to budget with confidence. In addition to rate stability, space is protected. When space is tight, some shippers are forced to pay higher rates in order to secure space on ships. That is not the case for IHSA members. Carriers allocate IHSA space based on the original contract rate levels. Bottom line, IHSA members will have a sizeable competitive advantage if the spot rates take the expected increase in August.

IHA member companies looking to reduce their ocean freight costs are encouraged to contact IHSA to learn about the program.  Contact IHSA at +1-513-489-4743 and learn more on our website.

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Retail Profile: The Grey Goose Cookery

Retailer: The Grey Goose Cookery
Location: Mystic, Conn.
Owner: Suzanne Lane
Square footage: 4,000 sq. ft.

The Grey Goose Cookery bills itself as a “one-stop kitchen store,” and with 4,000 square feet filled with products ranging from cutlery to gourmet foods, it fits that bill for the locals and tourists alike in Mystic, Conn.

Located in the heart of Mystic’s prime attraction, the ersatz whaling town, Olde Mistick Village, the Grey Goose is an independent, regional kitchen store known for its assortment of everything a cook might need.

The store also offers a bridal registry, 2,500 square feet of tabletop items and cooking classes catering to all levels of cooking skill, from beginner to professional chef, says owner Suzanne Lane.

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But what really sets the store apart is Lane’s own involvement in helping her customers meet their weight loss goals through her “Pinch Diet” program, which she developed to teach people how to eat healthy while losing weight. Lane lost more than 100 pounds on the high protein, low carb regime, which she says can lead to a loss of three pounds a week. Customers noticed her slim figure and wanted to know what she did. She answered back with the Pinch classes.

“As a leader in the community, people can see that I have lost weight and realize that they can do it too,” she says about what inspired her to start the program. During Pinch classes, customers get a handout outlining the plan, go over the mechanics of the diet, get some tools to help stick with the program, and of course, sample some Pinch food. Lane, who has a master’s degree in higher education, has two customers who have lost over 60 pounds each on the plan.

The secret? “Just delicious food and simple recipes,” Lane says in a short video plugging the classes on the store’s web page, graygoosecookery.com. Also featured in the video are products sold in the store that help with weight loss, like a pressure cooker and Swiss Diamond cookware.

“The pressure cookware helps you get some great flavors out of simple veggies and meats. Swiss Diamond is great because you don’t have to use any oil and it is easy to clean up,” she says. And that easy clean-up is key because, Lane notes, her customers want convenience as much as they want to lose weight. “People are looking for ease,” she says. “They are busy and looking for easier ways to cook.”

She also offers some tricks: “Using spices doesn’t add calories, but adds flavor,” she says. “Warming frozen blueberries and raspberries in a toaster oven” makes for a special snack over yogurt.

In the end, she tells customers that dieting is not about deprivation, especially when you have the right cooking tools. “I call it the Pinch diet because you can cheat with a little pinch,” Lane says. “If you are making mac and cheese for the kids, have a noodle or two and then stop. It boils down to making the right choices.”

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Visa Chip Card

Retailers Not Chipping In On Credit Cards

Even though banks mandated the use of chip-enhanced credit and debit cards last October, many small specialty retailers have yet to adopt the technology. Though the major credit card companies are calling the changeover a success, retailers are not convinced, citing the extra time it seems to take for each transaction along with the cost of implementing the technology as reasons for not complying.

The new chip credit cards generate a unique code with every sales transaction, with the goal of making it harder for bad guys to churn out fake credit cards. MasterCard says 70 percent of credit cards issued in the U.S. were chip-enabled as of this spring. According to Visa, some 283 million-chip enabled cards are currently in the U.S. market, with nearly a quarter of the 4 million merchant locations set up with chip devices.

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MaryLiz Curtin’s Clawson, Mich., store Leon & Lulu, is not one of them. “We have not adapted to chip readers,” Curtin says. “The technology does not seem quite ready for prime time and converting to the new technology is expensive. In order to use it with our POS system, the costs for new hardware and software far exceeded any possible benefit.”

Consequently, Curtin is willing to roll the dice. “We could absorb a huge loss due to fraud, which is a very remote possibility, and still cost less than the new terminals,” she says. “Also a conversion at the holidays would have been a potential disaster when we have long lines at each of our four registers. We will watch the technology but have no immediate plans to implement it.”

Anne Dowell, owner of Apron Strings in Hutchinson, Kan., calls the chip system, “a sore spot,” and like Curtin, has also adopted a wait and see approach. “I haven’t converted to the chip system–yet,” she says, noting that she has had the chip reader hardware for almost two years, thanks to her software provider who sent the new reader to the store. “The software provider accepted all liability because they did not have the software ready by the October 2015 deadline.” However, by the time they got the software rewritten, Dowell was told she had to upgrade her POS software in order for it to work. Thus, the sore spot. “My current software is only three years old and of course the new software they want me to buy is several hundred dollars. Do I think it is fair? Absolutely not.”

In Ellsworth, Maine, Pamela Elias got her store Rooster Brother on the new chip program back in October, but like Dowell, found that the software lagged behind. “The software wasn’t ready for months after that,” she says. “It is not nice to make us responsible and then not give us the tools.” Elias says transactions take longer, it is easier to forget to give the card back to the customer as a result and there is a lack of clarity around pin numbers as some cards require them and others don’t. “We don’t love it,” she says of the new system. “And of course we don’t appreciate having to take more risk.”

Jennifer Baron says she hasn’t gotten the new chip readers for her Brooklyn, N.Y. store, A Cook’s Companion, hoping that if she waits for a bit, the technology will improve. “It is a large expense and the credit card processors have us over a barrel with every new ‘protocol’ they come up with,” she says. “From PCI compliance to Chip, they always seem to come up with a way to cost us money.”

Baron has watched other retailers handle the technology on the sales floor. “I haven’t seen that many small, local retailers using it,” she says. “They may have the machine, but the transaction time is so long that it seems customers prefer to swipe their cards.” Speeding up the process and requiring a customer to enter a PIN would go a long way in encouraging Baron to be inclined to change over.

“But the processors will never agree to that because their fees won’t be as high”” she says noting entering a PIN doesn’t generate revenue for the credit card companies. And for small retailers, every little bit taken away from a sale hurts the bottom line. “It may be only 5 cents per transaction, but that adds up pretty darn quickly,” she says. “That $.05 can cost more than $300 in December alone if a customer doesn’t use a PIN.”

To Rooster Brother’s Elias, off-loading the responsibility for adapting the chip technology onto small retailers plays almost like a spy novel with an evil overlord lurking in the background. “They say if we have the technology, we don’ have the risk,” she says. “But I’m coming not to trust ‘them,’ whoever ‘they’ really are. I don’t think that this changeover was well thought out.”

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Preview: IHA’s Annual CHESS Conference

Navigating Transitional Times…Through Political, Economic and Market Shifts
October 6-7, Rosemont, IL

It’s important for industry leaders to stay up-to-date on positive business practices and to learn how to navigate through today’s uncertain environment. IHA’s annual CHESS conference (Chief Housewares Executive SuperSession) for industry decision-makers will offer insights and information to help smooth the road ahead.

The 2016 CHESS conference, October 6-7 at the River/Riverway Westin in Rosemont, IL, will gather housewares executives and industry experts who will share their perspectives on current events and forecasts for the future.  The two-day program offers a varied menu of presentation formats that blend bird’s eye views of the business landscape with deep dives into how to operate efficiently—a keynote presentation on the U.S. political scene, panel discussions, paired co-presenters and several solo speakers, along with facilitated audience conversations and invigorating networking events.

On October 6th, Peter Giannetti, HomeWorld Business editor, moderates a discussion with Melissa Kieling of Pack-It, Bill Endres of Select Brands, Dan Siegel of Lifetime Brands and Scott Felsenthal of Whitmore, who will share their experiences in the Housewares Hot Seat: Navigating through Unprecedented Change. Political analyst Charlie Cook, author of The Cook Political Report and television commentator, will give his perspective on Where is Our Country Headed? Bernard Baumohl, chief global economist for the Economic Outlook Group, will offer a Geo-Political Forecast for the Global Economy.

On October 7th, Dana Telsey and Joe Feldman, of the Telsey Advisory Group (TAG), will speak on the Future of Retail. This dynamic duo addressed the 2015 CHESS audience and returns with their latest data and interpretations. In Protecting Your Value in the Supply Chain, attorney Scott Sanders will advise housewares suppliers on how to prevent factories from selling direct to customers. Peter Hubbell, founder of BoomAgers, an advertising agency focused on the Baby Boomer market and global aging issues, will inspire the CHESS audience with Getting Better with Age: How Business Can Win Big in the Age of Aging.  A final group presentation, The Future of U.S. Supply Chain Logistics, will join Rick Blasgen, president of the Council of Supply Chain Management Professionals, Dan Coll, vice-president retail logistics at FedEx/Genco, and a manager at a major online retailer, who will offer “nuts and bolts” information for how to balance time, distance and costs to efficiently manage global business.

 

CHESS, IHA’s annual strategic education and networking event, brings high-profile industry experts in direct contact with housewares and home goods executives. Held every fall, CHESS attracts more than 150 chief officers of IHA’s most prominent member companies. According to past participants, in addition to the informative programming, the networking opportunities are the most valuable benefit of the two-day conference.

To learn more about the program and to register, visit the CHESS website.