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Company profile
This case study examines Shimamura, the second largest apparel retail chain in Japan and ranked ninth in the global market. Its net sales amount to 502 billion yen (approximately 4.2 billion US dollars); it has 1,860 stores, and its return on equity (ROE) was 10.3 per cent in FY 2014 (Shimamura, 2014). Therefore, Shimamura is considered a very high performing company in Japan (Tanaka et al. , 2006).
However, it is also a low-profile company. There are several reasons for this. First, most of its stores are located in Japan, and it has just 36 stores in Taiwan and four stores in China. Second, even in Japan, Shimamura is not particularly well-known because most stores operate in local city areas. Third, Shimamura aims to be low-profile to avoid competition.
Strategy for a follower company
Shimamura was founded in 1953 and started to develop general merchandise stores (GMS) in 1957. The GMS value proposition was one-stop shopping, comprising three major segments: food, apparel and household goods. Pioneers had already developed stores nationwide; however, Shimamura fell behind its competitors and therefore abandoned its original plan to focus on the apparel segment, taking the decision to be an apparel retail chain.
Shimamura adopted a dominant strategy of opening its stores intensively in locations without serious competition and tried to create a high entry barrier by selling its goods at a lower price. The average price per item is 814 yen (roughly 6.8 US dollars). Shimamura clearly set its target market at homemakers in the 20-40 age range who welcomed the low prices. Inagaki (2014) argues, as a biologist, that there are four different types of survival strategy for the weak: huddling, hiding, escaping and displacing. Shimamura chose the displacing strategy to avoid competition and has since constantly improved its business model to implement this strategy.
Business model to implement strategy
Unlike other retailers, such as Zara, H & M, Gap and Uniqlo, Shimamura has not adopted a specialty store retailer of private label apparel (SPA) business model. Instead, Shimamura purchases its goods from various manufacturers. Therefore, the company's gross profit ratio is lower than that of companies adopting the SPA business model at approximately 30 per cent. The SPA business model yields a gross profit ratio...