Seasonality has its effects, but what goes up usually must come down

I’ve always chuckled at the way Japan seems to think it is the only place in the world that actually has “4 seasons,” and the news reporting about the ups and downs of sales related to the seasons always awakens my inner marketing cynic.

On the other hand, this past summer was a real eye-opener in terms of demonstrating the effect a season can actually have on sales. It will go down in history as the hottest on record since recording began, and from a marketing and sales viewpoint, the duration of those steamy 30 degree C+ temperatures well into September yielded both winners and losers.

We might have expected some retailers and beverage makers to benefit. Sure enough, most convenience stores overall seem to have fared well, with sales of beverages, ice cream and chilled noodles up over the same period last year. Family Mart and Ministop are but two of those reporting increases in both customer and sales, of approximately 3%. Meanwhile, tea drink producer Ito En reported operating profits up by 46% for the May-July period, and Kagome managed to lift its projected sales by 3% due to the heat.

In the larger-scale retail arena, general merchandise store operator Aeon posted a 70% year-on-year increase in profits as of August 31, with growth bolstered by sales of lower-priced beers and beer-like beverages (non-alcohol and no-malt beers), summer clothing and higher-margin private-label items. Osaka-based supermarket chain operator Life Corporation reported profit growth of 11% year-on-year for its March-August half fiscal year, based on higher-than-expected sales of beverages, as well as seasonal items such as watermelons, cantaloupe and other fruits, along with summer apparel.

There were several one-time drivers that served to “super-charge” sales in certain categories over the summer. Specifically, hybrid car sales were boosted by the ending of subsidies on September 7th. Similarly, the government’s soon-to-be-ended “eco points” program, designed to encourage consumers to buy environmentally friendly products, certainly helped to increase sales of air conditioners, refrigerators and flat screen TVs. Electronics retailer Edion Corporation reported that its air conditioner sales doubled in August compared to the previous year, while Bic Camera also reported booming sales of air conditioners.

Finally, the 40% tax hike on tobacco also served to boost sales at convenience stores, as consumers began hoarding prior to the increase on October 1st.

There were a few surprises, though. Beer producers, who rely heavily on high temperatures in July and August, failed to register a significant increase over the same period last year, even though overall shipments in July and August rose for the first time in 6 years (by 1% on the year). Still, Asahi Breweries managed to gain a 37.2% market share, regaining the top spot for the first time in two years.

Another recent surprise was the news that Uniqlo reported a 17% fall in net profit year on year through August 2010, marking the company’s first decline in four years. Introducing its “Heat-Tech” line right in the middle of inferno-like August probably didn’t help.

Looking back, consumer spending increased in the equivalent periods for 1994 and 2004, also due to unusually high temperatures, only to be followed by a decline in the following quarter. Some experts forecast an even sharper sales dip this year because of the “additional demand boost” generated by the eco-car subsidies, eco points program and the tobacco tax hike.

When companies are forecasting their sales and marketing forays, perhaps seasonal changes do merit a bit more attention afterall.

Debbie Howard is Chairman of CarterJMRN and President Emeritus of the American Chamber of Commerce in Japan.

Originally Published in Nikkei Weekly, 1st November 2010

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