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THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARIL... - page 11 / 38

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**Receptivity ratings: H - high; M - medium; L low Sources: METI Commercial Census (2009); ATO estimates on import growth and receptivity.

Chart 1. Retail Food Distribution Channels

Source: METI Commercial Census 2009

General Merchandise Stores / GMS Japan‘s general merchandise stores (GMS), like supercenters in the United States, offer shoppers the convenience of one-stop shopping for groceries, perishables, clothing, household goods, furniture, and electrical goods. Food sales, which typically used to make up one third of the total sales at GMS‘s, now reach a half of the total sales or even more at some chains. GMS‘s are operated by major national chains that have nationwide networks with hundreds of outlets and central purchasing is typical. GMS‘s are generally receptive to foreign products, although they often demand product modification to suit market tastes and preferences. They often purchase foreign products via trading companies. Inventory risks, long lead times, and communication problems make GMS buyers hesitant to import products directly. However, as Japan‘s retail market becomes more competitive, GMS‘s are open to new products and offer excellent opportunities to U.S. food exporters.

Supermarkets Supermarkets (SM) stores are smaller in size than GMS‘s and are more specialized in food and household goods. On average, food items such as perishables, readymade-meals, bakery, and refrigerated foods account for 70% or more of the total sales of these stores. Supermarkets are facing higher purchasing costs than GMS‘s. They are seeking a way to survive in the market through product/service differentiation, private brand development, and global sourcing. To gain economies of scale, regional supermarkets are forming alliances, such as joint merchandising companies, with non-competing retailers. Thus, although individual retailers are not large enough to engage in direct offshore sourcing, through

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