CBA Newsletter - June (draft)

Japan's Daiso Suffered from the Sinking Yen by Summer Woon Daiso is currently facing difficulties maintaining price of ¥100 per item due to several threats to the business, such as plunging yen and issues from overseas. Now, let us dive into Daiso's threats and solutions. The Current Business Affairs Newsletter (June Issue) of The Business Students' Union, HKUSTSU is taking you on the journey of the Daiso. Products Originate Threats Toward Daiso While Daiso stores originate from Japan, we may The head of Daiso has pledged to uphold its price be unaware that 40% of the items are produced in tag of ¥100 per item despite threats to the business China, with 60% being made in other countries. from global inflation and the plunging yen. Trade Over 90% of their on-shelf products are unique disruption caused by the pandemic, the weak yen Daiso-label products they design and manufacture. and the war in Ukraine have uncovered the fragility These labelled products are known for their of the ¥100 store business model. The yen’s rapid excellent quality at a constant low price, in which fall of more than 20 per cent against the dollar in they are continually known as the ¥100 stores. the past year has been harrowing since many of Daiso’s products are imported from overseas. For 30 years, Daiso has manipulated the yen’s buying power for inexpensive goods in China and Besides, the disruption caused by China’s zero- Southeast Asia. By purchasing in high amounts and Covid policy has impacted Daiso’s operations since liaising directly with manufacturers, they save most products are made in China. Although the considerably on costs and, like their Korean supply chain has mostly normalised today, the franchise, can pass on savings to consumers. In delivery delay is continued to some extent. It is also 2007, they set up an enormous 890,000 sq ft plastic known that the logistics costs were double in factory in Amata City, Thailand, which helps comparison with pre-pandemic levels. assemble the bulk of their plastic products at a low cost.

Daiso's Solutions production abroad and logistics rise. About 65 per cent of its products are now produced overseas, The current challenge for Daiso is how they could compared to 70 per cent five years ago. Daiso, which make the best total balance, especially in product has its factories in Thailand and Vietnam, is mix, while maintaining strict conditions that negotiating with the landowners to build another customers only pay ¥100 per item. Thus, Daiso will plant in western Japan, expected to open in 2028. have to access various product fit scenarios that could Therefore, Daiso will worry less about any sudden squeeze its maximum earnings. news from overseas or yen currency issues. As part of its strategy, the company will be investing Your Feedback intensely in two brands focused on generating sales primarily from the ¥300 goods. The profit from the Your feedback will help a lot to improve our CBA highly earned brands will then cover some loss of the Newsletter, if you have any enquiries or suggestions, ¥100 items. Besides, Daiso is expected to open 520 please do not hesitate to contact The Executive new stores in Japan and overseas this fiscal year Committee of the Union through email by through February 2023, more than 30 per cent of [email protected] or by mail to Mailbox #15, LG5 which will be under the two brand names. Student Amenities, The Hong Kong University of Science and Technology, Clear Water Bay, Daiso’s other tactic is to shift more production back Kowloon, HK. to Japan. Daiso has been slowly bringing manufacturing capacity to the country as costs for Sources:https://www.ft.com/content/acae6e37-3b4f-4c6a-ab96-7dd91516c60b