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Asian consumers go back to basics in downturn
(Agencies)
Updated: 2009-05-18 22:15

Scaling Back

Asian consumers go back to basics in downturn
Workers work at a small-scale assembly line of a South Korean MP3 maker BBT in Seoul April 22, 2009. [Agencies]

The 'no frills' attitude goes beyond electronics. Sales of cheap staples such as noodles and fast-food meals have risen even as purchases of items such as meat have fallen due to the slowdown.  In Japan, one of the country's leading department stores has reduced the range of products it sells by 40 percent to cut down on inventory costs as Japanese retail sales slow to the lowest levels in four years.

"It's time for back to basics. Customers have changed dramatically in the past few months," Motoya Okada, the president of Aeon Co Ltd department store, said at a news conference in March.

"By reducing the variety of items, the number of suppliers will be also reduced, which will be reflected in our bargaining power," he added.

One store in Tokyo, run by Aeon, saw its sales of frying pans rise after it cut variety to 37 styles from 60, according to officials from the firm.

Park Jean, an analyst for Woori Investment & Securities in Seoul, said reducing the breadth of product lines is an effective way of cutting costs in a difficult business environment.

"It is a matter of efficiency," he said. "Mass production of a few core products can lower production costs rather than producing a variety of models on a small scale."

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Making profits is tough in a difficult economy with the International Monetary Fund predicting that private consumption in Asia will remain subdued as long as rising unemployment, weak confidence and low asset prices weigh on household spending.

Kim Rando, a consumer science professor at Seoul National University, said the trick is to differentiate products and cut production costs by designing easy-to-use products that retain the functions that consumers most want and need.

Streamlined products may be the rage for some time if consumer preferences for simple, easy-to-use products prevail once Asian economies begin to accelerate again, he said.

"If the divergence trend is more about removing redundancies and simpler but stylish design than about lowering prices, it then would last even after the economy rebounds," he said.

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