By Murr-ma
Q01: From a business standpoint, how successful is selling by weight?
Sato (Kurun Kyoto): From seminar participants, we received many questions about the viability of selling by weight, from a business standpoint. There were concerns such as, “It seems to take a lot of time and effort.” I think many people are wondering about this.
Akatsuka (DONGURI): I think with most grocery stores, a rough estimate would aim for 30% gross profit overall, including vegetables and other groceries. That amount takes into account times when we decide to drop the price if an item isn’t selling well. If you don't mind my asking, does anyone else want to share anything about how you set your prices?
Umeda (TOTOYA): For retail items, we get 40% gross profit. For vegetables, we want our customers to be able to purchase organic products at the lowest possible price, so for those we keep our margin down around 15-20%. However, if, for example, we prepare mixed salads with various vegetables and sell them in our deposit jars, then we increase the margin. And yet, they are still not as expensive as prepared salads sold at other stores. And we can adjust the margin even further by using extra veggies when preparing side dishes for our lunch menus. By achieving zero waste, we are able to maintain an average gross profit for the year of over 40%.
Hashimoto (HELP): For a supermarket, 40% profit over a full year is very impressive. And to realize that on top of all that, you’ve also been able to reduce packaging costs. That’s really wonderful. Right now, between HELP’s three stores, we are spending 18 million yen per year on packaging. If we could cut that in half, we would be able to redirect those savings toward providing better service to our customers and improving our employees’ working conditions. I can definitely see how that would be a big benefit of switching to selling by weight.
Sato: I am really surprised that you spend so much on packaging. In terms of expenses, I think selling by weight also makes a difference in the flow of people through the store. How has that worked with the staff at TOTOYA?
Umeda: Two people from the retail department arrive at work at 10:00 a.m., and in one hour they set up the sales floor. The store then opens at 11:00. However, when we first opened, we had no know-how about all this, so labor costs were unexpectedly high. Optimizing staff time was really challenging. New customers had no idea what they were supposed to do, how to shop. So it was impossible for just two people to provide all the help they needed. Now we have more regular customers who can take care of themselves pretty well, and in that way labor costs have dropped.
Sato: So if you are able to take some time to get things right, over the long run selling by weight doesn’t necessarily require any increase in staff.
Umeda: That's right. As I mentioned at the beginning, we use self-service scales, and the more our customers get used to using them, the more smoothly everything works. Now we generally have no more than two or three people out on the floor at any given time.
Ideally, if we can keep labor costs down to 20-25% of sales, and expenses at 10%, we can hope to have left around 10% of gross income. If we achieve that, I think it is a very sustainable business model for us as a company, and I think it should help to encourage other companies to reconsider how they operate. Which is always of course the big goal in the back of my mind.
Akatsuka: That is really an amazing accomplishment. DONGURI is a family-run business, which reduces our costs and really helps us keep going. But it is amazing that you are able to sustain 10% profit and still pay your employees.
Umeda: Well, it isn’t all totally smooth sailing, yet (laughs).
Akatsuka: By the way, what kind of costs are you finding for the Teraoka Seiko weighing system you’re using?
Umeda: It depends. Teraoka Seiko is still testing. There are some products that they haven’t even put on the market yet. But costs seem to vary, depending on the item.
Akatsuka: I would love to see them come up with a system for small stores, too. In terms of support for selling by weight, I wish there were some government subsidies.
Umeda: Actually, I do know of one instance where another company received some assistance for purchasing Teraoka Seiko’s recycling equipment. It would be great if more of their product line could be certified environmentally friendly, and made eligible for government funding.
Akatsuka: Yes, that would be fantastic.
Sato: What do you think of TOTOYA's one-hour/two-person preparation for opening the store, in terms of common practice for supermarkets?
Compared to how other supermarkets operate, what do people think about TOTOYA’s being able to open the store with only two staff people, and just one hour’s prep?
Hashimoto: At HELP, the staff arrives at 8:00 and the store opens at 10:00. And, for example, in the fruit and vegetable department, it takes 30 to 40 minutes for one staff person to bag the produce. I think it would be great if we could do away with that. However, we are pretty well-known for doing our own processing for all the fresh fish we sell. I don’t think we would want to cut back on that. However, by reducing our packaging, I think it might be possible to revise our operations so people could start work later.
Sato: It seems as though one of the direct benefits of zero waste would be savings on the cost of garbage collection.
Umeda: At first, we had a contract with a garbage collector to come every day. But then, every time he came, we would say, “Oh, sorry. We don't have any (laughs).” But the fee was the same, whether we had any garbage or not. And the fees are expensive. After that, we negotiated with a waste management company that is more engaged in sustainable practices, and now we have a contract with them to come only when necessary. They charge us a set price per visit. So, yes, as we reduce the amount of garbage, we are also able to reduce the cost of collection. We generally ask them to come once every two or three months for plastic waste, and once every two or three weeks for combustible waste.
Hashimoto: That's amazing. That's like, unthinkable. We have them come every day and pay a fixed fee. If it were HELP, I think we would be in big trouble if there was no collection for even just maybe three days.
Sato: I would think that working with your farm suppliers, and getting them to collect and make use of your food waste (as TOTOYA is doing) would be something other stores could implement rather easily.
Umeda: With ordinary stores, I think it is a problem of quantity. Just too much for the farmers to deal with.
Sato: I see. What is your system for disposing of your kitchen waste?
Umeda: We use buckets with very tight-fitting lids. And once a week, the farmers we work with collect and take home one or two of those. One farmer up north of Kyoto City composts the waste and then uses the resulting soil to grow herbs and vegetables for us.
Sato: Does NANZAN produce a lot of food waste?
Kusumoto: Yes, we do. Quite a bit. Most of it is meat fat. However, starting just this month, some of our farmers have begun collecting our eggshells. But for the time being, other than that, we may not be able to do much more.
Sato: But once you have established that kind of relationship, it seems like other possibilities are sure to open up.
... the panelists continued sharing their in-depth stories and unique insights. The conversations could have gone on and on, but eventually we unfortunately ran out of time. Audience members asked various questions, and exchanged views on a number of topics: the fishing industry, what kinds of waste are inevitable, even with all of TOTOYA’s effort.
Expanding the Circular Economy
Umeda-san gave the closing remarks and at the end asked if, in the audience’s opinion, they feel the need for option’s like TOTOYA. Most heads nodded in agreement.
In response, Umeda-san suggested that, "If there are people who want this option, and want to support our work, then I think there are many changes that even small stores could try." As an example, she pointed out how TOTOYA and NANZAN have begun sharing deposit containers.
"I think that if we could establish a common deposit container and refund system here in Kyoto, a system that any store could use, it would make it easier for everyone to start shopping this way."
To achieve this, she suggested, "Just come to TOTOYA, buy a lot of stuff, and help us make a profit. Then everyone will want to imitate us (laughs)." She concluded by expressing her hope for the growth of a circular economy in which, the more profits generated, the better the world becomes, and the cycle just continues to spread. “Since we’ve all come together here to think about this issue, let’s put our heads together and try to really bring about some changes in the Kyoto retail situation.”
Well? If everyone in the audience and all those who’ve read this article share these sentiments, then the seminar was a great success for Kurun Kyoto.
How was it, everyone? We had a wide variety of visitors, not only those involved in retail, but also those involved in production and distribution, general consumers, students, and others. We hope the event has given everyone some good ideas for making changes in your daily lives.
Thank you for taking the time to read this lengthy report (over 17,000 words!).
And finally, thank you again to Umeda-san, the panelists, and to everyone who came to the event. We would also like to thank all those who helped with the organization and preparation of the event.
Please look forward to more Kurun Kyoto events in the future!