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Japanese retailing is more efficient than most people think
Kyoji Fukao, professor at Hitotsubashi University's Economic Research Institute, thinks so too. The team he heads provides much of the Japanese data that go into international comparisons. He argues that the usual measures of service sector efficiency - value added per man hour and total factor productivity, which incorporates capital and labour inputs - are crude and hard to compare across borders.
He cites Japan's retail sector, regularly branded as inefficient. The basic measure of retail-sector productivity is how much of a product an employee can shift in an hour. On this measure, Germany does well. That turns out to be because of restricted opening hours, which oblige customers to make hefty purchases in one go. Japan does badly. Cavernous US superstores do better than cramped noodle or tofu shops. Japan also has a dense network of convenience stores on almost every city block, open 24 hours, allowing people to shop whenever they want. This makes them inefficient, since purchases are less concentrated.
No allowance is made, either, for the fact that Japanese shops tend to be within walking or, at most, cycling distance. Figures do not capture the inconvenience of having to travel, or the externalities associated with long shopping expeditions: traffic accidents, pollution, road maintenance.
Here is the full article, interesting throughout. The quality of Japanese service, by the way, is miles ahead of anywhere else (though stores don't like to take returns) and those subjective pleasures of the shopping experience don't get picked up by the numbers either. I can't imagine how a Japanese would feel moving to Germany or Austria.
Posted by Tyler Cowen on May 22, 2008 at 05:17 AM in Data Source | Permalink
Comments
My Japanese friends almost uniformly consider the retail service in Australia slow and rude. Since having been to Japan, I thoroughly agree on the slow part.
Posted by: Klon at May 22, 2008 5:23:01 AM
Japan is a great country to be a consumer in. I live in Yokohama, work in Tokyo. I don't own a car. Don't need one.
No tipping is also one of the nice things about Japan. One less hassle. And the service is better, for sure. If you can learn the language, it's a great place to live.
Posted by: Tim at May 22, 2008 5:42:41 AM
I can't imagine how a Japanese would feel moving to Germany
My wife moved from Japan to Germany in 1990. She was frequently frustrated with the opening hours (at the time, stores were open until only 5(?)pm except on "langer Donnerstag" when they were open until 7 (or was it 8?). They closed earlier on Saturday and were closed on Sunday. But what really annoyed her was the tone of the service--we both had many stories about shop owners or retail employees who were irritated by the pesky customers who seemed to exist only to hassle them into (gasp!) selling their wares for cash. I wonder now, whether this was a side-effect of the concentrated business hours.
The funny thing was that when she came to the US in 1997, she thought that people would be much friendlier than they were. In fact, they are friendlier, but at large chains, the friendliness of the staff doesn't really stick out.
Mention of the quality of japanese service reminds me of when I went to buy stamps in wife's hometown: the young woman who sold them to me *ran* over to the shelf to get them and then presented them with a bow. It was actually more of a shuffling, jog than a sprint (those of you who have spent time in Japan will know what I mean), but I was still struck dumb by the sight of a postal employee in an near-empty post-office on a lazy afternoon in a small town, *running* to help a customoer.
Posted by: MostlyAPragmatist at May 22, 2008 6:42:30 AM
I can't find it for the life of me, but I remember reading an essay about untranslatable words that claimed the Japanese have a specific term describing the shock of dealing with rude French clerks.
Posted by: Jeff H. at May 22, 2008 7:02:50 AM
This conflates two different things. The high quality of service suggests that we underestimate efficiency. But the relevant question is the extent to which big box stores are constrained from opening in competition. The US has 24 hour stores and big box stores. The 24 hour stores provide a service at a higher price. If all stores were constrained to be open 24 hours but stay small it would be more "convenient" but undoubtedly more inefficient. The fact that some/even many people like the smaller stores doesn't change the fact that if many of these stores would be wiped out in open competition with big box stores then the market in Japan is indeed inefficient.
The politeness and deference however is a genuine quality upgrade. Some of this is really cultural. But some of this comes down to US rules that would limit an employer's ability to fire/punish/indoctrinate workers to be even more service oriented. [Just consider what's happened to US flight attendants over the last 40 years and how difficult it would be to force unionized workers to match service standards of the 1960s or those of the better Asian Airlines which have hiring rules that would be considered unfair, anti-labor, "ageist" and "sexist" in the US.] The fact that the US labor market is more competitive than in Europe helps explain part of the reason why surly wait-staff are rarer here than there.
Posted by: ajb at May 22, 2008 8:49:54 AM
If I was a Japanese store manager and they said to me "look, the German store is more efficient than you." I might say something like, "well, none of our customers have started shopping at the German store." I'd expect blank stares back.
On the other hand, bows and "false hustle" don't impress me. Service, like meal servers should be, not quite invisible, but like a good experimenter, shouldn't make much of an impression on their subject. I don't like rudeness, nor the hard sell, nor put-on helpfulness. If you were really helpful, you'd help me change a tire, or find a babysitter, or whatever. I know what I want, roughly, help me find it. Let me know honestly when I should pay up for quality. I tip servers better when they tell me something on the menu isn't great.
I like the idea of tips. But maybe it could be improved. I've thought if a server knew up front you were a 10-30% tipper, they might act different than if they assumed you were a straight 15 percenter.
Posted by: Andrew at May 22, 2008 9:33:44 AM
aib is correct. If you artificially force stores to be small and profits to be high then quality competition will eat away the gains - yes, the quality counts for something but on the margin it is less valuable than the alternative of lower prices. Thus "high quality" per se is no sign of efficiency.
Posted by: Alex Tabarrok at May 22, 2008 9:43:10 AM
"but I was still struck dumb by the sight of a postal employee in an near-empty post-office on a lazy afternoon in a small town, *running* to help a customoer."
- This would really just make me very uncomfortable.
Posted by: Mike at May 22, 2008 2:04:33 PM
I have to agree, the high quality of Japanese service (clerks running, lines of people saying "hi" to you in the department stores, clerks insisting on extravagant wrapping and bringing the parcel out from behind the counter to present to you, etc.) a little freaky as an American...
Posted by: Mr. Econotarian at May 22, 2008 2:27:55 PM
If you find the high quality of Japanese service annoying, try paying in cash, and using 1 yen coins (a multiple of five, of course). Most insincere thanks I ever got from a clerk.
Posted by: John Thacker at May 22, 2008 3:48:35 PM
Mr. Econotarian,
It should probably be made clear that the "hi" that is said is
a) usually transliterated as "hai" and b) supposedly means "yes,"
although I gather it means much more. One hears it in many
circumstances, usually accompanied by a bow, and it is a sort of
general acknowledgement. Thus, one sees announcers on TV saying
(and bowing) to the TV audience in closing. And, it is more like
"hai"!! much of the time.
Posted by: Barkley Rosser at May 22, 2008 4:55:18 PM
Don't call us backward. As of January 1st shops can open until 6 on Saturdays in Austria!
Posted by: heartofEurope at May 22, 2008 8:13:39 PM
While the areas in which they can open are restricted, there are in fact big box stores in Japan, including Costco. There's actually two Costcos very easily accessible from central Tokyo, and three more a little further out in the suburbs. It seems to me, though, that it's disproportionately foreigners who shop there. As Tyler speculated the other day, people in Tokyo generally just don't want a one-gallon tub of mayonnaise, nor would they have anywhere to store it if they did. Most other foods they seem to prefer to buy fresh on the day they need them, rather than in bulk. I suspect the impersonal feel of those shops also disconcerts Japanese people a bit.
Mike and Mr. Econotarian, I understand the feeling that the level of service can initially make you uncomfortable or seem a little freaky. But once you've been in Japan for a while, the service in America or Europe can be downright shocking. You get used to good, attentive service pretty quickly...
As for tips, I prefer not dealing with the hassle of them, but generally I'm indifferent. What I can't get used to when I'm back in the states is when a server says that they're finishing their shift and they ask you to "take care of the check" - i.e., tip them now - then tell you you're free to stick around and that so-and-so will take care of you. I had forgotten that that happens until I was back recently, but I am fundamentally bothered by the idea of it.
Posted by: bcw210 at May 23, 2008 3:29:09 AM
Thomas Sowell makes the point in one of his books that even economists make the mistake of misjudging efficiency because they have the wrong criteria in mind by which to judge whether a thing is being done efficiently or not.
It's one of the most important lessons I've ever learned.
Posted by: Jacob Oost at May 23, 2008 3:31:12 AM
Big Box stores aren't the most efficient way to move merchandise, because they need to have everything in stock all the time.
Austrians and Germans love discount stores like Aldi, Hofer and Lidl. These smaller stores stock certain goods only for short periods of time. This week, Hofer has fridges for 269.-, tents and a massage tables in stock, amongst other things. Next week, beer dispensers, food processors and blankets will be for sale.
People frequently line up at these stores before they open and sometimes they even get into fights.
Turns out that soviet style retail scarcity can be a popular form of doing business within a market economy.
Posted by: Ethnic Austrian at May 23, 2008 5:37:14 AM
Japanese service isn't as great as it appears on the surface. Sure, clerks and servers are excellent at doing what's in the employee handbook, but in dealing with problems or unique requests they're almost completely helpless.
Posted by: Matt L. at May 25, 2008 1:01:24 AM
