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In Japan, the 99 Yen Store Becomes a Retailing Force

TOKYO -- Japan's convenience store wars are heating up as more and more chains aim for the discount market.

One pioneer, the Shop 99 chain, which sells all its goods for 99 yen, has predicted its profits will rise 50 percent in 2005.

But it is facing increasingly stiff competition as Japan's thrifty consumers turn to discount shopping.

One of Japan's biggest convenience shop chains, AM/PM, is launching its own shops -- with goods priced at 98 yen.

The news sent shares in Ninety-Nine Plus, Shop 99's operator, sliding on Japan's Jasdaq start-up company stock market.

There are more than 600 Shop 99 branches up and down the country, selling not only prepacked food groceries and household goods for 99 yen before tax, but perishable fruit and vegetables as well.

But even now it does not have the so-called "one coin" market to itself.

Aside from AM/PM, Lawson - No. 2 in the convenience store market -- is also getting into the discount sector, while Can Do Co and Daiso are already established competitors.

In an interview with Reuters, Ninety-Nine Plus president Takahiro Fukahori said he was not concerned about the attempt by more established players to muscle in on the cheaper end of the market.

"It will be alarming if they actually expand as they targeted, but from looking at previous cases, many companies have set up about 10 stores... and ended up backing out," he told the news agency.

Still, shoppers are feeling more financially pressured in Japan after years of deflation, and the convenience store market is already a cut-throat business.

Japan's cities throng with such stores, often open 24 hours a day, and until now much of the rivalry between chains has been based on offering the widest range of services.

Bill paying at convenience stores is now a common feature.

Some -- notably FamilyMart, the No. 3 in the market -- are planning to enter the business of selling music and movies to be downloaded onto Japanese customers' ever-more-advanced mobile phones.

The competition is taking its toll not only on convenience stores, which have seen their margins shrink, but also on supermarkets.
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