Cosmos Pharmaceutical Corporation

Japan’s First Small-Catchment-Area Mega Drugstore

Unconventional Retail Approach

Cosmos Pharmaceutical has succeeded in developing large drugstores (small-catchment-area mega drugstores) in catchment areas with as few as 10,000 people. Conventional thinking in the retail industry calls for establishing small stores in small catchment areas and large stores in large catchment areas. Cosmos Pharmaceutical, however, has overturned conventional wisdom by building a small-catchment-area business model with large stores that, rather than trying to attract customers from a large catchment area, boost customer traffic to effectively double the catchment-area population.
In addition, our targeting of small catchment areas means we can deploy large numbers of stores. In other words, we partition markets into numerous small catchment areas for which we then develop competitive mega drugstores. That is the new business model that Cosmos Pharmaceutical describes as the “small- catchment-area mega drugstore.”

Limited-Catchment-Area, High-Market-Share Strategy

Until now, we have focused on building a dense store network, with no concern about stores cannibalizing each other's sales. The reason we have deployed large stores in a density some might see as unreasonable is to gain an overwhelming share of individual markets.
We believe that if we can gain around a 40% market share in Kyushu, which accounts for about 10% of the Japanese economy, we will also have achieved absolute regional superiority, even against national chains, and gained an advantageous position in business.
In addition, by placing stores close to one another, we can also reduce distribution and delivery costs. Having multiple stores in the same area also yields sales promotion and various other cost savings on a per-store basis. In taking these steps, we are aspiring to further growth through the establishment of a stable earnings base.

Super-Sized Convenience Stores

Does Cosmos Pharmaceutical operate drugstores? Or supermarkets? We’re often asked this question because our stores carry not only pharmaceuticals and cosmetics but also daily necessities and a selection of food items equal to what a supermarket would offer.
If we were to describe our drugstores using the nomenclature of another retail sector, the term, “super-sized convenience store” would be apt. Our aim is twofold - to offer customers one-stop shopping opportunities to purchase anything needed for daily life, and the ability to complete their shopping in a short amount of time.
Closeness, convenience and low prices. Our stores are not open all night but we make up for the convenience store's weakness which are the lack of a wide products selection and low prices to give customers a new, convenient shopping alternative.

Everyday Low Prices

Cosmos Pharmaceutical doesn’t engage in daily specials or limited-time sales, or try to enroll customers in a point card system. Our basic approach is to offer customers “Everyday Low Price” because we value repeat customers who will come to our stores on a daily basis.
In Kyushu, which lacks the population of a major urban area and is dotted with large numbers of unused properties, the number of retail stores is large relative to the population, so price competition is among the most heated in Japan. What we learned from that severely competitive environment is that nothing is more important than the trust of customers.
The reason we stopped running daily specials and limited-time offers, and did away with our point card system was that we came to realize that offering everyday low prices was the way to earn customer trust.

Private Brands

Because the products we offer are used or consumed on a daily basis, customers want them to be of high quality and available at the lowest prices possible. Cosmos Pharmaceuticals spares no effort in responding to that sincere desire. We strive to offer products that customers can rely on every day, day in and day out.
That’s why we work with trusted manufacturers to develop products of outstanding quality. Costs, of course, is a key concern and we keep them as low as possible to pass savings on to customers.
Realizing there is always room for improvement, we do everything possible to develop even better products.

Dominant Strategy

Our business model is not only valid in Kyushu but has great potential in other part of Japan. Since our store network in Kyushu, Chugoku, and Shikoku region is now close to completion, we are now planning to expand our business into other regions.
Our next target is to accelerate store openings in Kansai, Chubu,and Kanto regions. We will surely succeed in these highly populated areas.