The westward expansion of big corporations is forcing smaller firms to merge for survival.

OSAKA-The electronics retailing industry is in a state of flux.

Large players from the east are on a westward expansion drive that has smaller Kansai firms merging for survival.

For decades, Kansai electronics retailers have pursued a path of peaceful co-existence, operating small outlets in areas more or less exclusive to them.

Growth into huge corporations similar in stature to Kanto firms was next to impossible due to the presence of leading electronics manufacturers such as Matsushita Electric Industrial Co., Sanyo Electric Co. and Sharp Corp., which provide support to affiliated shops in the region.

Consolidation is rife. In fact, there is only one major player in Kansai, Joshin Denki Co., currently going it alone.

``We'll try things on our own for the time being,'' said Nobuhiro Sugihara, manager of the company's corporate planning department. ``But we may choose to tie up'' if a good partner comes along.

Despite its relatively strong business performance, Midori Denka Co. is the latest to seek strength in numbers. In April, the midsize retailer will become a wholly owned subsidiary of Edion Corp., active in the Tokai and Chugoku regions.

For the year ended February, Midori Denka, which operates about 90 outlets, mainly in Osaka and Hyogo prefectures, posted 222 billion yen in sales, up 7 percent from a year earlier.

Its strength lies in the service it provides, including same-day delivery and set-up of products, which has helped it build a loyal customer base.

But such factors do not ensure Midori Denka's survival, says Keiji Takahashi, adviser to the company's financial and accounting department.

``Our conclusion is that it will be difficult to survive on our own,'' he said.

Spurring the battle between east and west is an increasingly competitive environment the industry as a whole is locked in, one that is driving them to be bigger and stronger.

Front-runners are racing to break the 1 trillion-yen mark in annual sales.

Industry leader Yamada Denki Co., based in Maebashi, achieved 939 billion yen in sales in fiscal 2003, while No. 2 Yodobashi Camera Co. from Tokyo chalked up 545 billion yen.

Being big in and of itself results in perks for the retailers.

The larger the sales, for example, the greater the leverage the retailer has in negotiating prices when procuring products from manufacturers.

Big retailers are also entitled to more rebates from manufacturers. This in turn enables the companies to offer more discounts.

Smaller Kansai players cannot compete. Since 2002, four companies have entered into bankruptcy proceedings.

Another, Yachiyo Musen Denki Co., was swallowed up last year by Mito-based Gigas K's Denki Corp.

``(Kansai firms) were careful not to tread on each other's territories, and they were content to have small shops and small sales,'' said an official at one retailer.

But the small businesses were hard hit when new products started to make their way onto the market at shorter intervals, which has caused prices to fall faster and diluted profit margins.

While Kansai firms are in a tough situation, things are not that much better elsewhere, analysts say.

Tsutomu Hanzawa, a senior researcher specializing in mass retailers at Mitsui Trust Holdings Inc., says the ongoing price war could drag the electronics retailing industry into a slump.

``The price battle will not stop until the entire industry is consolidated into four or five major players,'' he said. ``In the meantime, the companies have to do something to raise sales, like offering additional services to stand out. Otherwise the industry as a whole will stagnate sooner or later.''

In fact, even at top player Yamada Denki, operating profit is less than 2 percent of its sales.

The Fukui-based 3Q group has adopted a down-to-earth approach to secure loyal customers.

One of its new strategies was to launch a subsidiary specialized in servicing mainly elderly customers, from the repair of products to the replacement of batteries.(IHT/Asahi: February 16,2005)