Profit margins in Japanese retailing

Using a rich data source, we explain differences and developments in profit margins of medium-sized stores in Japan. We conclude that the protected environment enables the retailer to pass on all operating costs to the customers and to obtain a relatively high basic income. High service levels are positively related with high profit margins, illuminating the importance of service in Japan. Small store competition does not affect performance of medium-sized stores, because small stores operate under circumstances different from those of medium and large stores.