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© Copyright 2014 Solee Irene Shin © Copyright 2014 Solee Irene Shin Making East Asian Consumers: Market Formation and Evolution of Demand in Japan, South Korea, Taiwan, and China Solee Irene Shin A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy University of Washington 2014 Reading Committee Gary G. Hamilton, Chair Daniel Chirot Yong-Chool Ha Becky Pettit Program Authorized to Offer Degree: Sociology University of Washington Abstract Making East Asian Consumers: Formation and Evolution of Demand in Japan, South Korea, Taiwan, and China Solee Irene Shin Chair of the Supervisory Committee: Professor Gary G. Hamilton Department of Sociology This dissertation examines the rise of organized retailing in East Asia. It pays attention to the roles of market makers as intermediary market players who act between the producers and consumers, especially in the contexts of national retail organization and expansion activities of multinational retailers. Theoretically, the dissertation combines the national business systems literature with a market power perspective to examine the contexts in which different national economies organize their retail sectors and incorporate retail innovations. Empirically, it asks what roles the domestic and global retailers played in building contemporary consumer markets in Japan, Korea, and Taiwan, and mainland China. It also asks, to what extent the development of consumer markets in Asia and the activities of multinational retailers have brought convergence or continued divergence between the different national markets, retail structures, and cultures of consumption. To answer these questions, the dissertation first pays attention to the links between national and global firms and retail markets, and second, to the links between national firms and products, and lastly, how the structure of global and regional production and national cultures of consumption are mediated by a set of intermediaries. Comparative case studies of standardized retailing, entertainment and fashion industries, and individual consumption are included to illustrate the roles of market makers. The dissertation finds support for the idea of increasing convergence in retail technologies and formats during the course of the Asian retail revolution, but also identifies how locally specific characteristics have mattered in three crucial ways; first, historical trajectories of business development and nationally institutionalized ways of conducting business led to different capacities of the newly appeared domestic retailers, and resulted in divergent patterns of competition against, or coordination with, the expanding multinationals; second, local organizational logics crucially shaped business strategies adopted for product development; finally, locally formed meaning systems and methods of making status claims play crucial roles informing individual consumption as well as the activities of intermediaries that actively monitor and strategize based upon local-demand. TABLE OF CONTENTS Page List of Figures ................................................................................................................... iii List of Tables .................................................................................................................... iv Chapter One: East Asian Consumer Markets .....................................…........................... 1 1.1 Rise of Consumption in Korea and Asia ......................................................... 1 1.2 Retailers and Demand Generation .................................................................. 8 1.3 Development of Organized Retailing in Asia ............................................... 13 1.4 Sources of Innovation: Country-Specific Structures and Market Making..... 20 1.5 Chapter Conclusion ....................................................................................... 30 Chapter Two: Theory of Retail Transition ....................................................................... 44 2.1 Conventional Explanations of the Success and Failure of Global Retailers.. 44 2.2 Economy-wide Variations in the Success and Failure of Foreign Retailers.. 50 2.3 Organizational Theory of Retail Transformation ........................................... 52 Chapter Three: Asia’s Retail Development ..................................................................... 66 3.1 Retail Revolution in Taiwan [Type 1 Economy] .......................................... 66 3.2 Retail Revolution in Korea [Type 2 Economy] ............................................ 74 3.3 Retail Revolution in Japan [Type 4 Economy] ............................................. 83 3.4 Predicting China’s Future Development ....................................................... 95 3.5 Chapter Conclusion ..................................................................................... 101 Chapter Four: Product Markets ...................................................................................... 113 4.1 Korean Wave and K-Pop’s International Success ...................................... 114 4.2 Explaining Hallyu ....................................................................................... 117 i 4.3 Market Makers in the K-Pop World ........................................................... 121 4.4 Emergence of Large Korean Entertainment Houses ................................... 125 4.5 Recipes for Success ..................................................................................... 131 4.6 Development of Feedback Loops and Their Macro Consequences ............ 138 4.7 Chapter Conclusion ..................................................................................... 143 Chapter Five: Consumption of Foreign Fashion in Asia ............................................... 148 5.1 Production and Consumption of Global Fashion Products ....................... 149 5.2 Hierarchical and Horizontal Arrangements in the Global Fashion “Brandscape” ............................................................................................ 153 5.3 Variation in the Production of Local Fashion ............................................. 159 5.4 Variation in the Consumption of Foreign Fashion ..................................... 165 5.5 Local Cultures of Consumption .................................................................. 172 5.6 Distributors and Retailers as Market Makers .............................................. 183 5.7 Chapter Conclusion ..................................................................................... 190 Chapter Six: Conclusion ................................................................................................ 201 6.1 Globalization and Local Consumption in Asia ........................................... 201 6.2 Demand-Based Capitalism in Export-Driven Economies .......................... 208 References ...................................................................................................................... 211 ii LIST OF FIGURES Page 1.1 Ownership of Household Items in Korea ................................................................. 38 1.2 Total Retail Outlets in Grocery and Non-grocery Sectors ....................................... 41 1.3 Market Share by Country and Retail Brand Origin ................................................. 42 2.1 Typology of Business Systems ................................................................................ 65 3.1 Taiwan: Number of Outlets by CVS Retailer ........................................................ 104 3.2 Taiwan: Number of Outlets by Hypermarket Retailer ........................................... 104 3.3 Korea: Number of Outlets by Hypermarket Retailer ............................................. 106 3.4 Korea: Number of Outlets by SSM Retailer .......................................................... 107 3.5 Korea: Total Sales by Retail Format ...................................................................... 108 3.6 Japan: Total Sales by Retail Format ...................................................................... 110 4.1 SM Entertainment, Domestic and Overseas Revenue, 2005-2012 ........................ 145 4.2 YG Entertainment, Domestic and Overseas Revenue, 2005-2012 ........................ 146 4.3 Big-3 Membership and Dance & Hip-hop Music, 1988-2012 .............................. 147 5.1 Fashion Pyramid .................................................................................................... 193 5.2 Japan: Aggregate Market-share by Brand Origin .................................................. 194 5.3 Korea: Aggregate Market-share by Brand Origin ................................................. 195 5.4 Taiwan: Aggregate Market-share by Brand Origin ............................................... 196 5.5 Japan: Orientation of Foreign Brands .................................................................... 198 5.6 Korea: Orientation of Foreign Brands ................................................................... 199 5.7 Taiwan: Orientation of Foreign Brands ................................................................. 200 iii LIST OF TABLES Page 1.1 Entry Periods of Major Retail Formats into East Asian markets.............................. 39 1.2 Chained Consumer Foodservice as a Percent of Total Foodservice Sales .............. 39 1.3 Combined Market Shares of the Top 5 and Top 10 Retailers .................................. 40 1.4 Top Ten Retailers of the Four Markets in
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