February 2014 News in Brief

Feb 15

A result for Abenomics: ¥6 million chocolate

Lower income consumers might be suffering, but Abenomics is certainly cheering up those with money to spend. Hanshin’s Umeda store has put a ¥6 million sapphire and chocolate tiara on sale in time for Valentine’s Day – the day when Japan celebrates chocolate consumption as a form of love. The one off creation includes a 5.76 carat, heart-shaped blue sapphire as its centre piece, as well as other stones in orange and yellow, and measures 9.5cm by 22cm. It is the most expensive piece of chocolate Hanshin has ever put on sale, apparently, even though the piece will not, of course, ever be eaten. Anyone flush enough to buy this for a potential loved one will have also paid to have the whole creation melted down by Juch Heim in Kobe, reconstituted to a desired level of sweetness, and the stones made into a unique ring and ear-ring set. Last year, Hanshin offered a similar piece featuring diamonds, but at the more modest price of ¥3 million no one was impressed enough to buy it – but that was before Abenomics really fattened the wallets of the wealthy.

H&M Japan sales jump 46% in 2013

H&M Japan’s sales rose 46% on a local currency basis in FY2013. In Swedish Krona, sales rose 18% to SEK 2.95 billion, around ¥46 billion. During the year, H&M opened 18 stores and closed one, leaving a net 39 stores. Eight stores were opened in the last quarter alone, during which sales rose 34% on a local currency basis. H&M now operates three brands in the Japanese market, H&M, Monki and Weekday, and is expected to continue the faster rate of store expansion seen in the last year.

Lalaport Tokyo Bay gets second update with Stradivrius and Flying Tiger

As part of efforts to face off the new competition from Aeon Shintoshin SC nearby, Mitsui is completing the second stage of its major upgrade of Lalaport Tokyo Bay. This will be completed over March and April in time for the Golden Week bonanza. 75 stores out of the 450 tenants will be new, of which 37 will be opened in March. Major crowd pullers will be the first Kanto store for Zara sister brand Stradivrius, which will open its first store in Japan in Lalaport Koshien this month. Inditex Japan will also open Zara Home here, and Sazaby League will open the third Japanese store for the hugely popular Flying Tiger chain from Denmark. Other firsts from domestic retailers will include a new SC-targeted chain from Ships called Ships Days, Baycrews’ new 417 by EDIFICE/IENA SLOBE, and United Arrows’ new footwear chain Boisson Chocolat. As well as retail tenants, like other SC operators, Mitsui has increased the entertainment offer at Lalaport Tokyo Bay including a new cineplex.

ABC Mart overseas sales jump 65%

Another large jump in sales for the first nine months of 2013 suggests ABC Mart’s expansion overseas isn’t being driven by saturation pressures at home, but Japan’s leading footwear chain is planning to double sales overseas in the short term. Sales overall rose 18.7% in the nine months, and operating profit was up 14.4%, backed by 96 new stores, bringing the total to 921. Within Japan sales rose 10.2% to ¥108 billion with same store sales up an impressive 5.8%. Overseas sales leapt 65.6% to ¥30.3 billion and operating profit by 56.5%. It now has 145 stores in South Korea, 25 in Taiwan and two in the US. For the full year, ABC Mart is expecting to hit another record, up 15.2% to ¥183.7 billion, widening its lead against rivals Chiyoda and G-Foot by a considerable margin. Key to growth will be further investment in overseas markets, particular the US and Greater China.

More women working, fewer permanent jobs

A recent report by the Ministry of Labour shows that more women than ever before are continuing to work. Between January and November last year, 71.3% of women between 35 and 44 were in some form of employment, an increase of 1.6 points on 2012. This is the first time the figure has broken 70%. The Ministry pointed to increased supply of daycare facilities and a more welcoming labour environment as key reasons, although there is also a growing need for women to work in order to make ends meet. This last reason was demonstrated as 2013 showed the first increase in the total number of working women for three years, and the first increase of more than 1.3% a year since 1997. In contrast, the number of working men actually fell by 120,000 last year, largely due to increased numbers of retirees. While the news is generally good for women’s status overall, there remains the question of the type of employment available. Numbers are increasing overall, but jobs in non-permanent positions rose 3%, while full-time permanent positions fell 1%.

Hankyu Nishinomiya Gardens to get major update

Hankyu will replace 80 tenants in Nishinomiya Gardens this Spring. The SC is one of the best performing in Japan, with sales increasing year on year since opening in 2008 thanks to careful focus and a relentless programme of events to ensure continued footfall. In 2012, visitor numbers reached a record 19.5 million, producing sales of nearly ¥74 billion. Following the update, Hankyu expects visitors to exceed 20 million and sales of ¥75 billion. 10 of the new tenants will be new to the Kansai area, with much of the focus on fashion retailers, particularly select shops. Highlights will include Aerie for American Eagle Outfitters, Point’s new chain Squoval and Baycrews’ Iena Slobe. Hankyu will also further emphasise the mall’s premium positioning with upgraded rest areas and garden.

Kusuri no Aoki extends online drug sales

With government regulations for online sales of over the counter (OTC) drugs finally in place, Kusuri no Aoki began sales online in January. The Kanazawa based drugstore chain, that has been turning heads with some of the highest sales growth of any retailer in the country in the past three years, began offering 500 SKUs of the lower category drugs on its own website, with plans to have 1,000 SKUs on sale by the end of the month. The chain is in the process of expanding its online operations, with plans for 9,000 SKUs in total, including both cosmetics and household items like detergents due to be on sale by the end of February. Despite Aoki’s stores being limited to northern Chubu, the website will sell nationwide, with a flat delivery fee of ¥500 that will be waived on orders over ¥5,250. Aoki also runs a Rakuten site, but is considering moving everything under its own system. The company says it will take 3-5 years to understand and develop the online drug market properly.

Sazaby opens store for Frank & Eileen

The enthusiasm for smaller overseas brands in Japan is easily proven by the fact that quite a few have their only stand alone store in this market. The latest is Frank & Eileen, the LA-based shirts brand that launched in 2009. Sazaby League distributes the brand here and will open the first store at the heart of its empire in Sendagaya, opposite the Ron Herman flagship. A small 60 sqm, the space will be themed like an Irish pub. As well as shirts, denims, knitwear and jewellery will also be sold.

Itochu signs Sanmarino for Outdoor Products

Itochu Shoji has given a sublicense for Outdoor Products to affiliate Sanmarino. Itochu Shoji signed a wide ranging license with the US backpack and accessory brand in 2012 for Japan and 18 other countries. The deal with Sanmarino will give Itochu rights to open stores selling apparel, bags and accessories with a target of 30 stores in the next five years. The first store will open 11 February in Lumine Est in Shinjuku. Sanmarino was originally a menswear brand but has recently diversified into specialty retailing and select shops.

Japan to begin taxing foreign downloads in 2015

In an effort to flatten the playing field for domestic businesses, companies outside Japan selling e-content for download will be required to pay Japanese taxes from 2015. The aim is to collect tax from sellers such as Amazon or Apple which host servers offshore, but also companies like Rakuten which have acquired overseas operations that sell e-content back into Japan. The aim was to introduce the new tax system in time for April, but this has since been postponed until October 2015 to coincide with the second Consumption Tax increase.

Suntory acquires Jim Beam

Suntory Holdings announced the takeover of US drinks manufacturer and distributor Jim Beam in mid-January. The US company was the fourth largest distributor of distilled drinks in the world before the takeover. Suntory, although dominating the market at home, ranked a mere 10th globally. The buyout, which will set Suntory back a whopping ¥1.65 trillion, will make the new company the third largest in the world, overtaking Bacardi Martini. It is no stranger to major acquisitions. Suntory acquired the drinks arm of GlaxoSmithKline (GSK) back in September for ¥210 billion, and Orangina Schwepps Group in 2009. It has quite a long history of more minor overseas acquisitions too, but most of these were aimed at manufacturing capacity and securing brands for import into Japan. Jim Beam is seen as an opportunity to push existing Suntory brands the other way. Analysts were initially positive. Although Suntory will have to increase borrowing in order to afford the takeover, it is one of Japan’s stronger firms financially – it forecasts a record operating profit of around ¥120 billion for FY2013, with sales also higher than ever before, closing on ¥2 trillion. Even so, Jim Beam is significantly more profitable than its new Japanese partner and also owns a raft of major brands. In addition to Jim Beam whiskies, brands such as Teachers, Laphroaig and Gibneys will all now come under the Suntory umbrella. Despite the weak Yen, Japanese firms have been looking to acquire overseas in the past six months, seeking routes to expand out of a domestic market with a declining population. In addition to new economies of scale, this is Suntory’s main aim, with its sights firmly set on expansion of its current brands in the USA.

Matsuzakaya Ueno to reopen ON 12 March

J Front Retailing will partially reopen Matsuzakaya Ueno next month. One of the most troubled stores in J Front’s portfolio, at 42,000 sqm Matsuzakaya Ueno is huge for an area not given to department store shopping. As has been the case for its other properties, J Front has completely repositioned the store to focus on a tight target, in this case better off residents of around 60 and above on the one hand, and young fashion shoppers on the other. Only the main building will reopen next month, comprising some 21,000 sqm, and this will focus exclusively on seniors. The south annex will reopen in 2017 as a Parco – the first example of J Front’s integration of the SC chain – following rebuilding work. The main store will focus on premium, daily use merchandise, creating a middle market emporium that aims to guarantee reliable quality at reasonable prices. J Front is hoping to encourage regular visits for both food and other necessities, offer hobby and craft ranges, as well as services suited to the market such as advice on pensions, investments and funerals.

Familymart to unify private labels internationally

Familymart has announced it will sell the same range of private label items across nine international markets. Beginning this year, the chain’s Taiwanese operation will introduce 250 SKUs of Familymart brands, and supply bases will be set up in Thailand for stores in both the Philippines and Indonesia, with expansion elsewhere later on. There are 2,900 stores in Taiwan, and Familymart brand juices and desserts are already on sale there. Quality will be the key concern, re-emphasising the more advanced nature of Japanese products to other markets in Asia, and each of Familymart’s operating countries will contract out some of their own supply but to strict, centrally laid down standards. Packaging will be unified across products and countries, although ingredients labelling will differ depending on local regulations. Currently Familymart sells around 450 SKUs in its Familymart Collection range, with target sales of ¥150 billion for FY2013, about 9% of total sales. Seven Eleven is the only other chain to take product overseas, but this is still limited to items such as wine and in small volumes.

Generic electronics begin to takeoff

Private branding (PB) is all the rage and, to the absolute horror of Japan’s global consumer electronics manufacturers, the trend is quickly extending into their carefully protected domain. More and more retailers are beginning to offer generic electronics from simple items like toasters and fans, to LED TVs and vacuum cleaners. While big name manufacturers rested on their belief that Japanese consumers would never buy an unbranded product over their own, retailers have gone to less known makers in Asia to source good quality products that undercut major brands on price. The big brands even offer only short-term guarantees on some product lines, as short as just 6 months, but several retail brands now come with a full 2 years guarantee as standard. One Korean-made vacuum cleaner designed for futons has sold 700,000 units at between ¥10,000 to ¥30,000, around half big brand prices. Aeon currently has just 40 or so SKUs in consumer electronics in its Topvalu PB range, but plans to have 200 by next year.

Retailers and restaurants gearing up for high demand

Retailers and restaurants are hiring more part-time workers in preparation for high demand over the next three months. Part-time workers have been in demand all year, with the average rate of hires increasing by 10% or more each month from November 2012 onwards. Service industry part-time jobs jumped by around 23% in May last year as hotels ramped up hiring pre-summer, expecting more people to take holidays and to cope with the growing influx of overseas tourists thanks to a steadily weakening Yen. In October, new part-time hires hit 907,000, up 10.8%, with manufacturing firm jobs increasing 20.2%. Retail jobs increased sharply too prior to Christmas. The result is that 79.8% of firms overall, and more than 81% of retailers, are increasing hourly wages to attract suitable temporary employees. Aeon Mall alone hired around 3,000 new casual employees for its Makuhari SC that opened on 20 December, many of whom could look forward to long-term employment. Uniqlo too opened a new website aimed at recruiting more casual workers last month.

Mitsui ties with Mitsukoshi on concierge service

Mitsui is already collaborating with Mitsukoshi Nihonbashi and other partners in its long-term efforts to redevelop Nihonbashi into a high end mixed commercial and residential neighbourhood. One of the first fruits of this effort will be the upscale residential tower, Park Axis Premier Muromachi, located a short walk from Mitsukoshi in Muromachi, which opens in April. To add lustre to the development, Mitsui has signed Mitsukoshi to provide a range of high end services for residents befitting their income levels. Mitsukoshi will make assistants available to consult on Mitsukoshi merchandise and take orders and other instructions. Among the paying services will be interior design, delivery of custom ordered meals for dinner parties, tailored holiday consulting and purchasing of tickets for concerts and other events. Mitsukoshi will also be putting together a starter pack for luxury living, a set of “luxury essentials” for new residents. Mitsui says it plans similar collaborations for other high end residential developments.

Locondo the store

Locondo experimented with its first bricks and mortar store in mid-December. The online shoes and fashion retailer that launched in 2010 as a rival to Zozo, Rakuten and Amazon, has had to weather difficult trading during its short life, and the company’s flexibility has been one of its main strengths. The pop-up store opened in Futago Tamagawa Rise in early December for two weeks, with the aim to boost awareness of the online site brand. In keeping with online sales, customers were given the option to return any purchases post-paid within 30-days. Sales hit ¥10 million for the two week period, with Locondo considering longer term openings. The store was a 25 sqm space inside the Shikata bag store in the SC, and offered 40 of the most popular bag and shoe lines from the Locondo range. Staff used iPads to introduce customers to the site directly.

United Arrows launches e-commerce app

United Arrows launched its own smartphone app last month. The app, only for iOS at launch but with Android planned for this month, profiles eight house brands and allows for purchases within the app. In addition, customers can search for product, check inventory and also find their nearest store using the GPS function on the phone. As is increasingly common among select shops, shop staff have been co-opted as models and stylists. Users can select some brands to follow more than others, and receive notifications on offers and news. United Arrows garners around 12% of sales from e-commerce and says sales from mobiles is the fastest growing segment.

Ito-Yokado opens first store in China for 3 years

In mid-January, Seven & I opened its first new Ito-Yokado store in China for three years. The lull was provoked by the continuing political spats between the two countries, in addition to Seven & I looking to consolidate its business around Beijing. The group has opened its full range of main brands, including Ito-Yokado GMS, York Benimaru supermarkets, and Seven Eleven convenience stores, all feeding from an overlapping supply network and closely managed with Japanese oversight. The latest store added to the five existing Chengdu stores. It is due to be followed by a new SC in the city this summer, which at 38,000 sqm will be the largest so far with target sales of ¥8.3 billion a year. It will also host a number of tenants brought in from Japan. Despite the political impact on Japanese brands in the republic, Seven & I says GMS sales grew 6% in Chengdu last year to ¥53.5 billion. Results in Beijing have been less encouraging, however.

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