Isetan-Mitsukoshi has already proven its capacity to think beyond department stores through a series of small format concepts, and it will launch two more in the next year. These are helping the department store group reach new customers and better serve its core target too. Given the scale of investment, calling Isetan a department store business could well become a misnomer in a few years. Other department stores are looking at similar moves too.
As expected, Isetan-Mitsukoshi will open an entirely new form of small format store in Autumn 2015. Opening in Mitsubishi Estate’s development at Nagoya Station, the new 3,000 sqm store will be a large scale select shop within the 80 tenant 8,500 sqm shopping zone in the Dai Nagoya Building. The store will be similar in merchandise profile to the Haneda Men’s store, but much larger, and target both men and women with a significantly higher positioning than a typical select shop chain like United Arrows. As with Isetan Haneda, the store will emphasise the department store’s sourcing and merchandising skills across a range of product categories from cosmetics through apparel to food.
The new store has been designed as a chain for rollout to key cities, with potential for as many as 50 stores nationwide. The first store is certainly in a great location. Along with JR Takashimaya’s expansion to 80,000 sqm and other developments, the Dai Nagoya Building will cement the station area as a serious rival to Sakae as the principle shopping destination in Nagoya (see box). Mitsubishi has plenty of experience of this; while its Marunouchi project had a slow start in terms of pulling traffic from Ginza, in the last two years it has gained momentum, creating a more discreet retail destination for Tokyites preferring to avoid the tourist bustle and fast fashion stores in Ginza.
A hint of the kind of merchandising to be seen in Nagoya will be on show at Haneda Airport from this Spring. Isetan-Mitsukoshi will open two stores there. The new men’s emporium will be a 450 sqm boutique in Terminal 2 to complement the 800 sqm store in Terminal 1. The smaller store will focus on a narrower range of accessories and gift foods. The Isetan Haneda Ladies store will be on the second floor of Terminal 1, a 500 sqm space dubbed a ‘fashion museum’, offering high selling lines from Isetan Shinjuku’s womenswear and accessory floors. Also included will be a nail salon and cafe. This will be a key testing ground for the first dedicated womenswear small format store from Isetan-Mitsukoshi.
Meanwhile the department store group continues to rollout its other small format chains. Isetan Mirror will get three more stores this Spring bringing the total to nine, including a larger 154 sqm space in Lalaport Tokyo Bay this month and a store in Shinagawa. As well as the luxury brand staples, Isetan Mirror is also adding in natural skincare brands such as Jurlique and John Master Organic. Some stores will see a much greater concentration on natural organic brands in the future where the demographic supports it; the upcoming Kinshicho Termina store will be largely made of up natural and organic cosmetics brands, store branded lines and hair accessories. Taking a leaf from the select shop model, Isetan Mirror launched its own Isetan branded cosmetics merchandise in 2012.
The select shop chain for seniors, MI Plaza, opened its first store last October. There are three stores currently with four more opening this Spring in Yamagata, Chiba, Niigata and the new Amyu SC in Atsugi (formerly a Parco).
Isetan-Mitsukoshi may well have started a trend. Takashimaya, which also has its own cosmetics only format, will open its first food specialty store in Aeon Okayama In November (see Page 6), and Odakyu also announced last month that it will begin expansion of a new select shop concept called Desk My Style, featuring everything from food to accessories and targeting career women. Given the lack of opportunities in department stores alone, more new formats could well follow.
Nagoya: retail battle lines redrawn
The growing investment in the area around Nagoya Station is causing concerns among retailers in the traditional shopping heartland of Sakae about 2km into town. Before 1999 when JR Takashimaya opened, sales around Nagoya Station were around 25% of Sakae. Within five years, and despite troubles at Meitetsu, the station area had increased share to 35% and today it is at 40%. Unfortunately for Sakae, this growing share at the station has not come through increasing sales; the station area’s sales have been flat since 2005, but Sakae has seen sales fall from ¥330 billion to ¥250 billion since 1999.
The real problem is the impact of massive suburban SC development. Since 1999, more than 1 million sqm of SC space has opened in the city, 650,000 sqm since 2005 alone. An astonishing 70% of this is operated by Aeon. Rough estimates suggest this new SC space already turns over some ¥400 billion a year. There are clear generational shifts going on with many young consumers foregoing city centre shopping entirely given the access to affordable fashions and entertainment at nearby SCs. Department stores have been trying to fight back with Matsuzakaya’s younger annex anchored by H&M and even JR Takashimaya introducing younger floors, but the scale of SC investment is hard to counter.
It is within this wider picture that the upcoming investment in the station area makes sense – it is after all an area with far superior transport links than Sakae ever had. Rather than trying to compete with SCs, station developers are narrowing the target to focus on premium shopping and dining for affluent 30s and 40s consumers, a profile that Isetan-Mitsukoshi’s new store looks ideally positioned for. Given that these shifts in purchasing patterns and development are common to other cities too, the new format store looks likely to have plenty of potential locations to choose from in the future.
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