May 2014 News in Brief

May 15

Musashi Kosugi becomes key suburban retail hub

As JC’s new report on Japan’s Top 100 Markets shows, Musashi Kosugi already has the highest apparel spending per capita in the country but is about to become an even more important retail hub, with two new SCs opened last month and one more due this Autumn. Mitsui opened Musashi Kosugi Lala Terrace with 72 tenants and Tokyu unveiled Tokyu Square with 100 tenants, both part of the large Musashi Kosugi Station South Exit Area redevelopment project. The 8,000 sqm Lala Terrace mixes fashion and interiors tenants with food stores and services such as clinics and is being billed as a new model format for suburban station locations with future SCs also expected to be of similar size. In the future, Mitsui’s portfolio will be split between its 30,000 sqm and larger Lalaport SCs, Lala Terrace SCs at 6,000-8,000 sqm, and Lala Garden in the middle with 15,000 sqm of sales space. This Autumn Seven & I will open its own SC in Musashi Kosugi called Grand Tree. The 37,000 sqm SC will be the biggest in the area with 150 tenants including group retailers Ito-Yokado, Sogo & Seibu, Loft, Akachan Honpo and possibly new acquisitions Barneys New York and Bals. The mall will aim to be a ‘family oasis’ as well as being the first SC designed to help Seven & I fulfil its ambitions to become an omnichannel retail conglomerate, a feature of all the company’s PR at present.

Japan to get largest Stradivarius store in November

Inditex Japan will open the largest Stradivarius store anywhere in the world this November in Osaka. Located in Shinsaibashi, the new store will comprise 1,350 sqm of sales space. Stradivarius was launched in 1994 and now has 900 stores worldwide. The first Japanese store opened last month in Mitsui’s Koshien SC in Hyogo with the second due this month in Lalaport Tokyo. This year alone eight stores are planned. This is the fourth Inditex chain to come to Japan, following Zara, Bershka and Zara Home.

Aoyama Shoji launches new chain for shopping centre market

Menswear market leader Aoyama Shoji launched a new chain last month for the shopping centre market. Called Next Blue, the chain is designed to complement the main Yofuku no Aoyama suit chain and the younger city-based chain The Suit Company. It will be the first fully unisex chain from Aoyama – 40% of merchandise will be womenswear compared to just 10% at Aoyama stores and 20% at The Suit Company – offering a mix of suits and casual apparel. The first store opened in Lala Terrace in Musashi Kosugi in April and shows a clear effort to separate the new brand from Aoyama’s existing chains, with a much more contemporary design to appeal to both men and women. The success of the chain will be key to Aoyama Shoji’s efforts to make serious inroads in shopping centres; its only real success in this sector so far has been its franchise of American Eagle Oufitters, although this is still at an early stage of development. Over the next five years, Aoyama plans to open 100 Next Blue stores, targeting sales of ¥15 billion. Aeon is expected to be a key SC partner.

ABC Mart launches men’s and women’s fashion footwear stores

ABC Mart launched a new footwear chain in Shibuya last month called Billy’s Ent selling the fashion lines from footwear brands like Nike, Adidas and New Balance alongside its own labels like Vans and Saucony, and a new fashion footwear brand called Vans Vault. ABC Mart also launched a women’s chain called Charlotte in Shinjuku in March. Charlotte too sells fashionable lines of leading footwear brands as well as some apparel, bags and accessories. ABC Mart plans 20 Charlotte stores over the next 18 months. Both chains are designed with the current boom in West Coast culture and fashion stores in mind – Ron Herman style stripped wood store displays, lots of faded light blue paint and so on. While ABC Mart has seen a big jump in fashion sneaker sales in the last few years, its core chain doesn’t lend itself to fashion conscious consumers, leading to the decision to create the Billy’s Ent and Charlotte chains, both of which have no reference to ABC Mart in the stores.

Isetan-Mitsukoshi and Japan Post launch joint venture

Japan Post set up a previously announced joint venture business with Isetan-Mitsukoshi last month and it looks like an ideal platform for anyone selling to the over 40s. The two organisations have collaborated on catalogues in the past, but JPMitsukoshi Merchandising is a completely new company focusing on direct marketing of non-food categories like apparel, accessories, home, and health to complement Japan Post’s existing direct mail food business. The first catalogue, called Tanjosai, was distributed late last month and offers a range of high quality apparel and accessories targeting the over 40s. The tie up looks like a great fit, mixing Japan Post’s vast network of 20,000 post offices and their constant flow of customers with Isetan-Mitsukoshi’s skills in merchandise selection and marketing. Catalogues will be located prominently at all service desks and waiting areas, ensuring a high level of visibility. Post Offices will also handle orders and of course delivery.

Kintetsu Hoop relaunches

With a serious overstore problem and lots of new competition, Osaka’s older shopping buildings have an uphill battle to stop the decline in sales. Some have seen sales fall 15% or more in the last year and the only solution is to invest to bring customers back. The latest SC to get an overhaul is Kintetsu Hoop which reopened late last month as part of the much larger Abeno Harukas development. It has added higher grade tenants including stores not yet present in the Kansai market, such as Freak’s Store, Salon adam et rope and US bag brand Manhattan Portage. Hoop is also appealing to the growing ethical and environmental consciousness of younger fashion consumers by linking up with students on a Golden Week Fairtrade exhibition featuring fair trade fashions, supported by Soup Stock Tokyo and Muji.

Sogo Chiba gets a facelift and web orders

It has been eight years since Sogo Chiba was last given a lick of paint, but at the end of April Seven & I unveiled new fashion floors targeting younger customers in their 30s and 40s. To better appeal to busy working women and mothers, Seven & I has introduced a new system for reserving an item online to try on at the store, the first time such a service has been offered within the Seven & I group. In addition, fashion floors now sport a modern, uncluttered design, centred around a gallery-like area managed directly by Sogo that offers brands such as Helmut Lang and Muller of Yoshiokubo. Tenants include Urban Research as well as Sogo & Seibu own brands like Avec Mode.

J Front and partners confirm Matsuzakaya Ginza replacement

J Front Retailing and its partners in the Ginza 6-Chome Urban Renewal Project have confirmed plans to construct a new shopping building on the former Matsuzakaya Ginza store. Although the branding for the building has yet to be disclosed, it has been confirmed that between 250-300 tenants will occupy the 46,000 sqm SC. The bulk of the tenants will be fashion related alongside restaurants and cafes. J Front is working with Mori Building, L Real Estate and Sumitomo on the development, which will be the largest in the area on completion.

Low cost carriers enter the mobile phone market

Until recently the Japanese mobile phone market has been restricted to just three players. Over the past few months, led by Aeon, a series of new, low cost carriers have suddenly appeared, much to the delight of consumers. Aeon, Lawson, Yamada Denki, Bic Camera, Edion, Yodobashi and Nojima have all set up their own services. Customers can buy low priced handsets, even smartphones, and buy pay-as-you-go data plans for as little as ¥1,000 a month. Electronics retailers are already the biggest sellers of mobile devices, and the new services will help them sell even more. For other retailers, having their own mobile data services not only adds extra income, but also provides opportunities for tightly targeted marketing initiatives based on individual customer profiles, locations and shopping activities. For customers, there’s now new, low cost, minimal contract options that the big carriers have so far avoided offering.

Nitori to expand smartphone marketing

Smartphones are now used by more than 50% of consumers according to NTT, and leading furniture chain Nitori is looking to leverage this new marketing channel. Using popular chat app LINE, it sends registered customers news on new products and promotions every Friday, linked directly to its online store. The promotions use the same content and graphics that Nitori sends out in its traditional newspaper flyers. Taking a leaf out of IKEA’s book, Nitori has set-up its own studio to provide constant updates to marketing materials, including a much expanded set of room sets. The materials are pumped down to Nitori’s own smartphone app, which has the ability to read product barcodes in store and provide on demand product information – as well as allowing instant online purchases. From FY2016, Nitori plans to make tablets available at stores to help customers browse more easily and order colours and other options not on display. Nitori’s online sales jumped 45% last year to ¥12.2 billion, about 3% of total sales.

World launches new lifestyle chain

World launched a new chain last month in Futako Tamagawa Rise, aimed at what it calls ‘new families’, offering a mix of apparel and home fashions. Called Le Tiroir de Dressterior after its own select shop chain Dressterior, the 260 sqm store offers around 50% apparel, 40% home fashions and 10% accessories. Around 70% of merchandise is store branded and 30% imported, mostly from Europe. Designed like a basic version of a Ron Herman store with an emphasis on workwear, Le Tiroir also includes a cafe called Ltd. Cafe. The home fashions section includes kitchenware, gardening tools and plants.

Amu Atsugi replaces Parco building

Tokyu Management opened a new shopping building in Atsugi last month, replacing a Parco SC that closed in 2008. Called Amyu Atsugi, the SC mixes fashion tenants with daily use stores. There are 20 tenants, including MI Plaza, the fashion to foods select shop set up by Isetan-Mitsukoshi to target the over 50s in city suburbs. Also included is new lifestyle chain Navy Store operated by Mac House, offering colourful home basics, another example of an apparel retailer expanding into the fast-growing home fashion market.

Harman opens first Japanese store

Audio brand Harman opened its first Japanese store last month in Roppongi Midtown. Harman sells high end audio equipment under brand names like JBL, Kardon and Mark Levinson.

Department stores suffer in April

Not surprisingly department store sales fell significantly in April, but not as badly as some had feared. Mitsukoshi Ginza and Hankyu’s Men’s Annex in Osaka actually saw sales increase, by 1.1% and 0.6% respectively, partly thanks to support from tourists. Overall both Isetan-Mitsukoshi and Hankyu-Hanshin saw sales fall 7.9% year on year. Daimaru-Matsuzakaya fell furthest among the leaders, down 15.3%, Takashimaya by 13.6% and Sogo & Seibu by 11.4%. Takashimaya said it expects group sales to fall around ¥83 billion in the next five years, a rate of 1.1% a year, largely because of demand falls due to increased prices from the consumption tax. Takashimaya’s department store business alone is expected to see sales down nearly 5% or around ¥45 billion.

Kisarazu Mitsui Outlet Park to open expansion in July

The second phase of Mitsui’s Kisarazu Outlet Park in Chiba will come online July 17, expanding from 175 stores to 248 stores in 8,500 sqm of extra space, taking the mall to 36,500 sqm in total. Located next to the Chiba end of the Tokyo Bay Aqua Line bridge, it is one of the most accessible outlet malls from central Tokyo. The new section includes many brands opening outlet stores in Japan for the first time including Itochu-controlled cashmere brand Lucien Pellat-Finet and denim brand Jacob Coen. Kisarazu also features a lacquerware store, a fishing kit outlet, and a Kukuruza Popcorn store, following on from the Seattle brand’s huge success in Omotesando Hills. The original Kisarazu Outlet Park opened in 2012, with sales of ¥40.9 billion in the first year, dropping to ¥32.2 billion last year. Mitsui is now forecasting a big boost in sales, aiming for visitor numbers of around 80 million a year.

Rakuten expands loyalty points system for retailers

Rakuten will introduce a new extension to its loyalty points system called R Points this October. The new system links with retailers and will allow customers to earn points when shopping at 13,400 stores in 11 major chains. Rakuten has initially signed up Circle K Sunkus, Pronto and Idemitsu, but says it plans to have 50,000 stores in its network within three years. It also plans to leverage data such as postal addresses and e-mail to provide focused marketing, including services to member retailers. The new scheme is a direct attack on Culture Convenience Club’s (CCC) T-Point card. T-Point is accepted by a wide range of vendors and was the only independent loyalty card system in Japan until now, but CCC does not provide enough added value for either vendors or customers. Rakuten, which boasts close to 90 million registered accounts on its various sites, introduced its own loyalty points scheme in 2002, and then merged this with the Edy e-wallet system acquired from Sony two years ago.

Rice consumption still declining

Demand for rice is being propped up by the convenience store industry with its constant supply of rice balls and bento boxes. For the past thee years, the value of the rice market has risen slightly, up 0.3% in 2012 to ¥2.246 trillion according to Yano Research. Most of this increased demand is, however, for added value processed products rather than for raw rice alone. In 2012, total consumption was 62.1kg per person, less than half that of 50 years ago. In addition, since the 2011 earthquake, even senior consumers are increasingly using the ready-made meal services of convenience stores, further reducing demand for rice grain. There is some hope that the increasingly industrialised production of rice will create a new export business, but with expensive production and prices three times that of similar Californian varieties, most analysts expect the industry to continue to contract.

Cheese producers take opportunity to increase prices

To correspond with the tax increase last month and while noting that prices had been static for some six years, Japan’s major cheese suppliers including Yukijirushi Megmilk, Meiji and Morinaga, have announced increases in retail prices, citing a shortage of domestic raw material and rising prices of imports. In addition to the low Yen, increased demand from China has pushed up the price of natural cheese products. According to second tier supplier Rokko Butter, where cheese makes up 95% of sales, import costs have risen 25% in the past year, and domestically produced dairy ingredients for cheese are also up between 6-15% since 2009.

Seven & I, J Front, Lawson all report record profits

End of year results are just coming out, but on the back of huge demand prior to the tax increase, a number of companies have confirmed record profits. Seven & I Holdings, Lawson and J Front Retailing have all said they will report record consolidated profits. Takashimaya also reported sales exceeding ¥900 billion for the first time in five years. In contrast, Aeon will see both operating profit and net profits fall compared to last year as a result of its acquisition of Daiei; Daiei posted its sixth straight net loss, dropping to ¥24.33 billion, worse than the ¥3.6 billion lost last year. The addition of Daiei and other acquisitions, along with further organic expansion of store assets, has pushed Aeon ahead on volume, however, with the group now turning over well over ¥6 trillion.

Hermes thanks Japan for sales increase

Hermes confirmed that the “exceptional performance” in Japan was the main reason for its 10.1% growth in sales in the first quarter. At constant exchange rates, total sales grew 14.7%. Sales in Japan were boosted by rush buying, growing by 21.7% at constant exchange rates and by 5.8% at current exchange rates to €116.7 million. Sales in the rest of Asia were up 17.7% to €329.3 million on a same currency basis, or by 12.8 percent at current exchange rates. Sales in Europe rose 7.9%.

H2O to open in China

H2O Retailing announced late last month that it plans to follow other major department store operators into the Chinese market. The leading Kansai department store confirmed it plans to open its first store in Ningbo in 2018. The store will be run as a joint venture with investment and real estate firms and local government, and is due to cost around ¥50 billion to build. The development will include residential and office space in a new development around 5km away from the current main city centre, offering gross floor space planned at around 160,000 sqm over six floors and one basement.

Joyful Honda completes IPO

Top tier home centre operator Joyful Honda, known for some of the largest stores in the sector, completed its IPO in mid April. The Mitsubishi linked company is small compared to some of its rivals, with just 15 stores around northern Kanto, but has a format that is popular with both consumers and trades people. Joyful is expecting sales down 0.1% to ¥176.7 billion at the end of FY2013 in June this year, with operating profit down 9.3% to ¥9.15 billion.