Mitsukoshi Ginza to house 3,000 sqm duty free store

Tourism has helped boost city department store revenues by as much as 10-15%, but until now the only real benefit for foreign customers has been the consumption tax rebate – and even that was highly restricted until now. Isetan-Mitsukoshi will go one further next year, opening a dedicated duty-free store that will sell luxury brands free of both consumption tax and import duties. Aeon and Ito-Yokado are introducing tax-free services too.

Isetan-Mitsukoshi Holdings will open a duty free store within Mitsukoshi Ginza in Autumn 2015. The store will be managed in association with NAA Retailing and Japan Duty Free, which operates shopping areas at Narita Airport, through a new company called Japan Duty Free Fa-So-La. Japan Duty Free Fa-So-La will be 45% owned by Japan Duty Free (Japan Airport Building), 27.5% by Isetan-Mitsukoshi, and 27.5% by NAA Retailing. The 3,300 sqm store will be focused largely on luxury brands in fashion, accessories, jewellery, watches and cosmetics.

By showing a passport and airline ticket, customers will not only be able to avoid consumption tax but also customs duties and import duties on things like alcohol and tobacco. Customers will not receive goods in the store but at Narita and Haneda airports after clearing security.

Isetan-Mitsukoshi expects sales of an impressive ¥10 billion in the first year alone rising to ¥13 billion a year later. Currently 10% of Mitsukoshi Ginza’s ¥70 billion annual sales come from tourists, and the lure of duty and tax free luxury brands should mean that the department store easily meets its targets. Further duty free stores are likely at Isetan Shinjuku and other key stores.

This news was quickly followed by both Seven & I’s Ito-Yokado GMS chain and Aeon announcing that they would also introduce tax-free sales in their chains for consumption tax alone. Both companies report large numbers of tourists bulk buying Japanese branded products before returning home, with foods, confectionery, cosmetics, toiletries and even adult nappies apparently very popular. Ito-Yokado, which currently does not offer any such service, will add tax-free counters at 150 of its total 180 stores beginning in October. Counter staff will be trained by Sogo Seibu which has offered basic tax-free services for many years.

Rival chain Aeon already offers tax-free counters at 50 of its stores, but will expand this to 100 in October too. One of its largest SCs is just five minutes drive from Narita Airport and a favourite tourist shopping destination

At present, consumption tax can only be rebated for electronics and apparel, but the range of products will be expanded in October to include food, liquor, cosmetics and other products. The minimum daily spend per store will also be adjusted down from ¥10,000 currently, to ¥5,000, with a maximum of ¥50,000 per day. A number of drugstore chains are looking to introduce similar services.