The home fashion market is booming, but despite this, Bals, one of the largest retailers of interior accessories, has seen sales fall in recent years. Part of its problem is new competition from cheaper chains offering similar ranges of pop home goods targeting 20s and 30s women such as 3Coins and Flying Tiger. It now sees a greater opportunity in the more serious home fashion market among home owners in their late 30s and 40s.
FrancFranc has been a leader in the home interiors market for the last decade, with its pop home fashion ranges designed to target 20s and 30s women, particularly single women looking to accessorise small apartments. This was a successful strategy in the 2000s, but sales have fallen in recent years with parent company, Bals, likely to see sales flat at ¥33 billion for the year ending January 2015, after falling 7% in 2010, and smaller increments in following years.
90% of Bals’ sales come from FrancFranc’s 150 stores, but it is now under threat from a new group of competitors, not least chains like Zara Home, IKEA and Nitori, and, on the accessories side, Flying Tiger, 3Coins and even improving merchandising from 100 Yen chain, Seria.
To fix this, Bals now plans to reposition the chain to cater to the growing demand for home fashioning among 30s and 40s men and women, backed by its new parent Seven & I. Recognising the potential in the home fashion market, Seven & I last year acquired 48.67% of Bals for an estimated ¥5 billion. It sees synergies in helping expand Bals’ chains in its network of department stores and SCs as well as the potential for online sales – part of Seven & I’s much vaunted omnichannel strategy. Seven & I also hopes to use Bals’ skills in interiors product planning and merchandising for both its Sogo Seibu department store business and its Loft chain.
With Seven & I’s backing Bals sees an opportunity for more than 200 Francfranc stores in Japan alone, with target sales of ¥100 billion.
The bottleneck preventing expansion so far is FrancFranc’s supply chain. FrancFranc is yet another example of a Sogo Shosha backed chain, with Mitsubishi once again the backer. Mitsubishi’s MC Living has been the source for the bulk of FrancFranc product for more than a decade. While this helped Bals expand quickly, it meant higher costs, again fine in the early years when there was limited competition, but untenable today.
As well as seeing the necessity of building in-house sourcing expertise, Seven & I also wanted to work with its own main trading firm partner, Mitsui. Accordingly, Seven & I came to an agreement with Mitsubishi to hire away 50 staff from MC Living as the base of a new supply and product planning team. At the same time it hired a new creative director formerly from fashion brand Egoist – i.e. someone who understands the 1990s fashion generation that is now in its late 30s and early 40s, the principle source of growth in the home decoration market.
The new team unveiled its first range of home merchandise late last year, a much broader collection with more furniture, kitchen equipment and fabrics, as well as accessories and a more subdued colour palette to suit the new target market. With the greater emphasis on furniture and kitchenware, FrancFranc is also marketing directly to property developers and interior design firms. Going forward Bals will work to upgrade merchandise design and quality further as well as the brand’s overall design credentials – the first move in this area was the signing of a collaboration with a furniture designer from Slovenia.
With its own sourcing team in place and backing from Seven & I, Bals now plans to add 10 to 15 new stores a year, many of which will be located in or near Seven & I properties. It will also continue expansion overseas – it has six stores in Hong Kong and will start online sales in the US this Spring prior to opening stores there.
Bals has other chains, J Period selling modern Japanese tableware, and Bals Tokyo which showcases furniture designers, but neither has seen much growth. Its latest venture is WTW, a new chain that sells home fashions inspired by what Bals calls a North Californian surfer culture, and positioned at the higher end of the market, for which Bals has high hopes. A flagship called WTW Club will open in Omotesando in March.
FOCUS: Leading shopping centres upgrade their way to 3.9% jump in sales in 2014-15
November 2015 News in Brief
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Consumer loyalty in Japan: loyalty programmes add value
Seven & I continues major overhaul of GMS and department stores
Lumine plans direct franchises with international brands and retailers
Mobile ads help reach 15 million young women
Itokin and Onward under pressure from changing market
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