In the 1980s and 1990s Japan became a fashion market like no other, with almost every generation developing a fascination with personal style and brands, and a concomitant willingness to spend. Until recently this interest in fashion as a form of personal expression, of presentation to the outside world, has entirely focused on fashioning the body. Today, though, there is a new and growing obsession: fashioning the home, a market with almost as much potential as the personal fashion market of the 1980s.
Home. Fashion. Boom.
Some analysts dismiss the idea of a coming home fashion boom. This is usually based on data for the DIY sector, which remains a tiny market compared to countries like the US and UK, and with only limited growth too. But such an assessment misunderstands the Japanese approach to the home. True, almost every new house owner continues to choose from the standard 300 shades of beige and cream prefabricated and pre-wallpapered walls, along with standard window sizes and parquet flooring. But what is changing is that, while in the past most Japanese regarded this as sufficient, today more and more see this living space as a blank canvas and an opportunity to fashion their home.
This is partly a function of changing attitudes to home design and partly a result of the growing trend to entertain at home – and both trends are being encouraged by the greater sophistication of retailers serving these markets. While the over 50s rarely invite friends over, younger generations are used to doing so, having begun the trend for ”home parties“ back in the mid-1990s. Now in their 30s and 40s, they increasingly enjoy entertaining at home, for everything from children’s birthdays to dinners and BBQs. This means a growing interest in making the home presentable and expressive of the family, not dissimilar to the motivations of the personal fashion boom in the last 30 years.
It also means healthy market growth. Yano’s latest survey of the home fashion market suggests expansion of 9.7% in 2013 reaching a value of about ¥3.4 trillion, the third consecutive year of growth – 2014 growth is forecast to come in at around 0.5%, but is expected to expand more robustly in 2015.
New house builds only accounted for a small percentage of this growth; the bulk came from updating existing homes – bedlinen sales for example shot up more than 27%. But new builds are increasing too. According to government data the number of completed new builds increased 9% in 2013 to 98,000 homes, the fourth straight year of growth.
The recent years of growth follow several years of a downturn, but although the financial crisis hit sales, it was also partly driven by restructuring of prices following the arrival of IKEA and the rapid growth of Nitori.
9.7% growth isn’t bad in itself, but this figure only accounts for the retailers whose core business is household goods and interiors such as Home Centres. Yano’s value does not include the growing number of lifestyle and former apparel-based fashion stores that are rapidly expanding the ratio of home and interiors merchandise in stores.
Taken together the market is substantial.The home centre market alone is estimated at ¥3.83 trillion and the house refurbishment market at ¥7 trillion. Add in additional home fashion retailing of around ¥3 trillion, and this means a market of ¥14 trillion. At wholesale, METI data suggests just the furniture and home equipment wholesale market alone had a value of ¥3 trillion in FY2013.
IKEA and Nitori lead the way
As well as consumer demand, another key driver of growth has been the expansion of supply. Previously a market famous for high prices and the paucity of decent furniture, Japan how has several chains selling well designed furniture and home fashions at reasonable prices.
IKEA entered the Japanese market in 2006 and progress has been steady and assured. After opening its first store in Minami-Funabashi, it built more in Yokohama, Osaka and Kobe, but none in the following four years as it studied the market. Then in 2012 it opened in Fukuoka, and added a small, temporary store in Sendai. Last year, it opened a new distribution centre in Nagoya, a new store in Tachikawa and a permanent store in Sendai.
But that’s just the beginning. It recently confirmed it has secured sites in both Maebashi in Gunma and in Hiroshima – this last one unusual in that it’s a fairly central location. The Maebashi and Hiroshima stores are due to open this year. IKEA has also identified a site east of Nagoya and is close to confirming another in Sapporo. IKEA targets 14 stores by 2020 up from eight today, and sales of around ¥150 billion, up from ¥77.1 billion in FY2014.
Home centres continue to expand, but more slowly with some concerns over profits. While furniture specialist Nitori is the largest single chain at ¥387.6 billion, both Cainz and Komeri also sold more than ¥330 billion each in FY2013. This was the weakest sector of all in terms of sales growth and five of the leading chains also saw pretax profit fall in FY2013, three of them significantly. Homac and Kahma, both parts of DCM Holdings the biggest home centre group, saw pretax profits down 15.5% and 13% respectively while Daiki, the third member of DCM, didn’t report separately.
Nitori remains the outright leader in furniture and one of Japan’s most successful retailers to date, with a determination to compete with IKEA. Despite having a business based on direct imports from China, in FY2013 it overcame higher costs due to the weakened Yen, and reported another record performance with sales up 11% to ¥386.7 billion, and pretax profits up 2% to ¥63.4 billion.
One of the secrets of its ongoing success is a shift to higher quality and higher prices to match. Although it originally sold itself as ‘good quality at cheap prices’, it now says ’great quality for great value’. Prices on its most popular items have risen 50-100% over the last 18 months, partly due to the impact of the cheap Yen on imports, but also because Nitori sees growing demand for genuine home fashion, and consequent higher quality and design.
It is also expanding into city centres and inner suburbs through its small format store, Nitori Deco Home, the latest example of which will open in Ikebukuro’s Sunshine City this month. Deco Home stores are usually around 600 sqm, displaying smaller SKUs but selling the whole range through in-store screens and catalogues. Nitori has 29 such stores to date, but plans to double the chain within two years. The smaller formats also reach into inner cities which are mostly omitted from IKEA’s normal strategy.
The company is confident for the future and sees a shake out in mass market home fashion retailing with lots of opportunity. Company CEO Akio Nitori says he fully expects the increased price consciousness among consumers to force less competitive retailers into or close to bankruptcy, with more discount orientated chains emerging to cater to the growing number of lower income households.
Nitori is also expanding overseas. The first three Nitori stores opened in California in 2013, and it has another in Taiwan, and three in China scheduled by the end of FY2014. By 2022, Nitori hopes to take more than a third of sales from overseas markets. It targets 1,000 stores overall by 2022 of which 300 will be overseas. For FY2014 alone, the company was forecasting another great year, with target sales of ¥413 billion, up 7%, and pretax profits up 4% to ¥66 billion.
Another fast growing business is Lixil, which marries a chain of home centres with direct to trade sales, all part of a ¥1.6 trillion group of construction and home related companies. Its home centre operation has grown for the last nine years straight, with sales reaching ¥170 billion in FY2014, and it forecasts ¥500 billion through 2019. To do this it will increase ties with regional home centres for wholesale as well as expand its own chain, Lixil Super Viva Home, from 25 to 70 stores. Key to growth has been its ability to up-sell house reform packages to home centre customers.
Lixil has just begun opening smaller home centre stores in inner city suburbs, with plans for many more over the next three years, and is looking to expand overseas too. Its parent already owns multiple manufacturing operations in Asia and North America.
Fashion retailers become lifestyle businesses
Yano’s above mentioned survey does not include lifestyle and former apparel-based fashion stores that are rapidly expanding the ratio of home and interiors merchandise. Trinity Arts, the fastest growing specialty fashion retailer in FY2013, is popular not just for its apparel and accessories but also because of the home fashion and accessories goods in its two key chains, Niko and… and Studio Clip, with everything from tables and chairs to designer bicycles and potted plants. In a typical Studio Clip store only around 30% of sales space is used for clothing, and the rest for tableware, bedlinen, designer kitchen goods and decorative accessories. Other fashion retailers are following suit, notably Urban Research, Adastria Holdings (Point), and Sazaby League’s Ron Herman franchise among many others.
Other mixed merchandise retailers benefiting from this trend are chains like Muji, which while focusing on raising its apparel sales from 30% to 40% of turnover, is also seeing furniture sales rise.
The higher end of the home fashion market is particularly buoyant given the larger homes this segment own, and its capacity to buy higher ticket imports – even more so thanks to the boost from Abenomics. Ryohin Keikaku itself has been quietly expanding the Idee chain it acquired in 2006, transforming it from a one store design emporium in Aoyama into a chain of 15 stores. It now plans 50-80 stores for the Idee Shop Variete chain – designed for premium shopping centres as an upmarket version of Muji home. It also sees significant potential for the Attache de Idee chain which mixes interiors with cosmetics and jewellery.
In the mass market too, there are signs of retailers’ growing understanding of the potential of the market. Aeon just unveiled a new version of its Aeon Style Store, which mixes fashion, lifestyle and home interiors in one giant store, but now with a much larger ratio of home fashion and household goods. Aeon says it plans to roll out the chain across its GMS network, replacing some of the drab interiors corners that currently clutter up its SCs.
Department stores boost overseas brands
Department stores too are finally realising the potential, and are working to transform the dreary sales and indeed design of their ’Living’ floors. Isetan Shinjuku is completely rethinking its 5th floor, and unveiled a new Living Room space at the end of December. This followed the opening of a new bed & bath area in November. The Living Room space sells high end brands such as Knoll Textiles from the US, top Italian furniture brand Flexform, Lithuanian linen brand Siulas, and German brand JAB.
Isetan is looking to build in sales of a range of services alongside product (see Page 1), offering interior design, design plans and even architectural services. There is even a pet area selling advice on pet diets and training alongside achingly expensive accessories from brands like Mungo & Maud, the UK pet brand which is launching in Japan through Isetan (a mere ¥30,000 for a cashmere coat for your chihuahua). Custom furniture can also be ordered from a range of sources in Japan and overseas.
Key overseas brands benefitting from the upsurge in home spending include Le Creuset and Waterford Wedgwood. The latter has sold its Wedgwood and Royal Albert brands here for years, but in 2013 relaunched the iconic Waterford crystal brand here too. A key shift in thinking is that prominent overseas brands are no longer limiting their distribution to department stores. Le Creuset’s bright and appealing Japanese stores are increasingly found in prominent SCs such as Grandfront Osaka, with 14 stores to date as well as some 20 department store concessions – it also sees strong sales online, including through flash sale site Glamour-Sales.
Among retailers, Zara Home has seen a solid start in Japan, and Flying Tiger, a joint venture with Sazaby League, continues to be swamped daily to the point that customers need to book a ticket to get into some stores. Other brands are just arriving; lifestyle goods distributor Emporio opened the first Japanese store for Spanish lifestyle and interiors chain Muy Mucho in November last year. Emporio has a license for the Barcelona-based chain and will merchandise a mix of imports and Japan-developed product. The second 300 sqm store will open in the Disneyland Ikspiari SC in February and Emporio plans 20 stores within three years.
A new generation of Japanese home fashion chains
Local home retailers and brands continue to spring up and evolve and look set to emerge as the leading chains in lifestyle home fashion retailing in the next decade, much as the likes of Uniqlo, Point, United Arrows, and Urban Research did in specialty apparel retailing.
Yu Nakagawa has been around since 1716 but has found new life as a shopping centre chain selling modern versions of traditional Japanese tableware and accessories.
Timeless Comfort is a relatively new chain owned by Asplund with 25 stores to date and plans for 10 more in 2015. Asplund itself is a key distributor of overseas lifestyle and household goods brands, such as Timothy Oulton by Halo and Vincent Shepphard, and owns the 50 store chain, 212 Kitchen Store, also a useful source of sales for overseas household goods brands.
One of the most prominent chains is Actus, with sales of ¥13 billion in FY2013, selling a large number of overseas brands. As well as the core chain, it also operates the Sonoma chain (no relation to Williams Sonoma) and distributes Poggen Pohl kitchens. Actus has a long history but says it has never been as excited about the home market as now. Its latest medium-term plan calls for a doubling of stores from 20 to 40, with a focus on SCs but also large format stores. A good example of the latter is a new 1,600 sqm store in an upscale neighbourhood of Sendai opened last October, which mixes top end European and US brands of furniture and accessories with Actus’ own lines. It continues to add more SC-based Actus stores such as Futako Tamagawa Rise this coming Spring, as well as for its upscale chain, Slow House.
As the market develops, retailers and brands are finding their niche. B-Company, which has been going since 1969, focuses on natural materials and an Asian ethnic style which is popular with younger households. It has added 10 stores in the last two years, totalling 40 in all.
Manufacturers are also seeing an opportunity to break into retail; the inspiringly named Waki Woodwork, a furniture manufacturer in Okayama, has created the Momo Natural chain for the SC market with 10 stores to date. Online, one of the biggest distinct vendors of interiors is Tabroom (tabroom.jp), an online store and catalogue business operated by Recruit, showcasing more than 200 brands and 400 designers. Another is Stylics (www.stylics.com), which sells interior design plans alongside furniture.
Knick Knack stores: made for Japan
While furniture, tableware and kitchen goods are all buoyant categories, this being Japan it is the small ’knick knack’ home accessories market which is growing the fastest. Stores like Flying Tiger offer consumers the kind of casual, browsable merchandising that allows even a young woman living at her parents’ to buy into the craze for home fashions, and their bric a brac design and rapid refresh rates mean they are also perfectly designed to compete with e-commerce.
Not surprisingly, a host of competitors have sprung up. The first was Yu-Shin Creation’s Asoko chain which opened to much fanfare the same year as Flying Tiger, but which still has just four stores compared to 15 for the Danish chain. Other competitors include Pal Group’s 3Coins chain and Self & Shelf Loft.
Just launched is Awesome Store from lifestyle retailer Rep House. Awesome Store has an industrial chic look of distressed concrete and rough wood displays, in stark contrast to Flying Tiger and Asoko, but sells a similar range of pop home accessories, with about 2,500 SKUs and core prices of ¥200-¥400. Unlike many competitors in this area that buy from a myriad of suppliers, Rep House uses the SPA model, controlling production through to store experience. Rep House also hopes to develop a core range of timeless items that can be sold over many years. It plans 30 stores within three years and sales of ¥10 billion.
The most unique home store to date is DIY Factory, an Osaka-based chain that will launch its first Kanto store in Futako-Tamagawa this Spring. DIY Factory offers workshops for adults and children about home DIY including carpentry, pottery, leather, metalwork and other crafts, all alongside merchandise and fully equipped workspaces which can be rented, complete with sets of tools and support from staff. The shop side is a bit like Tokyu Hands for tools, with every possible type of tool from around the world included – those not available in store can be bought through the website.
Variety stores: Loft and Tokyu Hands
The big three in variety/lifestyle/home fashion retailing are Loft, Tokyu Hands and FrancFranc. Loft is being expanded by parent Seven & I across its own and other SCs. It now has 95 stores and had sales of ¥95.7 billion in FY2013. The more rapid rate of expansion in recent years under Seven & I ownership as well as access to its sourcing teams and those of Seven & I’s main trading firm partner, Mitsui, has allowed Loft to improve its merchandise, and to offer lower prices.
Access to Seven & I locations has also meant it can play with more formats. It now has six small format stores in station and fashion buildings like Lucua and Lumine, and has recently begun to roll out its Self & Shelf Loft chain. Although prices are higher than Tiger and Asoko, Self & Shelf Loft sells a similar range of home, accessories and stationery products within small 150-200 sqm stores. Unlike its cheaper competitors it also showcases overseas brands in special promotions, such as Finnish decorative home accessory firm MK Tresmer.
Aeon is behind in this category, having decided to rollout its own new brand, R.O.U, but last month announced it has plans for 100 stores by 2020 and will begin expansion in non-Aeon properties, notably station buildings. R.O.U. is a cross between Self & Shelf and Tokyu Hands’ Hands Be formats, with a clearer target of younger women through a higher proportion of cosmetics.
Tokyu Hands continues to expand its own small format variety store, Hands Be, with 22 stores now in operation, but again prices are premium. Hands Be stores are between 400 sqm and 1,000 sqm and only sell the best selling lines from the main Tokyu Hands stores, largely targeting women in their 20s and 30s. Unlike competitors, there is more focus on women’s hair and body care products, particularly natural and organic brands, and a mass of stationery.
After years of stagnation the full size Tokyu Hands chain itself is on a roll (at least in terms of store numbers), largely because it is increasingly a favourite anchor tenant for SCs across the country, as well as hybrid department stores like Daimaru Tokyo. Despite its premium prices, its one floor per product category and infinitesimal number of SKUs within each floor remains popular, but while its stores offer the kind of browsable entertainment that is e-commerce resistant, it is also often easy for shoppers to buy online at lower prices. There are now 31 stores in Japan and, tantalisingly, the first Tokyu Hands opened in Shanghai last year, with two more in Singapore. Given that 13 of its Japanese stores are near or in Tokyo, there is clearly potential for more stores in other regions such as Tohoku, Shikoku, Hokuriku and North Kanto. It continues to work closely with Aeon and other SC developers as they expand.
Despite all this expansion, however, sales have not kept pace. Tokyu Hands posted sales of ¥84.2 billion for FY2013 but this was still less than the ¥90.8 billion of FY2007. This is partly due to restructuring in the last five years but also due to its premium prices. Managing and stocking such a vast range of SKUs is neither easy nor cheap, and in a way its role as purveyor of multiple varieties of the same product has been taken over by e-commerce. What it does offer though is curation and selection, and this inspires loyalty. Many Japanese are happy to buy at the store rather than ’showrooming’ before buying cheaper elsewhere. This loyalty, and its potential for expansion at home and overseas, stands it in good stead.
FrancFranc: more mature
FrancFranc has been a leader in the home interiors market for the last decade but its pop home fashion image has largely been designed to target 20s and 30s women, particularly single women looking to accessorise small apartments. This was a successful strategy in the noughties, but sales have fallen in recent years. Its parent, Bals, is likely to see sales flat at ¥33 billion for the year ending January 2015, after falling 7% in 2010, and then smaller increments in following years.
90% of Bals’ sales come from FrancFranc, but the chain faces an increasing number of competitors. 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.
A new, much broader merchandise range now includes more furniture, kitchenware and fabrics, as well as accessories and a more subdued colour palette to suit the new target market. FrancFranc is also marketing directly to property developers and interior design firms.
Bals 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 sees an opportunity for more than 200 Francfranc stores in Japan alone, with target sales of ¥100 billion.
Bals also has a new chain called WTW, which sells home fashions inspired by what it 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 next month.
The home: a key fashion trend
Although Japan is best known for fashion that is wearable, the simple fact that most Japanese have never before felt a burning need, or had the requisite retail encouragement, to enhance and enjoy their homes, means that the new home fashion market is wide open and has huge potential. It is set to only expand further in what could be the latest Japanese fashion boom. Consumers today have many options from the mega-chains like Nitori or IKEA, to SC tenants specialising completely or partially in items for the home.
As with fashion for the body, home fashion is about originality, cuteness and practical use. While many major brands are already represented in Japan, there are many which are not. The next few years will offer huge opportunities in this market, for everything from furniture right down to small knick knacks. Japan has finally caught the home decoration bug.
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