April 2015 News in Brief

Apr 15

Itochu signs FitFlop

Itochu Shoji signed a distribution deal with British footwear brand FitFlop last month. Prior to the signing, Fitflop was handled by Krongthip, a distributer of fashion and interior goods. Itochu’s affiliate, Doshisha, will handle day to day distribution. Fitflop was founded seven years ago by mother and entrepreneur Marcia Kilgore, who wanted to create comfortable and practical shoes for mums that also looked good and lasted. She teamed up with some biomechanists and created the Microwobbleboard, a multi-density mid sole with claims of great comfort. Fitflop started with sandals but now sells fashion shoes for both men and women. Since the launch it has sold more than 24 million pairs to 54 countries. Doshisha will sell to department stores and specialty chains like ABC Mart, and expects sales of ¥2 billion within three years. Prices in Japan will range from ¥7,800 to ¥21,000.

A seamless logistics solution for online SMEs

Japan has some of the best logistics services in the world, but these can come at a price, especially for small businesses and new entrants. The rapid growth of venture businesses is helping, however, with a new service called OpenLogi receiving backing from Infinity Venture Partners recently. OpenLogi (openlogi.com) does not have any warehousing of its own but focuses on offering simple, transparent pricing and easy to use web-based management of storage and shipping. What is clever about the service is the tie up with warehouse companies to exploit their smaller, unused pockets of warehouse space and quiet times in their logistics schedules, thus keeping prices down. Warehouse businesses don’t want the hassle of dealing with large numbers of customers, so OpenLogi does this job for them, and has been designed with C2C trading and SMEs in mind, including users of services like Mercari and Yahoo. With services like Stores.jp making it simple to set up an online store in a few hours and Yahoo now free to sell through, OpenLogi adds an equally simple fulfilment back end to complete the process. International fulfilment is expected shortly.

Seven Eleven enters Tottori and Aomori

With rivals looking to consolidate through M&A (see Page 1), Seven Eleven is calmly conquering Japan one prefecture at a time. It will open the first stores in Aomori Prefecture in June, followed by entry into Tottori Prefecture in October. This leaves Okinawa as the only prefecture without a Seven Eleven and, surely to Okinawans’ horror, the country’s biggest fast food retailer says that, for now, it has no plans to expand to the island. The Tottori entry will be part of the chain’s deal with JR West to convert station-based kiosks and stores into Seven Eleven, although standard roadside Seven Elevens will also open immediately with franchisees already secured. It plans to have 50 stores in Tottori within five years, along with 100 stores in Aomori by 2017.

Singapore cafe tcc in Japan

Unico Japan International opened the first store for popular Singapore cafe chain TCC in Ginza at the end of February. The Japanese iteration offers a cafe, bar and restaurant format and took five years of negotiations and preparation to get off the ground. TCC, which operates 28 stores in Singapore, has been widely touted for its potential as an upscale, niche rival to the likes of Starbucks and Coffee Bean. It is already popular with Japanese tourists visiting Singapore and arrives in Japan with a unique menu, store design and ambiance – the siphoned artisan coffee also makes a welcome change from its larger chain rivals. Unico has secured a key location overlooking the main Ginza crossing and, in addition to coffee, offers steak and seafood, with prices running from ¥3,900 to ¥7,900 per plate.

Senshukai acquires stake in Yukijirushi Megmilk

In an unusual move, leading direct marketing firm Senshukai has acquired a 33.4% stake in Yukijirushi Megmilk, a leading dairy products producer. The investment was made through Senshukai’s subsidiary Shufu no Tomo Direct. Reports suggest it aims to develop new health products to go on sale through Shufu no Tomo catalogues, and plans to build on products like Megmilk’s calcium enhanced Everyday Bone Care MBP milk substitute lines. To signal its intension to put the new brand and other health foods at the core of its business, the Shufu no Tomo name will be retired in July, replaced by Belle Neige (French for ‘beautiful snow’).

Emporio opens second store for Muy Mucho

Emporio acquired the franchise for Barcelona-based home fashion chain Muy Mucho last year and opened the first store in November in Harajuku. Last month it opened the second within Ikspiari SC. Known for its design and low prices, Muy Mucho has 33 stores in Europe. The latest store sells the full range of product from Spain as well as a large selection of product sourced directly by Emporio. Around 60% of merchandise comes from Muy Mucho, shipped monthly, and the rest is sourced by Emporio. Emporio expects sales of ¥250 million from the 300 sqm store in the first year and plans to open 20 stores in the next five years, of which 10 will be in Kanto and 10 in Kyushu.

Amazon Japan launches sales of BMW electric cars

Amazon Japan this month launched sales of the BMW i3, BMW’s electric car. The cars are provided by BMW Japan, naturally, and sell for ¥4.99 million under two payment plans: a 60 month payment plan with a ¥990,000 deposit, and a five year lease. Amazon began sales of second hand cars at prices under ¥550,000 last June, but this is its first foray into sales of new vehicles.

Tokyu cancels deal with Isetan-Mitsukoshi

Tokyu Group has cancelled its joint venture with Isetan-Mitsukoshi to manage its Tokyu Department Store subsidiary. The original deal was signed in 2007 in a bid to rescue Tokyu’s department stores from collapsing sales. This was also at a time of massive change in the department store sector, with a multitude of mergers, when Tokyu was concerned about the growing isolation of its small chain. Original plans included merger of management systems and store cards, and even tentative suggestions of a full merger. In the end the venture only resulted in improved merchandising and staff from Isetan moving over to Tokyu to manage the stores. Isetan-MItsukoshi itself will continue to cooperate with Tokyu on product development and “keep channels open”, and some senior executives transferred from Isetan will remain at the helm of Tokyu Department Stores. However, with Tokyu now planning to rebuild big parts of the Shibuya station area, and its flagship now in much better shape, further collaboration was no longer felt to be necessary.

Cole Haan opens first ever SC store

Cole Haan Japan opened a new store in Lalaport Tokyo Bay last month. This is its first shopping centre tenancy anywhere in the world. Featuring impactful visuals on the fascia and a dual aspect corner location, the 105 sqm store looks set to attract a new type of customer for the US brand. Until now all of Cole Haan’s Japanese stores have been in department stores or stand alone locations and the core customers are in their 40s and above. Opening in Lalaport will attract young singles and families too. The new store sells both footwear and accessories, as well as outerwear, with a new line of children’s shoes, and a focus on its more accessible lines ranging around ¥20,000 to ¥40,000. The popular Zero Grand collection of lightweight footwear that was launched last July, is also available with prices of around ¥28,000.

Rice getting cheaper

Food prices remain high in Japan due to a tortuous distribution system and government control of key staples, notably rice. At one time, Japanese rice was six times the world market price. Rice imports have gradually been deregulated over the past two decades. More imports and rapidly growing competition from retailers sourcing direct from their own farms is helping too. Price differentials between Japanese rice and USA imports fell to an all time low last month of just ¥72/kg at farm gate, down from a ¥130 differential in 2012. Japanese rice prices for farmers now stand at just ¥246/kg. Price deflation was slightly helped by duty-free imports of 11,606 tons of rice last year, although this was the lowest volume since 1995. An import quota of 100,000 tons isn’t met due to pressure from domestic food suppliers and consumer protection groups who regularly stoke fears of contaminated foreign rice. Even without the 778% tariff on imported rice outside the 100,000 ton quota, however, lower domestic prices mean Japanese rice is becoming more competitive.

Aeon signs deal with Apple

Aeon has signed with Apple to become an Apple Premium Reseller. It will roll out stores called Newcom centred on Apple products, including the upcoming Apple iWatch. Aeon is hiring staff with a high level of knowledge of Apple products and plans to open the first stores this month.

Coffee shops still popular, Blue Bottle Coffee opens first Japanese branch

Despite the meteoric rise of convenience store coffee, Japan’s legion of coffee shops remain popular with some segments. A recent Nikkei survey of 1,000 adults aged 70 or below, revealed that 36% used a coffee shop at least once a month, and most of these were frequent users, 21% of men and 25% of women using a cafe two or more times a week. Almost 80% of the total preferred a branded chain rather than one of the dwindling number of independent ‘kisaten‘, and the figure rose to 92% for female customers, although dropped to just 60% for customers in their 60s. Price was the most important factor in choosing where to drink, but this was closely followed by ‘taste‘ – taste is far more important than anything else for customers aged 50 and above. Coffee shops remain a preferred place for waiting and meeting people, and, at least for the few chains that still allow it, as somewhere for a quick smoke – interestingly far more 30 year olds liked coffee shops for a tobacco fix than any other age group, perhaps because this is the group mostly out of the office, needing to kill time between sales calls. All of which is positive news for Blue Bottle Coffee, the US chain which opened its first foreign coffee shop in Japan in February. Located in a quiet corner of Edogawa-ku, the launch was deliberately low key, matching its approach in the US, where it now has 16 branches. Designed for coffee aficionados, Blue Bottle Coffee prices start at ¥450 rising to ¥600. A second store opened in Minami Aoyama last month with a third within the Tartine Bakery & Cafe in Daikanyama due this month.

Shimamura targets 2,000 stores by 2016

Shimamura, is already the largest clothing chain by store numbers, and it now plans to hit 2,009 stores by February next year. As of February 2015, the Fashion Shimamura chain was made up of 1,321 domestic stores, 289 Avail stores and a further 174 Birthday stores selling children’s and babywear as well as some smaller chains for footwear and home. It also runs 37 stores in Taiwan and a further eight in China, for a total of 1,931. In the coming year Shimamura will open 25 stores for the main brand, almost all in inner cities as it looks to reach customers beyond its traditional suburban markets. The Birthday chain will also see 30 new stores with a further 35 stores for other brands both at home and overseas. New stores give prominence to the new private brand lines: Closshi the slightly more premium line, and the low price Freude line. From 2016 onwards, Shimamura says it will enter a new phase of development targeting 3,000 stores with major expansion outside Japan. For FY2014, Shimamura announced sales up 2% to ¥511.8 billion, but operating profits slumped 12% to just ¥36.8 billion. It is now targeting a 6.3% increase in sales to ¥544 billion for this year with operating profit expected to recover significantly, up for the first time in three years with a forecast 24.9% increase to ¥46 billion.

Aeon to open first SC in Indonesia at end of May

Aeon will open its first SC in Indonesia in late May. The SC, Aeon Mall BSD City, will open in the suburbs of Jakarta with gross leasable space of 77,000 sqm and a Aeon GMS as anchor alongside 280 tenants. Of these half will be restaurants and bars, with 1,200 seats in food courts and other eating areas. Aeon has confirmed a second SC in the country by the end of the year. Indonesia adds to recent openings in Vietnam and Cambodia. Despite its problems at home, Aeon sees these markets in Asia as low hanging fruit given the lack of retail development there.

Q Plaza opens in Harajuku

Q Plaza, a new SC operated by Tokyu, opened in Harajuku last month, housing 18 tenants in a 1,700 sqm space. Located on Meiji Dori between Omotesando and Shibuya, the new SC focuses largely on dining and services tenants, a deliberate strategy to avoid competing with the plethora of accessories and apparel stores already in the vicinity. The exception is a flagship for Urban Research’s fast growing mass market fashion chain, Sense of Place, that occupies the first two floors. Urban Research also opened three new concepts in the same space, a flower shop, smoothie bar and its new food/lifestyle chain Tiny Garden Kitchen. Q Plaza also has a strong focus on weddings to exploit the growing demand for more diverse wedding options, with a flagship for Harmonie Soluna over three floors, including a restaurant to hold wedding parties. Restaurants on the top floor have access to a roof terrace.

Buyma buys 4meee

Enigmo, the operator of fashion e-commerce site Buyma.com, has acquired fashion media site 4meee. Founded just a year ago, 4meee curates fashion content and claims 30 million monthly page views. Enigmo will use the site’s popularity, especially with mobile fashion news viewers, to drive traffic to Buyma.

Urban Research introduces size checking system

Urban Research introduced a new size checking system for its online store last month. Called Virtusize, the system has also been adopted by United Arrows (see JC1503). Customers can see a “Check the size” button next to the size specifications of any garment. The system offers two ways to compare the measurements of the selected item, either using an item previously purchased on the site or one of the customer’s garments at home. In the latter case, customers simply measure that garment, and then the system will compare it with the prospective purchase using a semi-transparent overlay. By making it simple and quick for customers to compare browsed garments with their own, the system claims a 50% reduction in fit-related returns, and all the customer service, freight and inventory problems such returns create.

Familymart and Softbank to invest in T-Point

Familymart and Softbank have announced they will be jointly investing around ¥20 billion in the Culture Convenience Club (CCC) T-Point loyalty card system. Not counting the Rakuten Edy system that acts more as an e-wallet, T-Point is the largest independent customer loyalty point system in Japan and the main loyalty system used by its two new investors. The ¥20 billion influx of capital into the privately owned company will represent a combined stake of around 30%. The funds will be used to further improve the data analysis side of the business and this may encourage other retailers join the system as a relatively painless way to acquire and employ sales data.

Lawson launches mobile shop service in Saga

Lawson has launched a new mobile store service in Saga Prefecture aimed at elderly, less mobile consumers. The truck-based service offers 300 SKUs of standard convenience store items such as bento, deli foods, fresh vegetables and drinks. The new store was launched in consultation with local welfare groups and builds on experience gained running mobile retailing in Tohoku following the 2011 earthquake. Lawson now plans to actively expand the idea into other rural areas.

Start Today acquires Aratana

Start Today acquired e-commerce solutions provider Aratana last month. Aratana was originally conceived as a job-creation scheme in Miyazaki in Kyushu as a way to stop migration of younger people from the coastal city. Since its launch in 2007 it has become a significant provider, helping more than 5,000 companies with e-commerce sites, and had sales of ¥600 million last year. Start Today will use Aratana to bolster its consulting division which develops e-commerce sites for apparel and other fashion firms such as United Arrows and Isetan. Aratana also operates fashion news site, Honeyee (www.honeyee.com). This is the second acquisition by Start Today in the e-commerce space following its purchase of Stores.jp last year.

GU opens 300th store

GU opened its 300th Japanese store last month, a roadside store in Nagasaki Prefecture. The 450 sqm store is its biggest in Kyushu and includes the full line up, including childrenswear. The Fast Retailing owned chain is expected to reach 500 stores within the next two years.

New store format for Pola

Pola Orbis Holdings subsidiary Acro opened a new cosmetics store format last month for Three, its rapidly growing natural cosmetics brand. The new store is much larger than previous formats, with fewer products and far greater space for customer-consultant interaction. The first two stores opened in station buildings in Tokyo and Sapporo in March, with Pola hoping it will prove successful enough for both domestic and international rollouts in the near future. In addition to cosmetics, the new stores offer body-care products and diet supplements. Three already has 28 concessions in department stores, and another 24 in semi-self-service stores such as Isetan Mirror. The brand also operates 13 stores overseas in Thailand and Taiwan, and opened the first Indonesia store in January. It plans to expand to 10 countries by 2020. Sales for the brand are reportedly strong, with Pola saying they increased 60% in the past year, with sales across all Pola Orbis brands up 10%.