June 2015 News in Brief

The Coffee Bean & Tea Leaf opens first Japanese branch

The first Japanese outlet for LA-based Coffee Bean & Tea Leaf beverage chain opened in Nihonbashi last month. Founded in 1963, Coffee Bean & Tea Leaf is regarded as one of the progenitors of the gourmet coffee business in the US and is today owned by the Singapore-based Sassoon brothers along with private equity partners. It has over 1,000 stores worldwide and Japan is its 26th country franchise. The Japanese franchisee is a joint venture business called LA Style, owned by Aeon Mall and Hotland – Hotland runs GinDaco (www.gindaco.com) and other food chains. LA Style hopes to distinguish Coffee Bean & Tea Leaf from competitors through its emphasis on a better than average food menu, which shouldn’t be hard, and marketing of the history of the chain to emphasise the quality of its teas and coffees. In addition, it is hoping the much wider range of teas will attract a different type of customer compared to rivals like Starbucks. LA Style expects footfall of around 1,000 customers per day spending an average of ¥500 in the 164 sqm store. The second store opened at the end of May in Aeon Laketown. Aeon is expected to use the chain to replace competing coffee chains in its SCs and will open eight stores this year alone with another 50 expected next year. Aeon had hoped to launch the chain in Japan four years ago, but put off the project following the 2011 earthquake.

Kadokawa becomes first publisher to work directly with Amazon

In April Kadokawa became the first major Japanese publisher to sell books directly on Amazon. Kadokawa, like all big publishing houses here, initially refused to work directly with Amazon, instead launching its own online sales and working with industry cartels designed to control distribution of both physical and digital publications. Japan’s publishing industry remains highly protected, but Kadokawa’s change of heart shows an understanding that it can no longer rely on that protection for success, and that Amazon has effectively won the distribution battle. Kadokawa will sell both books and magazines on Amazon, although initially only the physical variety. Previously, Kadokawa products have been sold on Amazon through wholesaler Tohan, but Tohan left customers waiting 5-8 days to get their orders, as well as charging delivery fees. By selling through Amazon’s own logistics centres, Kadokawa will be able to provide free, next day delivery on most orders – only out of stock items will be referred back to Tohan. Figures from the Publishing Science Institute suggest book sales in 2014 were 40% below those of 1996 at just ¥1.6 trillion. Traditional publishers are finding it increasingly difficult to make a profit, partly due to their own restrictive supply chain models.

Consumer prices remain stubbornly resistant to inflation

The government’s goal of returning Japan to at least a low level of price inflation remains largely elusive. Prices on most products fell yet again in April. Excluding the consumption tax effects, the Consumer Price Index (CPI) was unchanged from the same month in 2014, and the BOJ’s goal of 2% inflation by 1Q2016 remains unlikely. Despite Japan’s increased imports of fossil fuels and the low Yen, global oil prices have remained low, keeping costs of utilities stable as a result. Prices of fresh foods are still increasing more than other categories, but this rate has also fallen dramatically in the first half of 2015, with some analysts even suggesting food prices too could return to deflation by the end of the year. The only categories where prices are increasing, at least at a low rate, are services such as cleaning and home refurbishment, largely due to higher demand. Prices on services to foreign tourists have also been rising, although this effect is largely limited to Tokyo. Wages did increase marginally more than for the same period last year, but economists remain sceptical as to how such fractional increases could help demand expand.

Muji’s new CEO aims to expand in China

Muji is aiming to expand more rapidly overseas. With new CEO Satoru Matsuzaki taking over this year, the chain will concentrate on China in the first instance, and expand locations beyond its current portfolio of mainly high profile flagship stores. Matsuzaki said he’s aiming to see the brand in 25 countries around the world, and will be building both logistics capacity and international personnel skills. The brand’s overseas sales increased 1.6 times last year to ¥577.1 billion or around 30% of total sales, nine points higher than for FY2013, making it the second most international Japanese retailer after Fast Retailing. Most of this growth can, however, be accounted for by exchange rate changes and more organic growth is needed. While the brand is popular for its eclectic range of products, minimal design and high quality standards, it is in Asia where sales have grown strongest, partly due to the general cachet of Japanese brands. While growth in Asia is strong, Muji is reported to have made an ¥582 million loss in Europe, and it is here that it really needs to build scale, but at current European prices this may be hard.

A new supermarket is born: USMH

United Supermarket Holdings (USMH) came into being in March, combining Aeon affiliates Maruetsu, Kasumi and Maxvalu Kanto into a single operation, jointly owned by Aeon and Marubeni. The new chain accounts for ¥600 billion in sales and becomes the single largest food retailer in Kanto. By 2020, USMH is aiming to have around 500 stores and sales of ¥1 trillion. To meet this target, organic expansion alone won’t be enough and the group will be looking for new members too. It is already taking steps to amalgamate back office and logistics operations for the founding three chains, reducing costs at a stroke. While the average consumer won’t have noticed any immediate changes, this cost reduction is designed to at least keep USMH price competitive in the long run. In addition, the new group will build on strengths, such as Maruetsu’s recent development of improved fresh produce and deli ranges, mapping know-how onto its new partners. USMH won’t see a major increase in the proportion of Aeon Topvalu brands in its stores. It will, however, be looking to develop new ranges based on the needs of local customers.

@Cosme running the cosmetics floor in Yamada Denki

Yamada Denki’s recently re-fitted Shinbashi store in central Tokyo has opened a special cosmetics floor operated by @cosme. The store reopened in April as the ‘Labi Amenity and Tax-Free Shinbashi Ginza’ store, the first Yamada Denki to target tourist shoppers primarily. Although Yamada sells cosmetics, toiletries and even some medicines across its major stores, @cosme was given the task of designing layout and merchandising for the cosmetics floor to provide a more specialty sales area. The online cosmetics retailer and review site is now overseeing the floor with Yamada covering day to day operations in a collaborative model that Yamada says it may well adopt in other locations. @cosme uses its vast database of customer reviews and sales data to pinpoint ranges suited specifically for the Shinbashi location, targeting both tourists and the large number of white collar women working in the area. The floor is called @cosme x Beauty Station and includes corners for top ranked products, @cosme awards winners, and one for trial products. There are around 50-100 electronic beauty aids on sale alongside around 7,000-8,000 SKUs in cosmetics and skincare. Total sales space is 109 sqm.

Tokyo Metro becomes a Lawson convenience chain franchise

While Seven Eleven is well on the way to converting some 500 in-station stores for JR West in Kansai, Lawson is aiming to leverage a similar captive market of commuters in Tokyo. Last month it announced a new corporate franchisee deal with Metro Commerce, the retail arm of Tokyo Metro. The new company will open in-station Lawson stores as well as rebrand most of the 140 existing stores and kiosks. The venture is targeting 50 stores within three years with another 40 earmarked for conversion later. The new stores will be a cut down version of standard Lawson convenience stores, carrying only around 600 SKUs and concentrating on snacks and magazines. The chain will also offer a number of Natural Lawson and Seijo Ishii private brands too. Lawson already has around 60 stores operating within Tokyu Railway stations. In addition to new stores, it will also rollout in-station ATMs and introduce new services for overseas credit cards, targeting tourists visiting Tokyo.

New Atre annex due in Ebisu in 2016

JR East will open a new extension to Atre in Ebisu in Spring 2016. The land, adjacent to the existing Atre and facing the taxi stand, is owned by Credit Saison and Atrium. JR hopes the new 10,000 sqm extension will further cement the station area as a shopping and entertainment destination. Much of the building will house high quality eateries as well as accessories stores with a terrace on the top floor.

Consumption tax to be applied to cross-border e-commerce

Changes to the Consumption Tax Act announced last month mean that cross-border e-commerce transactions will be charged Consumption Tax from October this year – financial and capital transactions, medical, welfare and educational services will all be exempt. The changes aim to help domestic businesses compete with those selling into Japan from overseas which, until now, were not subject to domestic sales taxes. They will effect sales of e-books, music, software downloads, as well as advertising sales. For B2B  transactions, which the government has yet to define but basically means any purchases by businesses in Japan, offshore e-commerce sellers will not be subject to Japanese consumption tax – and tax liability falls on the domestic purchaser. For all B2C transactions, as well as certain still to be defined B2B transactions, the offshore seller has an obligation to collect consumption tax from Japan-based customers and pay this tax to the National Tax Authority (NTA). Consumers can claim back the tax if the e-commerce provider is registered with the Japanese NTA. The new laws primarily target e-commerce sellers such as Amazon and Apple that have large businesses in Japan, but which have been set-up to supply from centralised locations offshore. Individual orders by consumers from overseas vendors will be charged consumption tax as a form of import duty.

Uniqlo to sell yukatas globally

Furthering its credentials as a purveyor of Japanese culture overseas, Uniqlo will being selling Japanese yukatas and other traditional Japanese casual apparel from this month. The yukata line will be sold in 14 countries to start with. Designs are inspired by fashion designer and illustrator Junichi Nakahara and painter Yumeji Takehisa, both of whom painted women in yukata with a modern look. Also likely to be popular will be a children’s line of yukatas.

Uhr-Kraft watches opens by appointment store in Omotesando

Tokyo-Based Heartmonies Trading signed a distribution deal with German watchmaker Uhr-Kraft last year and opened the first store in Omotesando last month. The tiny store is just around the corner from Omotesando Station but customers will need an appointment to enter. Prices average around ¥250,000.

Light up your legs

A start up has come up with a novel way to bridge the gap between the worlds of fashion and costume, or cosplay. Called Hikari Skirt, the product looks like any other flouncy skirt but in this case has LEDs sewn into the underskirt. The wearer can then control the LEDs with an app on her mobile. Options include changing colours across the entire spectrum, and various choices for pulsing, flashing and fading out lighting. At full brightness and with the pulse function on, it looks like there is a major rave going on underneath (www.makuake.com/project/hikaruskirt). The skirt has yet to be produced, but is currently soliciting support on Makuake, the crowdfunding site owned by Cyber Agent. The creative agency behind the project is Kayac, and it is asking supporters for ¥16,000 in return for one of the first skirts off the production line. Its goal was ¥4 million by June, but had raised just ¥426,000 from 25 supporters by 4 June.

Otsuka Kagu announces a ¥740 million loss in 1Q2015

Otsuka Kagu has announced a ¥740 million loss for January to March 2015, down from ¥140 million net profit for the same period last year. Despite the end to a vindictive family battle over the CEO position that was resolved in March, the number three furniture chain has a long way to go if it is to return to success. The chain’s brand has been publicly damaged and customers are staying away. Sales for the quarter dived 23% to just ¥12.2 billion, with sales in March alone down 38%, partly a readjustment due to the spending on high ticket furniture in the run up to the tax hike last year. The company is forecasting an 81% fall in parent only net profit for the year to December 2015.

LINE opens flash sale site

Messaging and phone service LINE launched its own flash sale site last month. LINE Flash Sale will promote well known brands, cosmetics and electronics with time limited offers lasting one week. It plans to offer 10,000 SKUs at any one time, adding at least one new item every day. Supply will come from brands and intermediaries on a sale or return basis, and LINE says it is currently looking for more suppliers. It plans to offer flash sales daily split by category, with men’s fashions on Mondays, electronics on Tuesdays and so on. Product rankings will adjust in realtime depending on page visitor numbers. LINE account holders will be able to buy directly through the app using LINE Pay, credit card or convenience store.

Mitsui breaks ground on massive Hibiya redevelopment

Mitsui has begun preparations for the building of a vast new office and shopping complex in Hibiya (Yurakucho 1-Chome) facing the Imperial Palace in Tokyo. True to its efforts to turn its assets in the Nihonbashi/Marunouchi area into a liveable city centre, mixing offices with housing and entertainment, the 190,000 sqm development will offer the biggest cineplex in Tokyo, operated by Toho Cinemas. As Toho was founded in Hibiya, plans include an event space and other entertainment to highlight the Toho brand and provide local workers and residents with a new entertainment destination. Mitsui also plans to encourage more venture businesses to the area from both Japan and overseas through an incubation centre and other incentives.

Japan Post to open 40 tenant SC at Nagoya Station in 2016

Japan Post will open the second iteration of its SC brand, Kitte, in Nagoya in 2016. The first Kitte opened two years ago at Tokyo Station with an emphasis on Japanese brands to appeal to tourists, and the new SC is likely to have a similar direction but with more emphasis on Nagoya foods and crafts. The SC will be part of a huge 40 floor 200,000 sqm office tower just in front of Nagoya Station adding to the growing shopping and entertainment hub that is pulling traffic from Sakae. Kitte Nagoya will house 40 tenants within the 3,700 sqm SC and will have direct access from the station and bus terminal.

Itochu enters e-commerce tie up with Citic

Itochu has agreed a deal to exploit the cross border e-commerce market in China. The deal is with Citic, with which Itochu signed a strategic business alliance in January this year along side Thailand’s largest conglomerate Charoen Pokphand Group. Itochu says it and its partners believe the Chinese cross border e-commerce market will expand from ¥1.5 trillion in 2013 to ¥20 trillion through 2018. Itochu’s partnership with Citic is expected to lead to other retail related deals. For example, there are discussions about bringing together Citic’s expertise in banking with Itochu’s Familymart business to create one stop shop banking and convenience stores across China.

Itochu signs New Zealand womenswear brand

Itochu Shoji signed an exclusive import deal with New Zealand designer Karen Walker last month. Karen Walker has been a noted fashion designer since 1990 and includes celebrities such as Liv Tyler and Natalie Portman among her customers. As well as sales to around 1,000 stores worldwide, in 2011 she signed a deal with Anthropologie for the US market. Itochu has handed distribution operations to subsidiary Coronet which will target 20s-40s women through department stores and select shops, with prices from ¥80,000 for coats, ¥50,000 for jackets and ¥30,000 for tops. Sales of ¥1 billion are forecast in three years.

Toys ‘R’ Us to open 20 Miki House corners

Toys ‘R’ Us Japan will open 20 corners for Miki House’s Miki House Hot Biscuits brand within Toys ‘R’ Us and Babies ‘R’ Us stores this financial year. This will bring the total to 37 corners for the childrenswear manufacturer. Toys ‘R’ Us has been strengthening its line up of childrenswear brands in recent years, and began opening Miki House Hot Biscuits corners in August 2013. The colourful, character-based range is the result of strong demand from parents as well as grandparents looking for gifts.

Yogibo bean bags come to Japan

US bean bag sofa brand Yogibo saw its first Japanese store open last month. Operated by distributor, Webshark, the store opened in Odaiba within Decks Tokyo Beach. The colourful store looks like a good match for Japan’s burgeoning home fashion market given its low rise sofas, multi-function uses, and strong branding. Yogibo sofas can be used as chairs, beds, and sofas with easily interchangeable covers and in the US the brand has 20 stores. A second store in Osaka as well as online store will open shortly.