Daimaru Shinsaibashi to be rebuilt

Daimaru Shinsaibashi is to be closed and completely rebuilt over a three year period. The iconic Osaka store has suffered less than some of its rivals in the face of the big increase in department store sales space since 2011, but the building is ancient by Japanese standards and increasingly unsuitable for modern retailing.

J Front Retailing (JFR) has announced plans to rebuild its flagship store in Shinsaibashi in Osaka, adding to the rebuilding of Matsuzakaya stores in both Ueno and Ginza in Tokyo too. JFR has been the most proactive in rejigging its department store portfolio, and apart from bold decisions to rebuild, has also closed poorly positioned, smaller stores, converted significant sales space to SC-type management, and acquired Parco and other brands that can be slotted into a hybrid model.

With the same aim to reposition for the local market, the Shinsaibashi store will be rebuilt at a cost of ¥30 billion – although refitting of the North and South Annexes, both of which will remain in operation throughout the rebuild, will add up to ¥10 billion more. The main store will close on 30 December this year, with a target date of 2019 for reopening.

Department store space has increased by 20% in Osaka since 2012. In March 2011 there was an estimated 610,000 sqm of sales space in Osaka, but today it is more than 750,000 sqm. All the major stores have received refits and expansions, and both Hankyu Umeda and Kintetsu Abeno were rebuilt from the ground up.

This has led to overcapacity which, combined with new shopping centres, means many stores are struggling to secure a decent return. Hankyu Umeda has done reasonably although still fell short of targets, while the poorly conceived Abeno Hakukas is looking at some immediate refitting and redesign due to awful first year results. Arguably, the failure of Isetan-Mitsukoshi was less about competition and more about poor planning, taking three years to correct.

In this environment competitors will be relieved to see an Osaka store close for three years, but JFR will still be confident that it can make a return on its investment. Today Daimaru Shinsaibashi is its third largest selling store, with sales to February 2015 of ¥84.5 billion. But the building first opened in 1933 and has struggled for some years with the needs of modern shoppers – parts of the arcade side entrance are so low that taller customers still need to duck to get in.

The South Annex will be refitted to offer more high end luxury brands, targeting inbound tourists. It will also introduce a broader range of duty-free and other tourist services in October, including a large concession for Laox. Last year, tourist sales hit 8% of the total for the store, but Daimaru reports that sales to tourists hit a whopping 20-40% of total turnover on certain days this summer.

Daimaru Shinsaibashi is also the leading store in the city for VIP (gaisho) sales, accounting for 30% of total store sales – about 10 points higher than any other store in the group. Maintaining and expanding these accounts will be another key objective in the new store build.