November 2015 News in Brief

Nov 02

Familymart-Uny deal finally inked in October

In mid-October, a month later than expected, Familymart and Uny announced they’d reached agreement to merge in 2016. The deal will be formally inked at the two companies’ AGMs next Spring with the merger initiated in September through a share swap agreement. For Uny, the deal offers business security and access to some much needed new ideas. For Familymart the key attraction is Uny Group’s 6,000 Circle K Sunkus (CKS) convenience stores. Many things about the deal have not yet been made public, notably the final make-up of the executive board, although Familymart and Itochu will dominate. What is certain is that Familymart will want to rebrand the CKS stores as soon as possible. There is still some debate as to whether the Circle K banner will be kept in Uny’s heartland around Nagoya, for company pride as well as licensing agreements, but the Sunkus banner is likely to disappear in short order. As revealed last month, the problem of poor profitability at Uny’s GMS chain will be met with drastic cutbacks in stores. The initial announcement is optimistic, with the new, yet to be named company aiming for group sales of ¥5 trillion within five years, about a third higher than currently, and operating profit exceeding ¥100 billion. Together the new company will operate more than 20,000 stores nationwide.

Folli Follie opens Ginza and other stores for Folli Follie and Links of London

Folli Follie Japan opened two stand alone stores in Ginza in September for its Folli Follie and Links of London chains, as well as Folli Follie stores in Shinjuku and Futako Tamagawa. The Folli Follie Ginza store, a 130 sqm 3 floor space on Chuo Dori near Swarovski and A.Testoni, is the first Japanese store featuring a new concept, with flowing, wave-like walls and bright upscale interiors to highlight the displays of watches, bags and accessories. The Ginza store includes limited edition products. The Links of London store is in Ginza 5-Chome, the seventh for the UK brand in Japan. Folli Follie is one of the big foreign retail success stories in Japan. It has 57 stores here, including 16 outlet stores, and is now looking to widen the target market through expansion of silver jewellery and other accessories that suit younger customers. In Shinjuku, Folli Follie recently opened a new store called Heart for Heart by Folli Follie in Lumine Est late August focused principally on bags, but also some other accessorises and targeting the younger traffic that shops at Lumine Est. It also launched a new series using the ‘Santorini Flower’ as a motif across jewellery, bags and watches aimed at older customers in their mid to late 30s.

2016 is the year of the Monkey – and red underwear

Japan’s lingerie manufacturers are banking on a red year in 2016. The legend that wearing red smalls in the Year of the Monkey is both lucky and helps you stay healthy is as good as any marketing gimmick, although one that can only be used every 12 years. Gunze launched Year of the Monkey Lucky Underwear in September featuring undershirts, briefs and shorts made of Egyptian cotton. This month, the company will add 50 SKUs to its existing lineup of 28 red products aimed at people in their 20s to 40s. In the last Monkey year, 12 years ago, Wacoal’s sales of women’s red undies jumped five times more than usual, and this time the brand will also target both men and tourists to boost sales even further. Its Bros brand of men’s underwear will introduce 10 new red SKUs. A Wacoal survey of 1,236 women showed that only 17% currently owned a piece of red lingerie, but that more than half thought red would bring good luck. Daimaru Umeda says it will set up a special section for red underwear as a feature of its year-end shopping campaign.

IKEA Touchpoint store opens in Kumamoto

IKEA launched a completely new format in late October. The new store opened in Kumamoto under a new banner, IKEA Touchpoint, and is the first of its kind. The aim is to provide a display and sales point for IKEA’s future online store, without the expense of opening the standard, large-scale showrooms that the Swedish retailer is best known for. The smaller format is also ideal for rollout across Japan, particularly in city centres, and could well find a place in other countries too. The Kumamoto store will link to the main IKEA Fukuoka branch, providing Kumamoto customers with access to the complete 9,500 SKU range. Customer orders are delivered to their homes or can be picked up from the Touchpoint store. The 1,500 sqm store itself offers 1,800 SKUs, mostly from the Marketplace ranges.

Nespresso opens first SC store, more to follow

The first Nespresso Boutique located in a SC opened in Lalaport Ebina in late October. The gourmet coffee brand offers the full range of machines, capsule refills and accessories in a store fitted to its usual high spec standard. This is the first in a rollout of new SC locations. On 11 November, the brand will also open in Kobe for the first time, the city where Nestle, its parent company, has long had its Japan HQ. This will be followed by a new Nespresso Boutique in Lalaport Tachikawa 10 December, locating in a high traffic, ground floor spot. Nespresso will operate 22 boutiques across the country by the end of the year, covering nine prefectures. It is fast becoming a nationwide brand.

Isetan-Mitsukoshi to open men’s store in Marunouchi in December

Isetan-Mitsukoshi will open its first stand alone men’s specialty store in December. Located on the street level of Shin-Tokyo Building, the 900 sqm will be called Isetan Salone Men’s, the same branding as its first luxury boutique that opened in Roppongi last April, and the moniker to be used on all future boutiques. Isetan Salone Men’s will take some experience and know-how from the Isetan Men’s Annex in Shinjuku, but Isetan says it is mindful of the distinct customer base in Marunouchi and plans something fresh to suit the local market. The store is likely to be popular with the many well-paid financial and trading firm employees in the area as well as tourists. Naka Dori is also an increasingly popular destination on weekends given its more muted, less crowded upscale dining and shopping. The store will include services such as shoe and bag repair as well as a cafe – selling expensive chocolate drinks to go. Further Isetan Salone stores are planned for Tokyo as well as other cities, with Isetan-Mitsukoshi saying it will have around 10 Isetan Salone stores within the next three years. These will vary in size between 1,000 sqm to 5,000 sqm. The only other publicly announced store is planned for Mitsubishi Estate’s station development in Nagoya due to open in March 2016, a 3,000 sqm store.

Innerwear & Hosiery market down 3%

Yano Research estimates the women’s innerwear and hosiery market contracted by 2.9% in 2014 to ¥644 billion, the third straight annual fall. The men’s market fell 1.9% to ¥26.5 billion. Hosiery, however, expanded 1% to ¥62.8 billion.

Mitsubishi Estate Simon plans 10th outlet mall

Mitsubishi Estate Simon will open its 10th outlet mall in Saitama in 2018. Located in Fukaya in the north of the prefecture in a 18 hectare plot, the initial launch will see a 15,000 sqm mall with 80 tenants, but extensions will be added in further phases in later years, to a final size of 30,000-40,000 sqm and up to 200 tenants. When Mitsubishi and Simon Properties (then called Chelsea Property Group) first brought outlet malls to Japan at Gotemba in Shizuoka, the partners hoped to reach a target of 10 properties. With that goal coming to fruition, Mitsubishi, which now has a majority stake in the joint venture, has plans to expand further. The tourist boom has helped, but Mitsubishi says Japanese have proved loyal and enduring customers. It points to the fact that the US has a population of 320 million and 200 outlet malls, Japan could support 70 malls, but currently has just 40. Mitsubishi believes the ongoing investment in Shinkansen lines and growing tourism will provide new opportunities, and offset the decline in population. In 2014, tourists made up 20% of sales at its flagship mall in Gotemba, but Mitsubishi says a similar mall in the suburbs of New York takes 70% of sales from tourists, showing the potential. Mitsubishi-Simon saw revenue of ¥39.9 billion in FY2014 up 3% and pretax profits of ¥14.5 billion.

Chiyoda optimistic about recovery

Footwear retailer Chiyoda is hopeful it can expand again. Once Japan’s biggest chain – back in 2000 it was 10 times the size of ABC Mart – its current position as Japan’s third ranked chain emphasises its problems of over reliance on wholesale suppliers, out of date ranges, and tired stores in roadside locations away from where the traffic is today. For FY2014, sales fell 3% to ¥143 billion, and have been falling for most of the last two decades. Operating profits also fell 26% to ¥7.7 billion on the back of a higher cost of sales. It now says it will increase sales to ¥145.5 billion through FY2017 and raise operating profits to ¥11.4 billion. This will be done through store refits, closure of loss makers, and expansion of private brands. Private brands this year will increase to ¥25.6 billion, just under 18% of sales. Overall 6 million pairs of shoes will be sold under the three main private brands of Cedar Crest, Bio-Fitter and Hydro-Tech.

Swedish home fashion brand Almedahls launches in Japan

Fashioning the home continues to evolve into a mainstream activity in Japan and more brands and retailers are opening to meet demand. The latest is Almedahls, a Swedish firm producing fabrics and home accessories in colourful prints. Established in 1846, Almedahls sells everything from carpets to curtains, but it is most famous for its colourful kitchen goods and tableware. The first Japanese store opened at the end of October in Lalaport Ebina and is bedecked in all the trademark leafy and pop prints on everything from trays to mugs. Fabrics are also being sold by the metre. Prices run around ¥3,000 to ¥8,000. A further five stores are planned over the next three years. Scandinavian home accessory brands have become a huge hit in Japan in recent years. Yes, there is IKEA and Flying Tiger, but also smaller brands sold through dedicated online stores such as hokuohkurashi.com and ditt-datt.com. The simple, clean designs, quality and colour palettes suit modern Japanese home aesthetics.

Cross Company unveils cultural website and fashion rental service for own brands

Cross Company will invest ¥800 million in a new online rental service over the next three years. Called Mechakari, the rental service lets users rent fashion items from Cross Company retail brands such as Earth, Music & Ecology. Similar to bag rental services like Cariru, Orb and Laxus, Mechakari will charge a monthly fee, ¥5,800 in this case. For this, users can rent a maximum of three items at any one time, and as often as they like. In addition to the monthly fee, returns cost ¥500 and all payments are handled through a smartphone app. Cross Company is also promoting Japanese culture through a new website, premium-j.jp. Although currently only in Japanese, the site will be offered in other languages too to help promote Japan as a tourist destination and to communicate Japanese culture to foreigners. The site is being edited by former editor of fashion magazine LEON. The site includes features on travel, crafts, food, art, anime and design, as well as an extensive product catalogue.

Consumption still weak

Spending patterns are always hard to pin down given the small sample sizes of government surveys, and the pressures to spin the data to meet policy indicators. August figures showed a 2.9% increase in household spending, which led the government to crow that policies were working. A month later, household spending fell 0.4%, confounding a median market forecast for a 1.2% rise. Not surprisingly, retailers themselves remain vigilant and concerned that consumption is not growing at all. Seven & I president Noritoshi Murata recently told Reuters that consumer spending has “ground to a halt” and expects weak consumption through the rest of FY2015. Seven & I reduced its sales forecast by nearly 4% to ¥6.15 trillion for the year. As reported before, the main problem is that wages are stagnant and have been for years. The official 0.5% gain in July 2015 in real wages (adjusted for inflation) was the first in 27 months and immediately petered out in August – and these numbers only account for full-time employees; anecdotal evidence suggests part-time wages continue to fall in real terms. Just to add to the government’s woes, consumer prices fell again in August too.

Isetan-Mitsukoshi ties with event planning firm to develop wedding business

Isetan-Mitsukoshi has launched a new venture with international hospitality business Plan-Do-See. The new subsidiary will be tasked with creating a new wedding event business. This will include converting some of the department store chain’s upper floors into spaces for weddings and wedding parties, as well as design and plan weddings in other locations such as top end hotels. The wedding event business will be linked to department store wedding merchandise floors, jewellery and other wedding related merchandise, as well as the upcoming stand alone Isetan Wedding boutiques that JC reported on previously. The new joint venture should be a significant opportunity for international designers, brands, hotels and food/beverage businesses.

Kokubu acquires stakes in Nacs Nakamura, Arista

Kokubu, Japan’s number three food wholesaler, will acquire 51% of Nacs Nakamura, the leading specialist frozen food wholesaler, turning it into a group subsidiary. Kokubu ruled the rankings for two decades until Mitsubishi and Itochu began consolidating their various wholesale operations, and remains a ¥1 trillion company, but it has recently struggled to maintain growth in the face of more modern operations. Acquiring Nacs will help to strengthen its own chilled food operations, further establishing Kokubu as the number one frozen food supplier in the country. Separately, Kokubu has also taken a 20% stake in Arista, the country’s leading confectionary wholesaler whose parent company is Marubeni. Like Kokubu, Marubeni has slipped back in food wholesaling. It attempted to emulate the larger trading houses by integrating wholesale operations with its own retailing through Daiei, Maruetsu and other chains, but this largely failed due to lack of know-how. The new deal is believed to signal closer ties between Kokubu and Marubeni as they both seek to fight off larger competitors.

Daiwa House to open huge e-commerce logistics centre in Osaka

Leading logistics provider, Daiwa House, has begun development of a ¥50 billion logistics centre in Osaka, its first in the prefecture. The 470,000 sqm site will contain a 100,000 sqm logistics centre, located just 30 minutes from central Osaka. Daiwa will target online retailers, providing options for same and next-day delivery throughout Kansai and further south. The building work will break ground in early 2016. Daiwa’s logistics business broke ¥160 billion in turnover in 2015 and is on target for ¥200 billion within a couple of years. In addition to amalgamated centres like this one, Daiwa also runs logistics for major clients such as Fast Retailing.

GU forecasts 32% jump in sales this year

GU expects to post sales of ¥141.5 billon for the year ending August 2015, a 31.6% increase on the year before. Operating profit is expected to rise to ¥16.4 billion, 2.7 times that of 2014. GU says strong sales of gaucho pants and other casual fashions during the first few months of this financial year, aggressive store expansion, and bigger stores will all help drive growth. GU says it is also seeing a wider range of customers at its stores, particularly more customers in their 30s and 40s. It will have 320 stores by the end of August.

Xebio centralises Kanto stores under Victoria

Xebio will transfer management of all its Kanto stores to its Victoria subsidiary before the end of the year. Xebio says it wants to improve the speed of decision making around store openings and closures, intra-store shipments and merchandising, and rationalise overhead. It currently operates 13 Super Sports Xebio stores in Kanto as well as 11 Victoria Golf stores and five other stores. The stores to be merged into Victoria had sales of just under ¥12 billion last year.

Ain Pharmaciez expanding at home and overseas

Ain Pharmaciez is the country’s leading prescription pharmacy chain, but it lags behind in the more competitive general drugstore market. It now plans to catch up. In February it acquired Medio Yakkyoku, a 50 store chain with stores around Tokai, and in September added Nishi Nihon Pharmacy, a ¥6 billion, 40 drugstore chain in Takamatsu, one of the largest chains in Kagawa Prefecture. As a result, Ain now operates around 760 stores. In August, it acquired the Aura cosmetics brand from Shiseido and is reported to be looking at buying more cosmetics brands in the near future. The Ainz & Tulpe beauty format is becoming a key conduit for international cosmetics and toiletry brands, with 49 stores, 22 of them in Kanto, 17 in Hokkaido, and the remaining 10 in Kansai, but it will now expand across the country. The newest and largest Ainz & Tulpe so far opened in August at Shinjuku Station. It offers 20,000 SKUs, 70% of which are cosmetics. Ainz & Tulpe will also be taken to China.

Seven Eleven enters Tottori, now in all prefectures

Seven Eleven opened its first stores in Tottori Prefecture on the Japan Sea coast at the end of October. Three stores were opened in Yonego on the same day, all as part of the convenience store chain’s tie-up with JR West to run stores in and around its stations. This is a bigger development than it may first appear. Tottori is the last remaining prefecture in the country to host Seven Eleven, meaning the chain now operates everywhere across the Japanese mainland with only Okinawa devoid of its unique fast-food experience. By 2021, Seven Eleven plans 50 stores in Tottori.

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