Laox rises from bankruptcy to become tourist shopping leader

Nov 02

Laox, a name apparently derived from Latin, was born in Japan more than 50 years ago, but in 2001 the company went under. Since being rescued by its new Chinese parent, the chain has re-emerged as the single leading retailer targeting tourists, and a major source of sales for brands of cosmetics, fashion, jewellery, and of course gadgets. Laox is set to lead this market well into the future, so much so that department stores are queuing up to offer concession space.

With the tourist trade booming, many domestic retailers are looking at Laox with more than a hint of envy. Once a prominent Japanese consumer electronics (CE) chain, Laox was rescued from bankruptcy in 2009 by Suning Commerce Group, a Chinese conglomerate based in Nanjing that runs more than 1,600 CE stores across China, plus a large online business selling everything from branded fashion through to books, travel and insurance.

Suning has more than saved the Laox brand; it has turned it into one of the most popular tourist shopping destinations in Japan – today the chain has 32 stores in Japan and three in China. It broke even for the first time in 14 years last year – sales to December 2014 were up 1.5 times compared to the year before at ¥50 billion, for a net profit of ¥1.2 billion. Profits are forecast to jump seven times this year, with a target of ¥8.3 billion.

Laox’s timing couldn’t be better. For the period July to September, the Ministry for Tourism (MILT) puts expenditure of inbound tourists at ¥1.09 trillion, up 81.8% on last year. Given that around half of all tourists entering the country are Chinese, outstripping the number from all other countries combined, many flock to a company that is widely promoted in their own country.

In addition to a sense of security provided by shopping at a Chinese-owned chain with Chinese sales staff, Laox has also met tourists half way by expanding to locations near popular tourist destinations. Akihabara, Ginza, Shinjuku, Shinsaibashi and Dotonbori are the main shopping locations for inbound tourists, and including Mount Fuji, Kyoto and Nara, have become parts of the so-called Golden Route that first time tourists follow.

The problem, however, is that these locations are favoured only by first timers. Repeat tourists tend to be more interested in the cultural and rural parts of Japan, and more often visit the extremities of the country, especially Hokkaido and Kyushu. So Laox has opened in key cities in these areas, including stores in Obihiro and Hakodate in the north, and Fukuoka and Nagasaki in the south, as well as other tourist spots such as Nikko, which got its own Laox store in early September.

Laox now plans to have 50 stores by 2018, every one of them targeting tourists rather than domestic consumers, and it sees potential for up to 150 stores.

Marketing to tourists before they arrive is relentless. In July the company worked with Docomo to promote the chain to mobile subscribers in China and South Korea. Using roaming ads on their phones, Laox offers discount coupons for shoppers using its stores. It’s all digital, so purchasers can be tracked easily, providing a gold mine of new data on shopping habits.

In keeping with its origins, around a third of sales still arise from the electronics category. But Laox is working very hard on capturing even more tourist spending. It now sells large amounts of cosmetics and drugstore items, and is looking to expand sales of fashion. In the summer it introduced its own private label apparel lines under the name ‘Origami’, with a dedicated sales space at the top of Laox Shinjuku. It also tied with Onward in a joint venture called Onward J Bridge, established in June, with new ranges of exclusive apparel due to go on sale by the end of the year. This was followed by the acquisition of Mode et Jacomo, the upmarket Japanese women’s footwear chain, in July.

So successful is it proving as a magnet for tourists, that department stores are falling over themselves to invite Laox in as a tenant with generous conditions. Daimaru-Matsuzakaya installed four new Laox concessions in Kansai in September/October and expanded space in Daimaru Umeda after a surge in footfall following the initial opening of a smaller Laox concession in March.

While still small in comparison with the largest overseas retailers in the country like Amazon, Seiyu or Costco, Laox is growing at a rapid rate and taking a significant share of the Chinese tourist market in Japan. The company has expanded intelligently and has the security of financial backing from a large, stable company at home. Domestic and other foreign retailers will keep a close eye on Laox to understand new ways to better target the tourist shopper.