September 2017 Highlights

Sep 22

FOCUS:
Department Stores FY2016: pulling out the axe again

After two years of reaping the benefits of optimism among the comfortably off and frenzied purchasing of luxury by tourists, 2016 was a much harder year for department stores. They faced a return to the tough challenges of eking out a profit from declining sales. The core weakness of the format remains apparel; 96% of all department stores posted lower apparel sales in FY2016, and a massive 60% posted sales declines of more than 5%. Even among the top 50 stores, just two increased sales, and then by less than 1%. The good news is that FY2017 is proving a much better year thanks to rising stock market values and a return of tourists. Whatever the current trading conditions, though, department store management has recognised the need to further restructure, with more stores closing and others being overhauled. These are positive signs that should lead to a smaller, more coherent sector, but some chains plan to slash apparel space by as much as 30%

Sogo Seibu to close Funabashi and Odawara stores
By February next year, Sogo Seibu will have 11 fewer stores than three years ago. It was Japan’s largest department store by store numbers in 2005 when it was acquired by Seven & I Holdings. Since then, Seven & I has failed to turn the business around, and some analysts are suggesting this might lead to the closing of all Sogo Seibu stores outside the Kanto region.

Editorial: Cleaning house and collaborating

Seven & I and Lohaco to rival Amazon Fresh in battle for online food market
A little note from one CEO to another offering sympathy in tough times has ended up becoming what some local observers are calling the biggest new development in omnichannel for years. Seven & I and Askul announced a deal in early July that will see joint online sale and distribution of fresh foods beginning, if all goes to plan, in November this year. Seven & I provides the foods, Askul, through its Lohaco subsidiary, the fulfilment, with both using the full weight of Yahoo and Seven & I for promotions.

Onward signs multi-year distribution deal with Mulberry
Mulberry is one of a small number of British luxury brands with a global presence, but has never succeeded in Japan despite a series of partnerships over 20 years. It has now been signed by Onward, which again promises investment in retail stores to raise the brand’s profile among Japanese.

Magaseek jumps 15% on tie ups
Magaseek is a small fashion e-commerce operator, but has found growth by becoming e-commerce partner for retailers, as well as running mobile shops for parent NTT Docomo.

Stripe finds new growth engine
Stripe International was the fastest growing fashion retailer for a decade, back when it was called Cross Company. In the last few years, growth rates have fallen away, and efforts to find new growth concepts to add to its core chains have largely failed. Until now.

Honeys slashes 200 Chinese stores, invests at home instead
Honeys has never fulfilled its early promise as a trading company-backed, cheap fashions retailer in the late 2000s. Finding the Japanese market too hard, instead it switched its focus to China, but tough competition there means it is now retreating home.

Don Quijote confirms 40% stake in Uny and takeover of stores
Don Quijote and Familymart-Uny revealed talks on a potential business tie-up back in June. The deal is now confirmed, with Don Quijote investing directly in FU’s GMS chain, a neat solution for both parties, allowing Don Quijote to expand and Itochu to partially solve the Uny problem.

Nitori to expand Deco Home to 500 stores as IKEA mulls small stores for Japan
Nitori already has more than 400 stores but most of these are suburban or roadside locations. It now plans to open 100 of its more upscale and smaller Deco Home stores in the next three years, and longer term reach parity with Nitori, some 500 stores each. At the same time, it is pulling in other retailers to help its expansion, including department stores, and as of last month, Yamada Denki. IKEA is worried, at last considering opening smaller stores for Japan, and is embarking on a programme of major price cuts.

Tokyo Base to launch mass market luxury chain
Tokyo Base has been one of the three fastest growing fashion retailers in the last few years, a significant achievement for a select shop retailer. More recently it has taken this knowledge of what sells to develop its own SPA chains, which could see the TSE listed firm emerge as a top 50 fashion retailer in the next five years.

Online spending hits 20% of total household outlay
Shopping through e-commerce grew 24% in the first six months of 2017, with the average household now spending ¥10,000 a month online. The proportion of households using the net for purchases grew to more than 30%, and the fastest growing category was food. The number of products and services available online also continues to grow.

Jupiter Shop Channel: growth again
Jupiter Shop Channel leads the TV shopping sector in sales but had seen sales flatten off in recent years. In FY2016 sales took off again, rising 11.1% thanks to new types of customer, and the merchandise to attract them.

Market for fashion goods polarises
Fashion goods manufacturers rely heavily on the department store channel, but are being squeezed by both contracting space and consumers who prefer either cheap, or very expensive, imports.

IN BRIEF
Longchamp set to shine in Omotesando
Luxury brands sell more kids fashion
Amazon Expands categories for subscription sales
Sazaby signs Norway’s Tom Wood
Kusuri no Aoki to hit ¥200 billion
H2O Retailing sees profits jump
Itochu signs Grenfell
Lumine sales up 2.3%, but apparel trading toughens
Cainz sees boom in DIY coming, buys stake in DIY Factory
Muji discounts apparel
Uniqlo now available at 80% of conbinis
Ain builds M&A war chest
Supervalue acquires Uny store
Supermarket sales fall for three months straight
Edion acquires Forest from J Front Retailing
Start Today doubles DC size
Otsuka Kagu: another loss
Parco experiments with robot floor guides
Lohaco expands delivery drop-off service
Yodobashi Camera opens 24-hour click-and-collect
Cosmos Yakuhin breaks profits of ¥22 billion
Mitsui to open new Midtown in Hibiya next March
Seven & I to open Primetree Akaike SC in November

RETAIL DATA: Department stores down 1.4%

 

Companies & Brands mentioned in this Issue:

Ace
Aeon
Ain Pharmaciez
Alipay
Amazon
American Holic
Anna Sui
Apita
Askul
Bain Capital
Belle Maison Logisco
Cainz
Carrot Co.
Cawachi Yakuhin
Charm
Cinema Club
Circle K Sunkus
Coronet
Cosmos Yakuhin
Cross Company
Daimaru Matsuzakaya
Dholic
Dior
DIY Factory
Edion
Factotum
Familymart
Familymart-Uny
Fast Retailing
Gallardagalante
Gibo
Givenchy
Green Label Relaxing
Grenfell
Gucci
H2O Retailing
Hankyu
Hankyu Oasis
Happy On Time
ICI Ishii Sports
Iiwa Iiwa Closet
IKEA
Instagram
Interior Reform Yamada
Isetan
Isetan-Mitsukoshi
Ito-Yokado
Itochu Shoji
Itochu Shokuhin
IY Fresh
Izumiya
J Front Retailing
JR Tokai Takashimaya
JR West Isetan Kyoto
Jupiter Shop Channel
KDDI
Kinokuniya
Kintetsu Department Store
Kusuri no Aoki
Lawson
Legato Largo
LINE
Lion
Logisco
Lohaco
Longchamp
Lumine
Ma Mere
Magaseek
Marni
Maruhiro
Marui
Matsuya
Mihara Yasuhiro
Ministop
Mitsubishi Estate
Moncler
Moonbat
Moonstar
Muji
Mulberry
Nagasakiya
Nitori
NTT Docomo
Omni7
Onward
Otsuka Kagu
Outlet Peak
Par Avion
Parco
Prologi
Rakuten
Right On
Robinson
Ron Herman
Sanki Shoji
Sazaby League
Seibu
Senshukai
Seven Eleven
Seven Premium
Shimachu
Shimamura
Shinzone
Shiseido
Sogo
Sosu
Start Today
Stella McCartney
Stripe International
Studious
Sumitomo Shoji
Takashimaya
Tokyu Hands
Tokyu Plaza
Tom Wood
Toray
Tsukuba
Uchihara Group
Uniqlo
United Arrows
United Tokyo
Uny
Urban Research Doors
WeChat
Welcia
Whole Foods
Yahoo
Yamada Denki
Yodobashi Camera
Zara
Zozotown

Get a concise monthly update on Japanese Consumer Markets – and a FREE copy of our monthly report.