Department stores saw ongoing decline in both value sales and outlet numbers in 2018. While the flagship department stores in the centre of major cities such as Tokyo and Osaka benefited from high demand from inbound tourists and affluent consumers, stores in other areas continued to struggle.
Inbound tourists continue to generate a significant proportion of the sales of department stores in the centre of major urban areas such as Tokyo and Osaka. While spending per tourist has declined since 2013-2015 when an explosion in the number of inbound tourists was accompanied by bulk buying, spending on products such as jewellery, watches and cosmetics continues to have a significant impact on department stores sales.
Department stores’ efforts to court foreign tourists are involving increasing use of well-known influencers in other countries to broadcast/promote their outlets. Having successfully used a live broadcast by a famous Chinese influencer to introduce products and selling space to inbound tourists in 2017, Hankyu Hanshin planned to expand this kind of promotional broadcast at the end of the review period.
Competition from shopping centres and internet retailers presents a significant challenge to department stores. Some department stores operators are closing down their unprofitable outlets in order to strengthen their businesses.
In their efforts to adapt to rapidly changing market conditions and consumer lifestyles, department stores are experimenting with new business models. Marui has been looking at the sharing business, beginning with a collaboration with online bag share service, Laxus, in April 2017.
J-Front Retailing and Takashimaya are working to strengthen their real estate businesses as they look to ensure stable incomes in the face of intensifying competition from shopping centres and online retailers. This type of diversification is likely to become increasingly common as department store operators struggle to expand within their traditional business models.
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