The Isetan Mitsukoshi Group, who owns Japan's No.1 Department Store, the Shinjuku Isetan Store, announced today that come spring 2012, they will open a cosmetics store in Shinjuku's Lumine, a station building operated by JR East, the former Japan National Railway who is now Japan's 3rd largest retailer.
As early as 2004, when I returned to Japan from my seven-year stint overseas (I was in Australia, Singapore, Dubai, then Singapore again) I was seeing market research results that showed that year by year, a growing number of F1 women (It is marketing jargon common in Japan and refers to women aged 20 to 34) had "never shopped in a department store."
With the easing of our Large Scale Retailers Law, and with the rise of a barrage of uniquely Japanese commercial alternatives, the department stores have been and continue to flounder and shrink.
In addition to malls, Japan has in-station shopping that is not just small kiosks selling coffee and sandwiches, but book stores, family restaurants, cosmetics stores, boutiques, and the likes of UNIQLO.
JR Shinagawa Station is one such station, and when they opened their shopping complex inside the ticket gates, there was a 250% increase in the number of consumers paying 130 yen to buy a ticket that gave them the right to get inside the station! (The said ticket will not allow the user to travel on the trains)
- Imagine being able to charge every customer who wants to walk through your store's door.
How profitable can that be?
Another uniquely Japanese retail format is the "station buildings" - commercial multi-storey properties adjacent to terminal stations such as Shinjuku in Tokyo.
Shinjuku is not just another train station.
It is in the Guiness Book of World Records as the busiest station in the world - with a daily average of 3.64 million people passing through it, and with 200 exits.
At each of its exits, there are major department stores and shopping complexes -
South Exit leads to Odakyu Department Store and My City;
West Exit leads to Keio Department Store and the municipal building (that is rumoured to have a 200 million yen Mayor's Office);
East Exit leads to Isetan and Mitsukoshi Department Stores, Marui, LUMINE, and Kinokuniya as well as underground shopping mall, the Subnard;
New South Exit (Southern Terrace) leads to Takashimaya;
and so on...
But department stores have always looked down on the newer retail formats as being less classy and cheap.
I am currently overseeing the roll out of a "newbie brand" - to the Japanese market - and have been told repeatedly how we would be signing our death warrant if we opened up in malls and station buildings.
Some people tell me that the average basket size at station buildings is only 3,000 yen;
while the department stores sell an average of 15,000 yen.
But I would much rather have customers visit my store 3 times a month to purchase 3,000 yen each time, than for them to only come once a year and spend 15,000 yen as they do at the jewelry stores in department stores on the ground floor (luxury jewelry brands are usually on the fourth or higher floors).
Inditex blew the world away when it was made clear that the average Zara customer visits their stores 17 times a year on average vs the three for competing brands.
At our business, we may not be getting customers to come back quite as often on average, but to date, our repeat customers come within 30.2 days of their first purchase, with some coming back as early as TWO DAYS after their initial purchase.
I like to tell my team that "if we sell well, we are the law."
To mean that if we can prove that it can work by having fabulous sell out, we can persuade the brand owners that jumping only on sinking ships - i.e. department stores - will not increase their brand equity.
For the last six months, rumours have been abound that the super brands will start opening up outside of department stores and in malls.
But now that a department store - or rather, THE department store - is moving out of its own comfortable kingdom and renting space in their once belittled competitors, retail in Japan has taken yet another turn down the road of no return.
Retail in Japan will never be the same again.