JAPAN CONSUMING
NEWS & ANALYSIS ON JAPANESE RETAIL & CONSUMER MARKETS
OCTOBER 2003
IN THIS ISSUE
RETAIL RANKINGS PART II: A TALE OF TWO
FORMATS
Following last month’s analysis of the overall trends
in retailing in the 2002 financial year, this month
we take a look at the two most influential groups:
specialists and large format mixed merchandise
stores. The results provide further confirmation that
the best of breed in the specialty sector are increas-
ing their lead and the large format store groups are
struggling. Without doubt, a tale of two different
universes, let alone two formats.
CASUAL APPAREL CHAINS
The specialty store sector as a whole is doing
well and within that, the casual apparel category
is leading the way. A few operators are racing
ahead, leaving other apparel chains looking very
unkempt.
MITSUKOSHI BECOMES...MITSUKOSHI
Mitsukoshi delisted in August and then, er,
Mitsukoshi relisted. Smoke, mirrors, and even some
real substance in the change.
CURRENCY CONVERTER ON PAGE 15
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VOLUME 4 • NUMBER 10
Saks: the new choice for upscale retail
developers
When Carrefour entered Japanʼs GMS market three years ago, the effect on the
local competition was profound. Aeon particularly was galvanized into action and
Wal-Mart and Tesco realized they had better get a move on. Will Saksʼ entry do the
same for upscale retailing and encourage others to enter Japan? The fact that Saksʼ
worldwide turnover is less than double that of Isetanʼs Shinjuku store alone should at
least indicate the potential for luxury retailing to other overseas retailers.
Saks Fifth Avenue has formed a joint large, mixed retail developments such as Canal
venture with established Japanese firms to City in Kyushu as well as helping with the
license the Saks Fifth Avenue name and build Marunouchi development.
a number of stores in the Japanese market. The final and most interesting partner is
The first store will open in the Fall of 2005 Shinpushachu which operates Shin-Puh-Kan
comprising some 15–18,000 sqm within in Kyoto. Shinpushachu is itself a joint ven-
a new 54,000 sqm development, and will ture between the founders of some of Japanʼs
probably be located in Omotesando near the more successful fashion retailers: Beams,
new LVMH head office. There are already Tomorrowland, and, to a lesser extent, Stock-
rumors of a second store in Naka Dori where man (a subsidiary of Kanematsu, the textile
Mitsubishi Real Estate is already working in trading company).
conjunction with Saksʼ joint venture partners. The stated aim of this joint venture is to
Between five and ten stores are planned in the overhaul the current status quo in the retail
following ten years averaging 5,000 to 10,000 industry. With the tie up with Saks, this may
sqm. The majority of Saksʼ stores are expected be a genuine ambition as the US retail brand
to open in newly built, mixed commercial may well have the power to shake up luxury
sites, a necessary condition if the venture is to retailing.
achieve its goal of luxury, high class stores at Although the stores will be operated by
the very top end of the market. a joint venture with local firms, this can be
The operating company is a joint venture considered another attempt at the Japanese
between two US firms and three Japanese orga- market by a US department store. The only
nizations under the name Specialty Fashion other examples, Barneyʼs, Robinsonʼs, and
Associates Japan (SFA Japan) and capitalized Printemps Ginza, were launched as subsidiaries
at ¥120 million. In addition to building and or license operations, with minimal involve-
operating the stores, SFA Japan will handle ment from overseas. Saks itself did form
all imports as well as licensing the Saks name work with Seibu in the 1990s, but this was
for use on product lines. Saks stores in Japan limited to product distribution in Seibu stores.
will focus on established and emerging Japa- As already mentioned, the new joint ven-
nese, European, and American fashion brands, ture is also unusual because a major trading
although SFA Japan also plans to develop new company is not involved—yet. Instead the
store brands specifically for Japan. From the Japanese partners provide actual operational
US, apart from Saks, the other US joint venture skills rather than simple networking. Ask and
partner is International Management Technol- ILC bring both expertise in store creation and
ogy, a consulting company based in Connecti- solid relationships with developers. It is these
cut, which has previously put a number of US land developers who have become tired of the
and Japanese companies together including lack of innovation in the Japanese retail market,
Circle K convenience stores. offering few compelling retail concepts to draw
The Japanese side includes key development consumers to their new sites.
partners to operate the business rather than the As documented previously in JC, the
usual trading company middlemen, and this is number of new urban developments in Tokyo
an encouraging sign. Ask Planning Center will and Osaka is creating a huge demand for top
provide its commercial building expertise as end retail operations to make them come to
well as shop design and construction skills, and life. The trouble is that, excluding the tired,
ILC will bring its substantial skills in planning
»» Page 3
www.japanconsuming.com
 JC
CONTENTS
Saks in Japan ............................ 1-3
Tourists stay at home.................... 3
Vuitton raves in Roppongi............. 4
Kokuyo modernizes ...................... 4
Boots are back.............................. 5
Aoyama’s mobility...................... 5-6
Casual apparel ups forecasts .... 6-7
Matsuzakaya’s annex ................ 7-8
Fast Retailing & Theory ............. 8-9
Daiei swings, Yomiuri blocks ........ 9
Paint Jobs................................... 10
Mitsukoshi: next 100 years .... 10-11
Mitsukoshi absorbs Usui..............11
Focus: Retail Rankings Part II: A
tale of two formats ................. 12-14
Retail Data............................. 15-16
Currency Converter .................... 15
CONTACT US
EDITOR ROY LARKE
editor@japanconsuming.com
RESEARCH STAFF SUMI KOKUBU
KANA KUNUGI
DAVID REED
SHOHEI ANDO
PRODUCTION CONTROL MIKI KAWASAKI
YUJI MORITA
SALES SALLY BEDOWN
sales@japanconsuming.com
PUBLISHER MICHAEL CAUSTON
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© Sensu Ltd. 2001, 2002, 2003
2 • JapanConsuming
“Its a miracle!” Not really
In this issue of JC, there is a glut of stories and analysis showing some encouraging signs of growth,
recovery and dumping the traditions of the past. Growth from the new breed of up and coming retailers
and consumer goods companies, recovery from the better managed firms that have adopted consumer
centered marketing practices, even off loading of millstones by the larger members of the corporate
establishment who have enjoyed years of grace from bankers—but have finally done something useful
with that time.
Amongst the new breed of retailers, there are of course the new entrants, like Saks and its Japanese
partners. This new venture is still to prove its worth but it provides yet more optimism about the state
of consumer spending in the next decade. Among domestic firms, apparel firms like Point are growing
as quickly as any company in Japan. Unburdened by the financial restrictions and, more importantly,
by the management funk of their much older, larger competitors, these firms are building new chains of
carefully targeted stores with better marketing and an improved retail experience for bored consumers.
Even Fast Retailing, the largest of the new breed, has shifted strategy, making an acquisition that could
provide fuel for another bout of growth within Japan and without. But the proof is in the pudding, as the
English say, and as this monthʼs JC focus on pages 12-14 shows, 16 of the top 27 non-electrical specialty
retailers didnʼt even appear in the rankings at all ten years ago. This is an astonishing transfer of market
share. Yet it has largely gone unnoticed.
Recovery of profitability and indeed the delivery of the kind of margins previously unheard of before
is evident across a wide range of retail sectors. Kokuyo in stationery has taken a sharp knife to its whole-
sale system of 41 wholesale companies. Aoyama Shoji, the largest menʼs wear retailer is one of the first
to make genuinely useful applications of new marketing communications through mobile phones. The
supermarket chains are being reorganized under the trading companies who also happen to own the food
wholesalers as well, giving further scope for rationalization.
Even the cream of Japanʼs old-guard establishment are trying to galvanize their soft and aging corpo-
rate bodies to become leaner and fit. Mitsukoshi has completely reorganized its holdings and while there
is the inevitable smoke and mirrors, the company is beginning to showing a determination to survive
without merging with market leader Takashimaya. And then there is Aeon, transforming itself into the
largest retail conglomerate in Asia.
Of course the contrast between the performance of the new drivers of growth and the old guard could
not be more striking. As the analysis in our focus shows, sales densities for the department stores average
a mere ¥2.141 million per sqm. The top 25 specialty chains average ¥3.227 million per sqm despite most
of them being much lower ticket retailers.
While all this change and improvement is encouraging, what is really remarkable is how little of it has
been reported in the Japanese mainstream press, let alone the overseas media. In the specialty sector, the
only company that gets a regular mention in the business pages is Fast Retailing and then usually only
recently poor year on year numbers, forgetting it is one of most profitable retailers in the country. What
of Shimamura, Yamada Denki, Bic Camera, Cainz, Cawachi Yakuhin and Sun Drug?
For the most part, the statisticians in the bureaucracy show the kind of sclerosis in data choice that we
are most familiar with amongst the die-hard crowd of old, debt ridden retailers of the past. They continue
to stick to the old, time-honored and lazy practice of concentrating on the results from the very largest
retailers alone. This matters because the department store and GMS chain sectors no longer paint a true
picture of retailing in Japan today and so, taken in isolation, give an unbalanced view of consumer spend-
ing as well. In reality, the real players in the industry today are merchandise specialists.
The bureaucrats might point out that the top 25 retail outlets in Japan by sales are still all department
stores, but it is equally significant that Japan is the last country in the world where such a claim can be
made. The truth is that overly reporting the condition of department stores and GMS chains gives the
world a distorted picture of the general state of retailing today. The contrast between the growth rates,
operating margins and profitability of the top 50 in the specialty store sector and the top 50 department
stores could not be more striking.
The result? As star performers emerge into the public arena in the next two years, there is little doubt
that once again we will hear the familiar chant of ʻItʼs a miracle!ʼ The truth is both much more pedestrian
and more exciting. The results beginning to emerge are the result of a lot of hard work, innovation, good
planning, and a necessary disregard for the old ways. Whatʼs exciting about this is that it is not a flash
in the pan and not some unique, inexplicable mystery of “those wily Japanese”. Itʼs just good business
sense. This is a universal value and there is as much of it, and as little, in Japan as anywhere else.
Tokyo, October 2003
Retail Japan2003
Over 500 A4 pages 2,000 companies indexed
WWW.JAPANCONSUMING.COM
 NEWS & ANALYSIS
»» While SFA Japan will have to move quickly,
old, unimaginative efforts of even the best depart-
ment stores, there are still few large store retailers
Saks branded stores should have an immediate
impact. Although they will be much smaller than COMPANY INDEX
full line department stores, the Saks chain will
at the top end with any new ideas. This creates Akita Bank, 11 Lowrys Farm, 6
compete for sales of the highest margin fashion
problems for retail developments like Naka Dori Alpen, 12 LVMH, 1, 4
products that, along with food, are the main source Aoki, 6, 8 Mac House, 6-7
in Marunouchi and Shirodome in Shinagawa that Aoyama Shoji, 2, 5 Mahna Mahna, 4
of department store profits.
need large format tenants. Apita, 13 Mammy Mart, 14
Even more worrying for local chains is the Ask Planning Center, 1 Marie Claire, 7
Saks presents a very different proposition to the Autobacs, 5 Mariella Burani, 9
possibility that Saksʼ entry may encourage other
bloated and tired Japanese department stores that Barney’s, 1, 3 Marni, 5
overseas luxury goods retailers to take a closer Beams, 1, 3, 11 Marubeni, 8-9, 14
dominate most city centers. Using a smaller and Best Denki, 12 Maruetsu, 4, 9, 14
look at Japan. Just as Carrefourʼs bold entry in to
more specialty store format, it could be an ideal Bric’s, 6 Marufuru, 7
the GMS sector acted as a catalyst for Wal-Mart Cainz, 2, 13 Max Mara, 7, 9
tenant for numerous new developments looking to Carrefour, 1, 3, 14 Max Valu, 14
and Tesco, so will other overseas multi-brand fash-
add an upscale position. The specialist orientation Cawachi Yakuhin, 2 Metro, 6
ion retailers take an increasing interest in Japan. Celine, 4 Millennium, 11
will provide a highly focused merchandise offer. CFS, 10 Mitsubishi Real Estate, 1
At roughly ¥270 billion, Saksʼ total turnover is
Isetan has attempted this in the past through its Changes United Arrows, 7 Mitsui Bussan, 7
less than double the turnover of Isetanʼs Shinjuku Chaumet, 4 Mitsukoshi, 1-2, 5, 7-8,
subsidiary Barneyʼs New York, but merchandis- Chiyoda, 6-7, 12 10-11
store alone. This statistic probably says everything
ing and store design remain less than optimal, and Christian Dior, 4 Nacx Nakamura, 8
about the size of Japanʼs upscale fashion market. CI Garment Service, 4 New Balance, 7
Saks has a chance to be the first to get it right. Circle K, 1 Nichiryu Group, 14
Already there are rumors that top London store,
Saks has a number of other advantages, not Coccinelle, 7-8 Nikki, 7
Liberty, is also making plans to enter. Colony Capital, 9 Nitori, 13
least a name which many Japanese will know Costco, 6 Parco, 8
If there is any remaining concern amongst
due to its existing status and prestige in the US. Costume National, 5 Pirandre, 11
overseas retailers that Japan remains an expensive Cox, 6-7 Point, 2, 6-7
Licensing this name for own branded lines within D Squared, 8 Pororoca, 14
and difficult proposition, it is time to reconsider.
Japanese stores should be extremely lucrative, all Daiei Group, 9 Prada, 7
With land prices at a 30 year low, the cost of Daiei Hawks, 9 Printemps Ginza, 1
the more so as product will be planned with the Daiki, 13 Q-Click Mobile Academy, 5
doing business falling by the month, and a good
help of Beams and others, some of the best fash- Daimaru, 11, 13, 15 Rakuten, 4
few uninteresting local competitors making more Don Quijote, 13 Reebok, 7
ion retailers in the country. SFA Japan stores will Donna Karan New York, 4 Reminiscence, 7
money than they deserve, overseas operators on
likely mix luxury department store retailing with Edwin, 6 Renown Look, 9
the scale of Saks are doing their shareholders a Eru, 6 Reo, 7
an upscale version of the select shop format first Eternal, 7 Right On, 6-7
disservice by staying out of Japan. JC
developed by Beams. Exberry, 7 Ripplewood Holdings, 9
F-mode, 4 Roberto Capucci, 4
Family Mart, 14 Robinson, 1
Fendi, 4 Root Star, 6-7

SARS still worrying Japanese tourists

Five Foxes, 7, 13 Roppongi Hills, 4
Flandre, 8 Ryoshoku, 14
Francebed, 5 Saks Fifth Avenue, 1
Fresta, 14 Sanki Shoji, 8-9
Whilst the number of visitors to Japan is back to normal, the annual outflow of Japanese Fukuoka Dome, 9
Global Work, 6
Santorico, 9
Seibu, 1, 11, 15
tourists is not returning to the heights of the pre-SARS months. Good news for Japan Inc. Goalway, 7 Seiyu, 4, 8, 11, 16
Hac Kimisawa, 10 Sergio Tacchini, 7
Hanshin Umeda, 15 SFA Japan, 1, 3
The number of travelers to Japan is quickly The increase in foreign visitors is good news Hassha Group, 14 Shimamura, 2, 7
Herbis Plaza, 9 Shin-Puh-Kan, 1
getting back to normal following the SARS scares for domestic consumption and tourist sites. Homac, 13 Shinpushachu, 1
earlier this year. In July, 502,000 overseas visitors Oita Prefecture alone received 15,008 foreign Hori Enterprises, 6 Shiseido, 8
Il Bisonte, 9 Sofmap, 13
entered Japan. This was down 2.7% on 2002, but is visitors in July, mostly to its key hot spring sites ILC, 1 Sogo, 11, 13, 15
still the second highest figure on record for July. around Beppu. This is a 3.5% increase on 2002. Inageya, 14, 16 Sotetsu Rozen, 5-6
Industrial Revitalization Star Berry, 7
The improved flow of travelers is, however, Most came from the USA and South Korea. Corporation, 9, 11 Starbucks, 7
still one sided. Numbers of Japanese going over- The JNTO forecast the shift would continue and an International Management Stockman, 1
Technology, 1 Sumitomo, 14
seas in July was well down, some 31.9% lower improving Japanese economy, despite the strength- Isetan, 1, 3, 5, 8, 15 Summit, 14, 16
than in 2002, at 968,000. This was the third month ening Yen, would improve Japanʼs image overseas Italian Trade Commission, 4 Sun Drug, 2, 13
Ito-Yokado, 4, 11, 13, 16 Tag Heuer, 4
in a row that the fall had been in double figures as well as attract more Asian immigrant workers. Itochu Shoji, 4 Takashimaya Store, 5, 7
(see Chart). Immigration Officials noted that this Ironically, this final news comes at the same time Iwataya, 13 Takashimaya, 2, 5-9, 11,
Izumiya, 6, 16 13, 15
was the first time in 18 years that the number of that Tokyo Municipal Government announced that Japan National Tourist Takihyo, 8
Japanese tourists has been less than double the it is expanding its operations against illegal immi- Organization, 3 Tiffany, 7
Joshin, 12 Tobu Railways, 9
number of visitors entering Japan. Indeed, since gration, and has deported more than 600 people JR Isetan, 15 Tobu Store, 9, 16
1980, on average, the number of Japanese travel- since April. JC JR Takashimaya, 13, 15 Tokyu, 10, 16
Jupiter Shop Channel, 10 Tokyu Store, 16
ers has exceeded visitors by more than five times. Jusco, 14 Tomorrowland, 1
TRAVEL MARKET PICKS UP
The reason for the fall in Japanese travelers is Traveler Numbers YonY % Change
Kanematsu, 1 Toys R Us Japan, 11
Kasumi, 14 Tully’s, 7
said to be a combination of worries about terror- 1,400,000 20.0

10.0 Kipling, 6-7 Uniqlo UK, 9

ism and SARS. Japanese tourists represent a sig- 1,200,000
0.0 Kobe Bussan, 6 United Arrows, 7, 11
Konaka, 6, 8 University Coop, 5
nificant chunk of the international tourist trade and 1,000,000
-10.0

-20.0 Lampas, 11 Uny, 13, 16

increasingly are becoming the most important visi- 800,000 -30.0 Lands End, 4-5 Usui Department Store, 11
Laox, 12-13 Villa, 11
tors to Asia countries, but, at the same time, they 600,000
-40.0

-50.0 Lawson, 14 Wal-Mart, 1, 3, 8-9

are once again proving that they are perhaps the 400,000
-60.0 Lee, 6 Welcia Group, 10
Lehman Brothers, 9 WR, 7
most timid. Reluctance to travel overseas reflects
-70.0

200,000
-80.0
Levi Strauss, 6 Yamada Denki, 2, 13
risk avoidance, but arguably its also reflects the -90.0
Liberty, 3 Yaoko, 14
0 -100.0
Link International, 8 Yodobashi Camera, 13
overwhelmingly domestic orientation and occa- Jan Feb Mar Apr May Jun Jul
Loewe, 4 Yomiuri Giants, 9
sional xenophobia that continues to infect Japa- Vistors to Japan Japanese Travelers Look, 1, 3-4, 7, 9-10, 12, 14
Louis Vuitton, 4
nese popular media. Japanese tourists may often Visitors YonY (RH Scale) Japanese travelers YonY (RH Scale)

be timid, but they are often equally misinformed. Source: Japan National Tourist Organization.

JapanConsuming • 3
 NEWS & ANALYSIS
MARUETSU TO BEGIN ONLINE FOOD
SALES
Maruetsu, probably Japan’s most progres-
sive large supermarket chain at present, has
begun experimental online food sales through
Rakuten. While the system doesn’t have
the sophistication of Tesco in the UK, what
Maruetsu is attempting is to offer same day
delivery for orders before 4pm. The service will
be trialed in Yokohama and Machida and offers
a range of some 3,000 items from household
items to fresh fish. Delivery charges are free
for orders over ¥5,000, but ¥500 otherwise.
Similar systems have been trialed by Ito-
Yokado and Seiyu within limited areas, but the
same day delivery system, something that may
actually attract Japanese housewives, is an
ambitious move for a food based supermarket
service.
ITOCHU SIGNS CAPUCCI
Itochu Shoji has signed another overseas
brand, Italian label Capucci, on behalf of its sub-
sidiary, CI Garment Service, which will handle
distribution and store operations. Capucci is the
ready-to-wear line of top haute couture designer,
Roberto Capucci who headed an exposition of
Italian fashion design in Tokyo organized by the
Italian Trade Commission in Tokyo last year.
The agreement is an import only deal which
will see retail sales of around ¥2 billion within
the next five years. In the first year, CI Garment
Service will focus on distribution to select shops
and hopes to see sales of ¥700 million in the
first year and will open a flagship shop in 2005.
Pricing will be slightly higher than in Europe at
about 1.5 times European retail levels.
ONLINE FASHION SHOPPING
INCREASINGLY POPULAR
Despite the image of Internet shopping still
being mainly for men, the number of very popu-
lar online fashion sites mainly targeting women
is increasing rapidly. JC has reported before
about the mobile phone orientated ‘F-mode’
sites and its biannual fashion shows that have
regularly attract 2,000 visitors. The company
has now launched a time limited website (http:
//fmode.excite.c.jp) that expires at the end of
October. The site introduces the new F-Mode
collections for Fall and Winter along with par-
ticipating stores.
Another site growing in popularity is the
Rakuten hosted online store for Mahna Mahna,
a small select shop based in Tokyo. The very
well designed online store offers a mix and
match approach to fashion sales, and is one of
the clearest and most professionally designed
sites for a small retailer that we’ve seen to date
(http://www.rakuten.co.jp/mahna2/).
LANDS END DEBUTS ON YAHOO! JAPAN
Lands End will open its own online shop
at the end of October using Yahoo! Japan’s
virtual shopping mall. The new site will be
part of Lands End Japan’s efforts to expand
sales routes. It will be supplemented by sales
through TV shopping channels early next year.
According to company president Keiko Hayashi,
the catalog retailer chose Yahoo over Rakuten
»»
4 • JapanConsuming
Louis Vuitton in Roppongi Hills
The latest addition to the Louis Vuitton store chain is the most exciting so far. Located
in Roppongi Hills, the large scale store is flashy, glitzy, and aimed at tourists visiting the
capitalʼs newest and biggest retail and office complex.
Louis Vuitton has opened its latest large scale
store in Roppongi Hills. Generating a queue of
300 people at opening, a modest number for Louis
Vuitton nowadays, the store saw 2,500 visitors
on day one. It becomes the forty-seventh Louis
Vuitton store currently in operation and is prob-
ably the most glitzy to date. Total floor space is
1,237 sqm. In a first for the chain, the store is open
until 11pm from Thursday to Saturday—attracting
late night diners looking to buy a nice doggy bag
on the way home perhaps.
Louis Vuitton boss Kyojiro Hata told reporters
he expected around 50% of customers to be tour-
ists visiting the development and merchandise is
positioned to attract these occasional visitors.
It features the first ʻBag Barʼ where customers
can sit on high stools to view and choose their
preferred luggage items. The store has four times
the range in bags available at other Louis Vuitton
outlets in Japan, covering, the company claims,
85% of the full LV lines. Shoes and travel bags
are also offered in a salon style setting. The store
Kokuyo modernizes its supply chain
Kokuyo is Japanʼs leading stationery manufacturer, and a company that has long
employed a traditional keiretsu system of distribution. It is now dissolving that system in
favor of a more modern, low cost, and direct system. The speed with which Kokuyo will
make this change is impressive.
Traditionally, stationery and office sup-
plies manufacturers have used a keiretsu model,
employing thousands of small, independent
retailers as sales outlets and points of payment for
catalog and other sales. Over the past few years,
however, the sector has been transformed by direct
catalog sales, the attempted entry of overseas
mass merchandise retailers, and a move towards
retailing of their own by some manufacturing
companies.
From October, Kokuyo will streamline its
wholesale operations down to just 13 wholesale
points. Under the current system, Kokuyo oper-
ates no fewer than 41 exclusive wholesale sales
companies and works with seven general whole-
salers. The main reason such a complex system
developed was to supply 16,000 small stationery
stores across the country that together made up the
Kokuyo keiretsu.
By removing these wholesale points, Kokuyo
is effectively disbanding its keiretsu system at a
stroke. Other routes, which include direct sales to
large corporations, catalog and online sales, and
sales directly to large chain retailers, will all con-
tinue as at present.
has more than 80 full sized mannequins designed
to let customers see as clearly as possible how LV
products will look in various combinations.
The glass tube design of the store itself looks
almost night-club like from the outside, and,
indeed, the store includes a jukebox where cus-
tomers can download music playing in the store.
JC
ONE OMOTESANDO STORE
In case you haven’t heard, a multi-brand store operated
by LVMH called One Omotesando opened in Aoyama last
month. The fashion complex includes four LVMH brand
stores: Fendi, Celine, Donna Karan New York and Loewe.
Total sales area of these four brands is approximately 1,600
sqm from B1F to 2F. The building also includes LVMH group
offices and showrooms on the other floors. In Omotesando,
the upscale fashion street which extends from Aoyama to
Harajuku, there are also a number of other LVMH group
stores, including the Louis Vuitton flagship store that opened
a year ago, Tag Heuer, Chaumet and finally, a Christian Dior
flagship store due to open in December this year.
Of course, the move will significantly lower
operational costs as well as providing Kokuyo
with more direct control of its supply chain up to
the retail stage. The company has recognized that
Japanese firms are now less willing to use small
local retail shops to supply office stationery, and
the actual number of such stores is in rapid decline
in any case.
The 13 new sales companies will be estab-
lished with Kokuyo taking a 33% ownership and
supplying senior management in most cases, with
the remaining ownership coming from various
combinations of the reformed 41 sales companies
of the past.
Kokuyo expects each new wholesale point to
generate a minimum of ¥10 billion a year. The
remaining 28 sales companies will be dissolved
as from October. At present, 70% of Kokuyoʼs
overall turnover comes from wholesale and 30%
from direct retail, but through expansion of online
and direct catalog sales, the company plans to
reverse this to 70% direct retail sales within only
three years. Pretty rapid movement for a stationery
company (sic). JC

Boots are back: cool summers are
good for some
The cool summer left most retailers with too many sandals, but those quick off the mark
with knee-high boots have made a killing. Department stores are busy preparing for a
busy, boot-full Fall season.
According to a Senken survey of Tokyo shoe
stores, sales of boots are up by as much as 70%
compared to last year. Given the higher aver-
age retail price of boots, the new trend is doing
wonders for sales and retail margins. Of particular
interest is that sales have surged in both July and
August suggesting that the cool summer was good
for at least some sectors of the economy.
As a result of the buoyancy of the market, all
the major department stores are revising their fore-
casts for Fall sales of boots. Isetan Shinjuku and
Mitsukoshi Ginza are expecting a 5% rise follow-
ing sales increases in August of as much as 10%,
while Tobu in Ikebukuro believes sales will jump
15% following a massive 70% jump during the
summer. In terms of unit numbers, Isetan Shinjuku
alone claims sales of some 500 pairs of boots since
mid July.
Two styles seem to be popular, both of which
emphasize elegance rather than the biker trends
from the past, with fur trim, belted and folded
styles doing particularly well. As in the boots
frenzy of the early 1990s, once again fashion
magazine editorials have helped generate a buzz
about boots. This time round, however, consumers
are showing much stronger individual preference
Aoyama uses QCMA to target students
Commercial use of the Internet and mobile phone networks is now exploding. Aoyama
Shoji, for example, is about to launch an innovative new system to market specifically to
students through their mobile phones. With the target so clearly defined the benefits are
obvious and it is probably the first of many similar campaigns.
Aoyama Shoji, Japanʼs leading menʼs apparel
specialist and discount suits retailer, is launching
Q-Click Mobile Academy (QCMA) in October.
The new mobile phone based sales promotion
system has been running experimentally for some
months, but Aoyama will now take it forward,
aiming specifically at students needing their first
suit as they begin job-hunting preparations in the
Fall.
Students who register for the service will
receive a three dimensional barcode through their
mobile phones that, when scanned at Aoyama
stores, entitles them to a 10% discount on any pur-
chase. In addition (or perhaps in return), students
receive up to 300 items of sales news items a day
from Aoyama and its affiliates covering apparel,
fast food, and rental video information. To regis-
ter, students need just a University Coop member-
ship number and, of course, a mobile phone.
In addition to a few discounts, the promo-
tion system allows students access through their
phones to business articles from the Mainichi
Newspaper, and Aoyama is tying with Gakujo, a
in terms of style, with greater demand for variety
within the overall trend. Price still is not an issue
though. At Tobu, sales of ¥120,000–¥150,000 a
pair boots by Costume National and Marni have
sold out.
Shoppers are not just younger women either.
Fashions for women in their 20s quickly influence
those of women in their 40s and 50s and depart-
ment stores are now busy stocking up on some
of the more elegant styles with more comfortable
fit for an expected sales rush from the “Missus”
market in October. Mitsukoshi has even set up
a special concession within all its stores called
Boots Studio to promote sales and, at the main
Nihonbashi store, held a special promotion day for
custom made boots in September.
Overall forecasts by department stores
should have manufacturerʼs mouths watering.
Mitsukoshi expects sales of around 100,000 pairs
from its 18 store chain this Fall/Winter with a
sales value of ¥2 billion, while Isetan expects to
sell 30,000 pairs from its Shinjuku store alone.
It may be late but given the boom, overseas boots
manufacturers should be rushing their catalogs to
buyers by courier today. JC
leading provider of student recruitment informa-
tion, to offer job hunting information services.
Gakujoʼs Shushoku Haku service already has
430,000 registered members with some 200,000
attending its recruitment events every year. By
tying with Gakujo, Aoyama is planning special
promotions whereby students receiving their
“naitei” (official job offer) will receive further
celebratory discounts automatically.
QCMA is an extension of a similar Aoyama
Shoji program targeting general businessmen, but
which requires the use of a special phone attach-
ment. With the dongle, which, even in Japan,
comes in a surprisingly cutesy range of colors for
a menʼs retailer, customers can access Q-Click
through the i-mode phone system. Aoyama is
planning to expand the system to other phone
systems from mid-December.
In trials Q-Click has proved very popular with
students, and for Aoyama it is a low cost method
of advertising that also targets a clearly defined
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NEWS & ANALYSIS
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because of the better name penetration of
Yahoo’s brand and its more advanced search
engine. Lands End Japan plans to change prod-
uct ranges online by season and keep the page
as dynamic as possible, the company said.
When pushed by reporters, Hayashi said that
Lands End had more or less shelved plans to
open its own directly operated stores in Japan
due to the cost, and that this led to expansion of
sales routes in other forms.
DOGGY WATER BEDS
Japan’s leading bed manufacturer
Francebed has started sales of a water bed for
dogs. The stylish doggy accessory has heating
and cooling controls that can be adjusted for
winter or summer to help pampered pooches
relax. The larger of two models also includes
storage drawers for brushes, ribbons, and other
important pet things, and even a head board.
Both models have a washable cover. The cost
of the bed is ¥57,000 for the larger model and
¥47,000 for the smaller. While the product is
being aimed largely at dogs, cats, guinea pigs,
and iguanas are likely to be equally interested
although seasickness pills are not provided.
FANCY A ROLL ON MY WATERBED?
AUTOBACS ENTERS THE US
Japan’s leading car accessories retailer
Autobacs opened its first US outlet at the end
of August. The new store is located in Stanton,
California under the name “Super Autobacs
Beach & 22 Store”. The site is 26,440 sqm with
retail space of 1,982 sqm. The store stocks
3,000 tires, and has 430 sqm dedicated solely
to car audio systems. Overall first year sales are
forecast at ¥1.08 billion or US$9 million.
MEN SLIP INTO ¥40,000 SHOES
Takashimaya Shinjuku claims that men
of all ages are rushing to snap up ¥40,000 a
pair Italian leather shoes. Men in their 20s and
30s particularly are said to be rushing to buy,
whether the shoes are Italian brand names or
Japanese marques made in Italy. A Japanese
brand of Italian made shoes featuring a long
front with a square toe is said to be the most
popular style, selling for ¥43,000 a pair.
TAKASHIMAYA SELLS SOTETSU ROZEN
Takashimaya has sold off its stake in
Sotetsu Rozen, a small supermarket chain
based around Yokohama. The move comes
in addition to the sale of Takashimaya Store,
the department store’s own small supermarket
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JapanConsuming • 5
 NEWS & ANALYSIS
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chain, to Izumiya earlier in the year. It rep-
resents Takashimaya’s complete withdrawal
from supermarket retailing. Takashimaya
owned 16.11% of Rozen and a further 7.98%
of Yokohama Chikagai underground shopping
mall. Both holdings have now been sold back
to the Sotetsu Rozen company as of the end
of August. The relationship between the com-
panies remains, however, as Sotetsu owns the
land on which Takashimaya has its Yokohama
store.
CASH AND CARRY EXPANSION
Metro and Costco may have the largest
cash and carry stores in Japan, but local
companies are also expanding rapidly. Kobe
Bussan is looking to quickly grow its chain
through franchise operations, aiming to sell
mostly food items for commercial use. Since
the business was founded in 2000, the com-
pany has grown its chain, mostly in the Kansai
region, to 180 stores.
Unlike Metro and Costco, Kobe Bussan
stores are small scale, operating at under 400
sqm in most cases. The chain is highly suc-
cessful and expects sales to grow 2.3 times
this year to ¥69 billion. President Shoji Numata
plans for more than 1,000 stores by 2010 with
sales growing accordingly. Kobe Bussan’s main
tactic is offering low prices, but the chain is also
looking to offer unique ranges among its very
Japanese targeted frozen food merchandise.
About 20% of merchandise is developed in
house. In China, the company has already
established its own factory and contracts with
more than 30 others. More unusually, being
small scale and headquartered in a major
port city, the chain handles all logistics itself,
so far avoiding use of either trading houses or
large wholesale companies in its supply chain.
Compared to the average supermarket operat-
ing on gross margins of 23-28%, Kobe Bussan
franchise stores work on only 17.5%.
HORI EXPANDS BRAND STORES,
LOOKING FOR MORE OVERSEAS BRANDS
Hori Enterprises, the distributor and retailer
of bags and accessories, has opened the first
Japanese store for Italian label, Bric’s. The new
110 sqm store is in Aoyama and includes Bric’s
full complement of accessories and bag lines.
Hori will follow the stand alone store with depart-
ment store concessions from this Fall. The new
store targets women in their 20s and 30s, an
older target than Hori’s other main brands.
Nevertheless, the opening confirms Hori’s ambi-
tions in becoming a full line multi-brand retailer.
Until now, the core of Hori’s expansion has been
its chain of Root star stores which offer general
merchandise for teenage girls. The company
currently has 54 such stores across Japan, all in
very high footfall locations such as train stations
and shopping malls. The dominant merchan-
dise categories are fashion accessories but also
include interior goods, make up, and stationery.
In addition to Bric’s, Hori also has an agree-
ment, originally brokered through a tie with
Mitsui according to sources, with Kipling, the
Belgian casual bag and accessories brand.
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6 • JapanConsuming
target market. Aoyama expects to cut costs by
reducing newspaper flier advertising through the
use of this and similar systems in the future, and
at the same time, become much more effective
in reaching an appropriate audience. At present,
Aoyama says it sends out 25 million newspaper
fliers a week, and of course hits its target in only a
tiny proportion of these.
Casual apparel chains come back
The casual wear market is another excellent example of the general trend in retailing
where leading chains are grabbing market dominance with the rest hobbling along behind.
Publicly quoted casual wear retailers such as
Right On, Point and Cox have all revised their
forecasts for this coming financial year. The most
striking common factor is optimism that profits
will increase sharply—a trend seen amongst the
best of breed retailers in other sectors as well.
At the same time, and again similar to the trend
in retailing generally, the increase in profits is
not being accompanied by forecasts of improved
revenue.
The focus for all listed casual apparel chains
is now on reducing exposure, streamlining opera-
tions and improving merchandise. The adjusted
forecasts have come through the success of own
label or higher margin product. All the leading
chains have implemented a range of new store
casual brands using in-house and contracted
design teams to put them together. More than 95%
of this product is manufactured in China, Vietnam,
and other low cost manufacturing centers.
As forecast in Retail Japan 2003, Point has
become one of the leading exponents of the new
model for casual wear retailing. The Tokyo-based
retail chain has grown from a ¥10 billion a year
operation offering a messy mix of casual brands
from Japan and overseas to forecast sales of ¥26
billion a year from a 200 store operation of highly
efficient mini chains with 90% of sales coming
from own label product.
Crucially, however, Point has not followed
the Fast Retailing model of focusing on just one
universal peopleʼs brand, but has built up own
labels with distinct targets, avoiding the problems
of consumer fickleness that have beset Uniqlo
and Right On. It operates stores under the fas-
cias Point, Lowrys Farm, Global Work, Heather,
and Eru, some of which are able to offer slightly
more fashionable ranges to differentiate from mass
market chains, but still provide reasonable prices.
The company has also followed the large SPA con-
glomerates by branching out overseas with a new
operation in Taiwan. Currently, there are only three
stores but sales within the first year are expected to
reach ¥300 million.
Again according to Retail Japan 2003, Point
sales for the year ending February 2002 were
just ¥15.6 billion, rising to ¥20.6 billion this
year. Now, with the help of 41 new stores last
year and 34 stores in the first half of 2003 alone,
sales are expected to hit ¥26 billion, a billion yen
The menʼs apparel market continues to be
highly competitive. Chain stores have entered
the fray with cheap suits and even department
stores are offering low price options. Aoyamaʼs
new marketing initiatives are likely to be a big
hit, reducing costs and differentiating its presence
from the other big regional players such as Aoki
and Konaka. JC
higher than forecast. Pretax profits are expected to
increase from ¥2.7 billion in FY2002 to ¥3.7 bil-
lion this year. In addition to the improved margins
garnered from more efficient product sourcing for
its own labels, Point has also cut costs substantially
through much better logistics, reducing inventory
levels and replenishing best-selling product more
quickly. The company has also followed the rest of
the industry with a fairly ruthless scrap and build
store policy, ignoring the traditional fears of losing
face by closing stores in highly visible but poor-
performing locations.
Rival chain Right On, however, has the most
radical scrap and build policy of all. In the past,
Right On made the mistake of trying to take
Uniqlo head on. Two years ago, president Masa-
hiro Fujiwara saw the error in this and rapidly
reversed policy, instigating a range of measures
to differentiate product from the competition as
well as between the stores within the chain. To
do this, the company works closely with leading
suppliers such as Levi Strauss, Edwin, and Lee.
Fujiwara has also cut the non-performing stores
that were set up to compete with Uniqlo, replacing
them with new outlets more in keeping with the
new Right On.
During the first six monthʼs of this financial
year alone (Right Onʼs financial year ends in
August like Fast Retailing), the company will
open 28 stores but also close 10. In August 2001
the company had 231 stores, falling to 216 last
year but rising again to around 230 this year.
As a result of these measures the company
expects sales to rise 12% this year on a like for like
basis and 16.7% overall. Pretax profit is expected
to double from ¥2.1 billion last year to ¥5.1 billion,
close to ¥1 billion above forecast.
Mac House, a subsidiary of Chiyoda the shoe
retailing giant, has raised its sales forecast slightly
to ¥43.1 billion up from ¥43 billion and is the least
optimistic about profits with little adjustment to
initial forecasts. Even so, projected profits of ¥2.9
billion are above last yearʼs return of ¥2.4 billion.
Like Right On and Point, the company has focused
on culling poor performing stores but, unlike its
peers, overall store numbers will remain flat this
year with eight store openings and seven closures.
New stores are substantially larger than those
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being closed and are better located in shopping
malls rather than shotengai (traditional covered
shopping arcades).
The smaller three of the five listed chains, Cox,
Reo and Marufuru have all revised sales projec-
tions downwards but, again, expect pretax profits
to rise. Cox, a less successful part of the Aeon
retail empire, is expecting interim pretax profits
of ¥245 million up from ¥190 million thanks to
a better positioning of stores in less competitive
regions of Japan and the closure of a large number
of poorer outlets. The company has seen a net loss
of some 20 stores in the last 18 months and sales
have fallen from ¥25.7 billion in 2001 to ¥22.8 bil-
lion as at the end of February 2003.
Reo, another chain belonging to Chiyoda
group, which includes the fascias Goalway,
Casual Off and Reminiscence, has also seen sales
decline in the last few years. Thanks partly to the
popularity of the Reminiscence stores and better
performance from the Goalway suburban roadside
stores, sales leveled out at ¥11.9 billion last year
and Reo forecasts an increase this year to ¥12.3
billion, slightly down from initial forecasts of
¥12.5 billion.
Marufuru is also hoping for ROSY FUTURES: MEDIUM-SIZED CASUAL APPAREL FORECASTS FY2003
improved sales this year, up
from ¥6.5 billion last year to ¥7
billion this coming year. More
promisingly, pretax profit doubled Right On
last year to ¥140 million and is Mac House
expected to hit ¥270 million this Point
Cox
year. Much of the improvement Reo
is coming from conversion to Marufuru
cheaper part time staff than any Source: Company sources; JapanConsuming.
Matsuzakaya opens another annex
Matsuzakayaʼs Sakae store complex was the largest single department store in Japan even
before it opened its new 10,189 sqm South Annex in September. Adding space is all very
well. Now Matsuzakaya has to get the customers into it.
Matsuzakayaʼs latest annex opened at its head-
quarters store in central Nagoyaʼs Sakae area on
18 September. Taken together, the three buildings
that Matsuzakaya operates on the site represent the
largest department store in Japan with 86,747 sqm
of sales space in total.
Matsuzakaya prides itself on being the depart-
ment store with the longest history. It claims to
have been founded in 1601, a few years before
Mitsukoshi, when Tokugawa Ieyasu, who hails
from the Nagoya area, became the first Shogun
of the Edo Period. It is also the most prestigious
store in Nagoya, a city famous for its concern with
personal status. This position has held the store in
high respect for many years.
The new South Annex aims more at younger
women consumers aged 20 to 30. Matsuzakaya
hopes to use this new positioning to regain some
of the ground lost to the new Takashimaya store
that opened at Nagoya Station in 2000. The Annex
houses a slew of top brands including Prada, Max
notable improvement in merchandise, stores, or
supply chain management. For all three smaller
chains, while operations are being improved,
footfall continues to decline and is only just being
made up by better sales of slightly higher priced
merchandise.
Frustrations and bottle-necks remain in the
casual wear sector. While Right On and, par-
ticularly, Point are excellent examples of the
new breed of more efficient, market-savvy retail
operators in Japan, the rest continue to give off a
whiff of the musty old retail market that depressed
many consumers during the 1990s. In any other
market these chains would have been merged into
the larger more efficient chains or culled by their
parent companies. In the case of Cox and Mac
House, parents Aeon and Chiyoda are determined
to carve out a share of the family apparel business
and, with profitability improving, look likely to
still be around for some time to come. There is
only so much the market can take, however, and
we havenʼt even mentioned the leading chains
of Shimamura, Fast Retailing and Five Foxes.
Optimism is all well and good, but thereʼs a long
way to go before the smaller chains can be sure of
independent survival. JC
Latest Forecast Previous Forecast
Sales Pretax Profit Sales Pretax Profit
¥mn ¥mn ¥mn ¥mn
61,000 5,100 59,000 4,345
43,140 2,990 43,000 2,950
26,194 3,683 25,261 3,475
21,300 500 22,150 500
12,310 793 12,500 402
7,000 270 7,200 140
Mara and Tiffany. United Arrows offers its import
fashion brand boutique, Changes United Arrows,
and up and coming Tokyo select shops such as
WR have also been attracted in as tenants. On
basement two, Matsuzakaya has a 1,000 sqm
womenʼs shoe floor, one of the largest in Japan.
Other interesting areas include a golf department
stocking more than 1,000 clubs, and a rest area
where the scent in the air will be adjusted to the
seasons. Eau de Nagoya.
Overall, Matsuzakaya has tried to get away
from the standard department store structure of
Young, Career and Missus floors for women, and
aim more squarely at younger female clientele. In
total, the Annex introduces 191 new tenants tar-
geted specifically at this group.
The Annex also fills in a gap in Nagoyaʼs
so-called brand street, creating a continuous set
of large scale shopping facilities from the two
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NEWS & ANALYSIS
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It operates four Kipling stores. The company
also distributes bags under the Star Berry and
Exberry labels. Combined turnover of the Root
Star and Kipling businesses is currently around
¥3 billion. The company is looking to expand
rapidly however and is actively scouring the
European and US markets for new brands to
take on.
NIKKI TO SELL SERGIO TACCHINI
Nikki, the large sportswear manufacturer
and distributor, has announced a new tie up
with Sergio Tacchini to meet the accelerating
demand for fitness apparel. As consumers
continue to focus more on a balanced lifestyle
in Japan, fitness activities ranging from Yoga
and Thai boxing through to standard gym sports
have become de rigueur for any self-respecting
couple. The deal with Tacchini will give Nikki
the rights to manufacture and distribute fitness
swimwear under license. Nikki plans to distrib-
ute through department stores and specialty
stores with projected first year sales of ¥100
million. In addition to Tacchini, the company
also licenses Reebok, New Balance and Marie
Claire for fitness swimwear.
STARBUCKS STILL STRUGGLING
Starbucks continues to struggle to get
back on the growth track. It is predicting a
24% decline in parent-only pretax profit to ¥480
million for the first half. Rival company FoodX,
which operates the Tully’s chain in Japan,
is expecting profit to increase 36% to ¥220
million. Tully’s has been praised for adjusting
better to Japanese market needs, offering
smoking areas and food options more typical
of Japanese coffee shops, while Starbucks con-
tinues to stick to the US store model. Starbucks
increased store numbers by 88 this year, up to
486 stores in total. But it expects like for like
sales to fall 13%, following a 16% decline in the
April–June quarter. Tully’s is still much smaller
with only 130 stores, but it too is expanding
rapidly, adding 50 or more stores a year.
ANOTHER EUROPEAN BRAND LIFTS
JAPAN SALES
Long-established fashion distributor, Eter-
nal, has opened a stand alone store for Italian
leather goods brand, Coccinelle. Coccinelle’s
collection includes bags, belts, wallets and
shoes with prices averaging around ¥30,000–
50,000. The 100 sqm store is located in
Marunouchi’s brand boulevard, Naka Dori and
is expected to produce sales of around ¥100
million in the first year. Although Eternal is the
distributor of Coccinelle, once again a trading
company holds the import rights, Mitsui Bussan
in this case. Eternal, with Mitsui’s backing, plans
to open a series of stand alone stores as well
as department store concessions. Eternal will
open at least four concessions by next Spring
and targets 30 outlets within three years with
sales of some ¥3 billion. Currently, Coccinelle’s
global turnover stands at around ¥5.2 billion
with exports of ¥1.6 billion. With a partnership
arrangement in place, subject to strong first
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JapanConsuming • 7
 NEWS & ANALYSIS
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year sales, it looks like Japan will shortly make
up 50% of Coccinelle’s global sales.
SHISEIDO GOES CHINESE
As widely reported, Shiseido has
announced plans to set up a Japanese style
keiretsu retailing system in China. The leading
cosmetics manufacturer will contract around
5,000 local stores, mostly in the key coastal
cities, over the next five years. It forecasts sales
of at least ¥100 billion from the expansion in
distribution points. Shiseido has also recently
opened its first directly operated store in Shang-
hai which will act as a model and PR point for
the sales network as a whole.
In Japan, Shiseido continues to maintain
a similar system with some 25,000 stores
nationwide. In this market, where personal
loyalty commands such respect, the system
works well, but Shiseido acknowledges that
in China the system will be based on financial
and efficiency incentives with Shiseido itself
providing promotional inducements and know-
how to member stores. With the Chinese
cosmetics market expected to hit ¥1.2 trillion by
2010, however, the investment is likely to keep
Shiseido near the front of the race.
D SQUARED FOR WOMEN TOO
Sanki Shoji, the leading importer of Italian
fashion brands, is expecting strong sales of
the newly launched women’s wear collection
from D Squared. Thanks to the popularity of
the men’s wear collection, Isetan is giving the
women’s wear a strong push within its own mer-
chandising area (“Jiyu-henshu-uriba”) within
the Shinjuku store this Fall. Next season, with
the official launch, a stand alone store will be
opened in Aoyama.
MARUBENI ACQUIRES NACX NAKAMURA
Marubeni has announced it will boost
its stake in leading food wholesaler Nacx
Nakamura to 70%, taking control of the com-
pany. Nacx is currently the second largest
frozen food wholesaler in Japan. Marubeni sees
the acquisition as a key step in its plan to further
expand its food distribution business both verti-
cally and across food retailing. The company
plans to install its own senior management team
and implement a wide ranging restructuring and
downsizing program.
SEIYU CUTS BONUSES
Wal-Mart is to cut performance related
components of employees’ winter bonuses.
The move is expected to trim some ¥3
billion in salary costs. The company has
made it clear this is to improve the chance
of achieving profitability, and illustrates that
employee pay is dragging performance down.
Wal-Mart apparently also has a long way to
go to turn employee performance around.
Currently Seiyu’s bonus system means 50% of
payments are based on personal performance.
Exceptional employees will receive 25% of
this 50% performance payment, in addition
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8 • JapanConsuming
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Mitsukoshi stores at one end down to Parco at
the other.
In the past two years, Takashimaya is estimated
to have grabbed a 16.8% share of the Nagoya
department store market. All of the incumbent
stores have lost out to the attraction of a totally
new store, but Matsuzakaya has suffered the most,
losing more than 6% of its share (see Chart).
While Takashimaya has a very impressive and
upscale brand mix seemingly ideal for the Nagoya
target, Matsuzakaya is hoping it can pull back the
younger set with its more fashionable additions.
It is likely that without further adjustments in the
Fast Retailing gets relief in Theory
The decline in Uniqlo sales is leveling out and Fast Retailing remains profitable. Still,
chairman Yanaiʼs hope for a ¥1 trillion turnover by 2010 seems far fetched. Acquiring
Theory, the US specialty apparel chain, might seem like a desperate effort to add revenue
but there is more to the deal than meets the eye: the expertise of Link International.
Fast Retailing will acquire a part of Theory
as well as its Japanese licensee company, Link
International. Together Link and Fast Retailing
will buy a majority stake in Theory, a chain of
womenʼs business-style apparel stores that was
launched in 1997 by Andrew Rosen and Elie
Tahari and is popular among working women in
both Japan and the US.
Last year the company had a turnover of
close to $80 million in the US market as well as
its licensing operation with Link in Japan. Fast
Retailing and Link will each take a 44.5% stake in
Theory but Fast Retailing will also acquire 47.1%
of Link International before selling its stake in
Theory to Link. As a result, Link will own 89% of
Theory, with the remaining shares held by Rosen.
Fast Retailing has several plans for the brand.
First, the acquisition provides a solid US base
from which to expand both with Theory and,
potentially, its own Uniqlo chain. Second, in Japan
the company will be able to use Theory to estab-
lish itself in the business wear market, an area in
which Uniqlo does not yet compete. Third, Fast
Retailing chairman Tadashi Yanai has indicated
that a jointly developed brand between Theory and
Uniqlo will emerge in the future, providing further
revenue streams. Finally, if (and itʼs a big if) Fast
Retailing can show it has the ability to acquire up
and coming retailers and develop them, it should
be able to boost its share price enough to fund fur-
ther acquisitions and transform itself into a retail
conglomerate, thereby overcoming dependence on
its core brand.
Of the various potential benefits of the deal, the
most immediate right now is of course the chance
for Fast Retailing to have a new source of growth
within Japan. Good news at the companyʼs annual
results press conference was lacking last year, but
this move could well turn things around as Uniqlo
sales also level out. There are currently 81 Theory
stores in Japan and Fast Retailing certainly has the
financial backing and market reach to double the
other parts of the store, however, Matsuzakaya
still has some way to go to dispose completely
of its traditional, and therefore rather dull image,
amongst the young. JC
TAKASHIMAYA MUSCLES IN ON NAGOYA: LOCAL
MARKET SHARES FOR 1999 & 2002
1999 38.8 27.4 20.6 13.2 0
32.6 23.9 16.4 10.3 16.8
2002
0 10 20 30 40 50
Market Share
60 70 80 90 100
Matsuzakaya Mitsukoshi Meitetsu Maruei Takashimaya
number of stores here within a year, not least by
converting some of the excess Uniqlo stores.
At any rate, with cash reserves of some ¥140
billion as of February 2003, there is money to
burn. Fast Retailing can also apply its consider-
able supply chain management skills to Theoryʼs
Japan operations. Link has already moved from a
pure import business to 100% license, and Link
will welcome access to Fast Retailingʼs vast manu-
facturing resources in the Shanghai region.
Is there a bigger market for a new brand based
on the strengths of Theory and Uniqlo in Japan?
For female business attire there is. While the
volume end of the menʼs business wear market
is swamped with large, efficient retailers like
Aoyama, Aoki, and Konaka, as well as offerings
from the GMS chains, the womenʼs wear market is
much more fragmented. Retailers such as Flandre
do well but are much less focused than Theory.
The combination of Theoryʼs US-based design
and planning teams with Fast Retailingʼs supply
chain management skills and financial resources
could be a powerful combination.
The other stated benefit of the acquisition,
gaining a foothold in the US market, is more ques-
tionable. Despite a relatively cosmopolitan man-
agement team compared to most Japanese retail-
ers, Fast Retailing still failed to build a UK busi-
ness in part because of serious cultural differences,
but equally because it badly misjudged the market.
The US is without doubt a much tougher proposi-
tion and it will be interesting to see whether FR
management will hinder or support Theory, which,
until now, has shown very healthy growth.
The difference this time is Link International.
Press have made little mention of the third
company in the deal, but it is actually Link that
provides the potential capacity to operate over-
seas. Although Link was founded just five years
ago, itʼs 52 year old president Riki Sasaki, has a
plenty of overseas experience. Whilst at Takihyo,
»»

»»
he worked in their New York operations as well
as in Hong Kong. He then went on to coordinate
Worldʼs operations in Hong Kong and China. It
does no harm that Yanai and Sasaki have also been
golf buddies for years and share some unusual
values for Japanese bosses—neither man smokes
or drinks. With Sasakiʼs involvement and the les-
sons from the Uniqlo UK mistakes, Fast Retailing
could well have more success in promoting both
Uniqlo and Theory across Asia, Europe and of
Daiei swings, Yomiuri blocks
Daiei has clinched the deal to sell off its expensive hotel, baseball and leisure facility
in Fukuoka. The buyers are foreigners, and for many in Japanese baseball circles that
presents a problem. Even though Japanese companies own US teams, in Japan, while
foreign players are fine, foreign team owners are another matter.
Daiei is relieving itself of its expensive Fukuoka
Dome development and has created a storm by
admitting it will also have to sell its Daiei Hawks
professional baseball team as well. The fate of the
team will cause the most controversy. Japanese
sports media and agents are making an increasing
pot of money from high quality Japanese players
moving to the US Major Leagues—something that
was initiated when Nintendo took over ownership
of the US Seattle Mariners. As a result, US inves-
tors could be very interested in acquiring Daiei
Hawks.
Tsuneo Watanabe, however, has already said
he will do everything to stop this. Watanabe is
the owner of the Yomiuri Giants, the Manchester
United of Japanese baseball, and has publicly said
he will oppose the entry of any foreign owners into
the Japanese game.
Ironically, Yomiuri is currently experiencing
its worst season for years, while Daieiʼs baseball
team is the only part of the Daiei Group company
performing well.
While Watanabe calls the Hawksʼ team a
Japanese ʻpublic and cultural assetʼ that he will
not allow to be sold in the open market, he con-
veniently overlooks the fact that Daiei acquired
the franchise after it had changed hands at least
once before. Speculation that the team could be
managed by the government run Industrial Revi-
talization Corporation (IRCJ), or by a syndicate
of companies, was also roundly condemned by
Watanabe.
Such politically incorrect rantings from an
aging newspaper tycoon could have far more seri-
ous implications, however. For Daiei, the freedom
to dispose of the team could be key in selling the
whole Fukuoka Dome complex, which certainly
loses its value if the team is disbanded. Failing an
approach from an imaginary domestic firm with
more money than sense—an entity that is more or
less extinct in Japan—disbanding the team is the
one option Watanabe is willing to condone. This is
perhaps not surprising considering the fact that the
Hawks have outperformed the Giants in a number
course within the US.
If it can make a success of this acquisition,
there is little doubt Fast Retailing has the resources
to go shopping for more brands. Despite declining
sales over recent months, the company remains
profitable and has one of the healthier balance
sheets among Japanese retailers. Maybe Yanaiʼs
target sales of ¥1 trillion by 2010, up from around
¥300 billion today, is not such a pipe dream. For
now at least, Yanai forecasts group sales of ¥450
billion for FY2005. JC
of seasons recently.
For the Fukuoka Dome real estate, however,
Daiei has had a number of potential buyers
in the frame for several months, all of them
foreigners. As JC goes to press, it seems that
Ripplewood Holdings and Lehman Brothers
have jointly beaten Colony Capital to the deal.
Although the partnershipʼs bid was lower, they
won on the basis of a better rehabilitation plan.
Daiei is, of course, keen for the deal to be final-
ized, but it may well have to wait for approval
from the Professional Baseball Association of
Japan and that may well mean finding a way of
bypassing Watanabeʼs considerable political influ-
ence. UFJ, main lender to Daiei as a whole, and
six other main creditors for Fukuoka Dome are
also pushing for the deal to be finished as soon
as possible, to the extent that theyʼre willing to
provide significant debt waivers to avoid further
prolonging the uncertainty. Smaller banks con-
tinue to drag their feet, not least as the sale could
again hurt Daieiʼs financial standing, pushing it yet
further down the cliff that the company fell off a
couple of years ago.
So Daieiʼs protracted divestment of its baseball
facilities continues as an ongoing saga. Ironically,
while purchasing the team and subsequent invest-
ment in the Fukuoka facilities is perhaps the single
most dubious financial decision of Isao Nakauchiʼs
career at Daiei, it is undoubtedly grown to be the
most popular asset in the publicʼs eyes. In 1988,
when Nakauchi acquired the Hawks, Daiei was
already a financial mess. After the teamʼs last
recent championship win in 2000, however, Daiei
made ¥54 billion in its celebration bargain sales,
and as the team took its latest title on 30 Septem-
ber, Daiei stores in Fukuoka immediately extended
opening hours and began another huge eight day
sale. So, we wonder, once the teamʼs sold, is that
the end of any chance of Daiei stores actually
making any money? JC
NEWS & ANALYSIS
»»
to the fixed bonus received by all employees.
Wal-Mart is hoping to avoid a repetition of
the pretax loss booked in the first half. It has
also adjusted its reporting period to end on 31
December, bringing it forward from end of Feb-
ruary, the date used by most retailers.
MARIELLA BURANI CATWALK SHOW IN
TOKYO BEFORE MILAN
Santorico, a subsidiary of one of the major
importers, Sanki Shoji that works with many
Max Mara brands, presented a catwalk of
Mariella Burani 2004 Spring and Summer col-
lection on the 18th September. This was the first
time the collection has been displayed before
the Milan show. The reason for putting Japan
first is that sales here account for 20% of the
worldwide total and, like many leading Italian
and other European brands, the company rec-
ognizes the importance of the Japanese fashion
market. At the moment, the company operates
Mariella Burani stores at Imperial Hotel Plaza
and the Herbis Plaza in Osaka. It plans to open
concessions in department stores, only distrib-
uting to small corners at the moment. Santorico
operates other foreign brands such as Bogner,
the ski goods label, Gres, the French apparel
brand.
IL BISONTE STORES IN TOKYO AND
OSAKA
Look, previously known as Renown Look
before it rebelled against its parent, has opened
stores for Il Bisonte the Italian bag brand. Like
most distributors, Look avoided the risk of
investing in retail for its brands until the late
1990s when the rapid opening of stores by
overseas brands directly forced their hand.
In Il Bisonte’s case, Look had been importing
the brand since 1990 before finally opening a
store in 1999. The new Tokyo store is located in
the popular Takashimaya Tamagawa shopping
center and comprises 70 sqm. The Osaka store
is a stand alone shop with 83 sqm. In addition to
bags, the store offers belts, shoes and the usual
assortment of accessories. There are now 11 Il
Bisonte concessions and stores in Japan.
TOBU STORE GOES GMS
Tobu Store, the smallest of the leading
chain stores, has established informal links with
Marubeni and Maruetsu and plans to open large
format general merchandise outlets. It will open
a 6,000 sqm store in Kawagoe, expanding from
its usual food supermarket format to include
apparel and other non-food merchandise. Tobu
Store is largely tied to its Tobu Railways parent,
and its small chain of around 30 supermarkets
is located mainly near Tobu lines. The chain
recorded its third straight year of losses earlier
this year, and sales were down again 8% in
the first half of FY2003. It is a key target for
takeover by more ambitious Tokyo supermarket
chains, although Tobu Railway will be unwilling
to sell it off completely and is looking for less
formal tie-ups that will allow it to return the chain
to profitability through acquisition of know-how.
»»
JapanConsuming • 9
 NEWS & ANALYSIS
»»
Paint jobs
CFS CORP TO RAISE OWN BRANDS TO For the past five years or so, department stores have pushed forward with a huge
15%
investment in store refurbishment and refitting. With some rare exceptions, all the money
CFS Corp, the new name for Hac Kimisawa,
is to expand its own brand merchandise to 15% spent seems to have had only a minor effect, but cozy relationships mean that banks are
of total. The company, which changed its name willing to provide ever more cash for stores to be spruced up. On the other hand, many
at the end of August, is a major player within stores are indeed in dire need of a face lift.
Aeon’s Welcia Group of affiliated drugstores.
Retail brands are a major part of the Welcia The ongoing refurbishment program currently
strategy, and Aeon has announced recently sweeping through the department store sector is
that it will be greatly increasing the number far from over. This is not surprising. Too many
of own brand medicines available under its stores have not seen even minor refits for decades.
banner. CFS Corp will stock Welcia merchan- Just in the first half of this financial year, ten of
dise, but also add its own set of retail brands, the leading chains have completed, or are about to
doubling the number currently available.
complete, refurbishments of key stores.
Most CFS brands will be in the categories of
medicines, hair care, and paper products and The most significant trend is the concentra-
the increase will expand CFS own brands to tion on food floors. As mentioned in the Chart,
some 400 items. Much of the merchandise will more and more stores are expanding food floors
be produced in China including Chinese and significantly. Consumers continue to value quality
other medicinal ingredients. and variety in food shopping, often placing greater
The move will do much to enhance profit- emphasis on these factors than on price or value
ability at the chain. Drugstores generally enjoy for money. Supermarkets are improving rapidly,
gross margins of around 40% for most branded
but, again, retailers that offer more upscale mer-
medicines, but CFS expects to achieve at
least 60% gross margin for its own brands. chandise and shopping environments are doing
At present, analysts estimate own brands notably better. Department stores recognize this
account for only about 5% of sales in drugstores trend and have always had strong food sales at
overall, showing once again, the vast potential the higher end of the market, particularly in recent
for profit growth in this sector. years with the so-called “Depa-chika” (department
store food basement) boom.
JUPITER OPENS OSAKA CALL CENTER IF AT FIRST YOU DON’T SUCCEED, THROW MORE MONEY AT IT: DEPARTMENT STORES REFIT
Japan’s leading television shopping chan- Opening
nel, Jupiter Shop Channel, is continuing its Company Store Date
rapid pace of growth. From Spring 2004 it will Takashimaya Tamagawa Nov
add a new Osaka based call center to its exist- Tokyo Ongoing
ing facilities in Tokyo. The new call center will Mitsukoshi Sunshine City Sep
work some 140 operators, increasing the total Nagoya Hoshigaoka Sep
capacity by more than 70%. Niigata Sep
Investment in the new center is expected to Nihonbashi Oct
be around ¥100 million, and will be opened in
Isetan Shinjuku Men's Annex Oct
a standard rented office with space of around
Daimaru Kyoto Oct
700 sqm. Naturally, the majority of operators
Sogo Omiya Sep
will be part-time with the center employing only
a handful of permanent Jupiter employees. Hiroshima Sep
The current center in Chuo Ward, Tokyo, is Marui Family Kokubunji Sep
1,500 sqm, and employs an automated order- Tokyu Higashiyoko Oct
ing system with operators only dealing with Hankyu Kawaramachi, Kyoto Sep
problems and excess calls, but, during busy Matsuzakaya New south annex Sep
times, operators are still taking more than 2,500 Printemps Ginza Ginza Sep
orders an hour, clogging the 260 lines. Source: Nikkei; JapanConsuming.
As mentioned, however, such investment
is long overdue. Parts of Tokyuʼs headquarters
store in Shibuya are getting their first refit since it
opened, a mere 52 years ago! In Tokyuʼs case, the
latest ¥700 million spent on one of its food areas
brings total refit investment to ¥20 billion over
the past three years, with ¥5 billion spent on the
Shibuya store alone.
Despite all the cash now being thrown at
department store problems, with some rare excep-
tions, it is not having a major effect. The major-
ity of stores, including, for example, the Tokyu
Shibuya store, has failed to come even close to
pre-refit forecasts for sales revival. Once again,
department stores will be relieved that Japanese
banks are so forgiving. Having said that, while
some stores now look a lot cleaner, too many have
added very little in terms of exciting, new retail
ideas. In the end, these refits often end in little
more than a paint job. JC
Investment Notes
¥2.5 bn Expand food floor 50%, expand exclusive brands
¥1.3bn Changes to floor layout, spruced up interior
na Re-targeting to younger consumers, 10-20 age group
¥700 mn Convert UFJ Bank to food sales floor
¥700 mn Improve women's apparel, expand Alta
¥1 bn Floor mix altered, new layouts
¥5 bn Complete refit of Annex, expand men's apparel
¥1.5 bn Overhaul of food sales, improved daily & deli counters
¥3.4 bn Carpark building switched to Bic Camera
¥1.1 bn Largest food floor in Chugoku region, other areas by next Spring
¥2.5 bn Expand food floor 50%, name change
¥700 mn Complete refit, new tenants added
¥200 mn Improved fashion floors, targeting women in 20s
¥9.4 bn Open new south annex, refit north annex (¥1 bn)
¥1 bn First refit since opening, 27 new brands added

Both centers will move to 24 hour operation

next Fall as Shop Channel itself also increases
from 17 hours a day to round the clock broad-
casting.
At the end of February this year, Shop
Channel already had a potential audience of
15.28 million households. It is expecting a 15%
increase in sales when it reports in December
this year, reaching ¥34.5 billion overall.
Mitsukoshi: the next 100 years
In 2004, Mitsukoshi will celebrate 100 years as a department store. It is one traditional
retailer thatʼs likely to survive, but it continues to struggle to improve performance as day-
by-day new, more dynamic retailers bite further into its trade. Now, in a sweeping move,
the company has merged with subsidiaries and wiped out a whole basket of debt. Effective
strategy or just a traditional corporate dance with smoke and mirrors?

COOLEST SUMMER SINCE 1993
Officially, 2003 was the coolest summer
since 1993. Average temperatures plummeted
to less than 23 °C compared to more than 28 °C
for the past two years. In addition to the prob-
lems for beer gardens and a fall of more than
20% in ice cube sales, retailers suffered badly.
»»
Late in August, Mitsukoshi celebrated its 99th
anniversary in unusual style: it delisted from the
TSE. It has now been replaced with a brand new
company called, well, Mitsukoshi. While this
magic trick has effectively reset all Mitsukoshi
financial figures, literally wiping the slate clean
so to speak, it is probably the least significant of a
series of changes finally implemented in the big-
gest restructuring and redirectional plan to come
out of any department store to date—or at least out
of a financially solvent one.
At the core of the ʻnewʼ Mitsukoshi is a newly
amalgamated group of the old parent and four
large regional subsidiaries. From a retailer with
12 stores and some autonomous subsidiaries,
»»

10 • JapanConsuming

CHART 1: MITSUKOSHI CONSOLIDATES SUBSIDIARIES
Debts Capital Assets
Old Mitsukoshi Group Stores ¥bn ¥bn
Mitsukoshi 12 264.9 104.0
Nagoya Mitsukoshi 3 56.9 8.3
Fukuoka Mitsukoshi 1 37.1 10.1
Chiba Mitsukoshi 1 13.1 -4.4
Kagoshima Mitsukoshi 1 4.4 5.1
New Mitsukoshi Group
Mitsukoshi 18 449.7 113.9
Source: Nikkei; JapanConsuming.
»»
Mitsukoshi Version 2.0 is now a chain of 18 stores
in a single company capitalized at ¥113.9 billion
from assets of ¥563.6 billion and debts of ¥449.7
billion (see Chart 1).
The subsidiaries in question are Fukuoka
Mitsukoshi, Chiba Mitsukoshi, Kagoshima
Mitsukoshi, and the very successful Nagoya
Mitsukoshi operations. The consolidation boosts
parent sales to ¥880 billion from ¥670 billion.
This is still significantly below the sector leader
Takashimaya, but increases the companyʼs lead
over the Seibu and Sogo partnership. By using a
reevaluation paper profit of ¥180 billion on land
and other assets, the chain was also able to wipe
out accumulated consolidated losses resulting
from unfunded retirement-benefit obligations and
deferred tax liabilities.
From November, Mitsukoshi will also imple-
ment new personnel policies, included in which
is a 10-20% cut in executive compensation. Other
subsidiaries, which still number more than 20, will
be merged or closed down, reducing the number to
13 overall. These final measures are expected to
reduce costs by around ¥7 billion a year.
All in all, not a bad weekʼs work, especially
for a department store, but it still leaves con-
tinuing doubts about improvements in actual
retail operations. When the new company was
launched, Mitsukoshi offered an unusual sale at its
Nihonbashi headquarters. Shoppers could choose
from 150 special items all priced at ¥1 million
each and ranging from a bronze bust of their own
image to a luxury cruise. According to Nikkei,
the store sold out, generating ¥150 million in
sales—about one eighth of an average single dayʼs
sales for the store.
Mitsukoshi is introducing more practical
improvements as well. The refurbished Nihonbashi
store features a new set of exclusive famous con-
fectionery brands, and apparel floors have been
spruced up somewhat. At store level, consumers
are still waiting for spectacular improvements,
but Mitsukoshi should be praised for biting the
bullet and making such significant back office
improvements. It expects the Nihonbashi store
alone to improve sales by up to ¥20 million a
day simply through better supply and inventory
MITSUKOSHI BAILS OUT USUI
Mitsukoshi has taken further control over the ailing Usui
Department Store based in Fukushima. Mitsukoshi has been
operating this family owned store for the past few years, but
with the interdiction of the Industrial Revitalization Corpora-
tion (IRCJ) in August, Mitsukoshi can officially step forward
as the company to take over the store’s rehabilitation. Usui
was one of three companies included in the first batch of firms
being helped by the IRCJ.
NEWS & ANALYSIS
control. Uniquely, the company »»
is making efforts to greatly speed Originally planning for yet another hot
¥bn Parent Ownership up invoice fulfillment, paying summer, companies like Aeon, Ito-Yokado and
368.9 100%
65.2 81.4% (61% directly owned)
suppliers within a couple of Seiyu found it impossible to adjust merchandise
47.2 90.5% (100% by April 2004) weeks where possible as com- quickly enough and have been left with a lot of
8.7 98.9% (100% by April 2004) pared to the minimum of one unsold summer stock.
9.5 100%
month that was more common Aeon sales were up 3.5% in August, but Ito-
Yokado and Seiyu saw sales decline 2.5% and
563.6 before.
3.6% respectively. Worse, Aeon and Ito-Yokado
In addition to its main 18
saw pretax profit fall 42.9% and 40.5% while
stores (see Chart 2), Mitsukoshi Seiyu made a pretax loss of ¥4 billion.
controls another 106 sales outlets in Japan and Back in 1993, retailers faced similar prob-
abroad. Of these only the Nihonbashi store has lems due to the sudden and unexpected shift
sales over ¥100 billion a year, compared to four in summer weather, but still performed relatively
outlets in the Takashimaya chain. Mitsukoshi much better. The poor performance this year
also has only four stores selling more than ¥50 reflects the increased competitiveness within
Japanese retailing and illustrates the need for
billion compared to six at each of Takashimaya,
large, general merchandise retailers not to lose
Millennium, and Daimaru. The Mitsukoshi stores sight of the flexibility needed to deal with chang-
in Yokohama, Osaka, and Kurashiki are all loss ing demand.
making, and the Shinjuku store is also struggling
badly. The result is that even Nikkei, usually sup-
portive of such traditional and venerable retailers, HAND MADE TIES
noted that improvements must go beyond simple Lampas, an Osaka tie distributor, believes
accounting tricks and management consolidation. there is a booming market for hand made ties
in Japan. It has announced it will begin import-
So Mitsukoshi still has a long way to go to
ing two Italian labels of custom made ties this
convince both financial markets and consumers fall, Pirandre and Villa. Sales will be targeted
that it will ever return to the glory years. Arguably, at select shops such as United Arrows and
it is still the most prestigious nationwide operation Beams.
with the strongest brand, but it still lacks a certain
punch in terms of scale compared to Takashimaya,
and is still yet to display the necessary dynamism 80% OF KIDS UNDER 9 USING COSMETICS
to compete in Japanʼs new retail era. Not surpris- What has Toys R Us Japan started?
A recent JMAR MDB survey revealed that
ing that, despite Mitsukoshiʼs side step move,
by 9 years old, 82.7% of girls had used make-
analysts recommending a Mitsukoshi merger with up. Close to 70% had tried make-up by the time
Takashimaya have yet to change their opinions.JC they were 3 years old. At the same time about
half of all mothers (for some reason, the insti-
CHART 2: MITSUKOSHI KEY STORES
tute didn’t ask fathers) did not like their children
Sales
wearing make-up.
Stores Prefecture ¥mn
Nihonbashi* Tokyo 301,650 Increasingly companies, not just TRU
Sakae Aichi 86,912 Japan, are targeting the so-called “kids cosme”
Ginza Tokyo 65,283 market, segregating the 3 to 9 and the young
Sapporo Hokkaido 58,359 teenage markets and expanding marketing
Fukuoka Fukuoka 47,502
to both.
Sendai Miyagi 44,415
Chiba Chiba 33,070 The majority of kids like both nail painting
and lipstick, with more than 85% of the survey’s
Ikebukuro Tokyo 29,960
Shinjuku Tokyo 29,438 respondents from a sample of 150 saying their
Takamatsu Kagawa 29,042 kids had tried it. Most mothers are happy to
Osaka Osaka 28,644
have their kids play with make-up for about “one
Matsuyama Ehime 26,386
Yokohama Kanagawa 23,975
day a month”, but a quarter said their children
Niigata Niigata 22,497 played with cosmetics almost every week.
Hoshigaoka Aichi 21,586 While the majority of cases were simple
Hiroshima Hiroshima 19,774 play, an increasing number of mothers said their
Kagoshima Kagoshima 13,753 children expected to wear make-up for special
Kurashiki Okayama 8,868
events, parties, and special photographs.
Affiliated Stores
Printemps Ginza Tokyo 27,690 Overall, MDB estimates the kids cosmetics
Affiliated Companies market to have a value of between ¥3 to ¥4 bil-
Okajima Yamanashi 17,100 lion, but growing at up to 10% a year.
Usui Department Store Fukushima 16,865
Ichihata Department Store Shimane 11,822
Okinawa Mitsukoshi Okinawa 10,981
Source: Nikkei; JapanConsuming
Note: * Nihonbashi store figures include stores
in Ebisu, Tama, Kichijoji and Shinjuku Alta
With this government financial support, the store’s main
lender, Akita Bank, is likely to waive outstanding loans, and
IRCJ will purchase financial claims from minor lenders.
Despite Mitsukoshi’s stewardship, Usui has continued to
struggle, unable to revitalize its operations in the face of com-
petition from new chain stores in the area. It posted sales of
only ¥17.4 billion in 2002 for a loss of some ¥200 million. Now
Mitsukoshi doesn’t have to worry about the debts, perhaps it
will try a little harder.
JapanConsuming • 11
 FOCUS

Retail Ranking Part 2: A tale of two formats

This month JC completes its look at retail company results for FY2002. We introduce rankings for both specialist retailing and
for Japanʼs largest stores. In many ways, the two seem unrelated, but the contrast goes beyond store size. Whereas specialty
retail chains have discovered modern retailing with positive results, large store, mass merchandise retailers continue to
struggle. A tale of two formats.
SMALL AND QUICK similar figures in 1993. There are sixteen non- of such mid-ranked retailers seems unimport-
Japanese retailing is modernizing rapidly. electrical retailers above Chiyoda and every ant in many ways, it summarizes perfectly the
Like it or not, and many domestic observers one of them has established its position over way and speed by which Japanese retailing has
clearly do not, retailing in Japan is increas- just the past 10 years. Even Alpen, one of only changed. Traditional, mass merchandise retail-
ingly coming to resemble any other industrial- two sports specialists in the list, was a much ers have declined and new, dynamic retailers
ized nation in terms of structure and control. smaller operation 10 years ago and has grown with a focused specialization have prospered.
Historically, Japan has seen retailing split significantly in the intervening years. Since Among the leading 25 chains, only four
between a huge number of tiny, independent 1993, Alpen sales have grown 33.3%. This recorded sales declines last year, and three
retail shops at one end, and a small number compares to Chiyoda, which has seen sales fall
of large format, multi-merchandise retailers, 20.9% in the same period. While a comparison »»
mostly department stores and general mer-
chandise stores, at the other. Since the 1970s, CHART 1:
convenience store chains have grown in size JAPAN’S LEADING SPECIALTY RETAIL CHAINS, FY2002
and power, but until the 1990s, the industry as Pretax
a whole saw few significant changes. Sales YonY Profit ¥
Now, driven by major structural adjust- Rank Company Sector Prefecture ¥mn % mn Stores
1 Yamada Denki Electrical Gunma 753,208 34.3 22,334 170
ments forced through by economic recession
2 Yodobashi Camera Electrical Tokyo 515,938 19.4 30,131 18
and other massive external forces, Japanese 3 Kojima Electrical Tochigi 502,651 1.5 2,294 250
retailing is changing and changing fast. The 4 Bic Camera Electrical Tokyo 386,670 12.0 19
traditional structure remains, but between the 5 Best Denki Electrical Fukuoka 342,830 -3.2 4,039 581
two poles, retail chains operating medium size 6 Fast Retailing Casual Apparel Yamaguchi 341,640 -18.4 54,774 570
7 Daiso Sangyo 100 Yen Shop Hiroshima 281,233 16.2
store formats specializing in a limited range of 8 Matsumoto Kiyoshi Drugstores Chiba 262,774 3.7 14,963 588
merchandise are now coming to the fore, and 9 Shimamura Women's Apparel Saitama 259,402 6.6 18,151 849
theyʼre achieving their new dominance very 10 Deodeo Electrical Hiroshima 232,607 1.0 5,807 598
quickly indeed. 11 Cainz Home center Gunma 222,775 14.0 10,345 126
12 Midori Denka Electrical Hyogo 220,709 8.5 6,593 83
In this monthʼs focus JC presents this
13 Joshin Denki Electrical Osaka 215,543 -6.8 503 134
scenario with a look at results for speciality 14 Autobacs Automobile Parts Tokyo 203,435 0.7 10,523 504
chains and large stores. The trend is clear: 15 Kohnan Shoji Home center Osaka 196,300 9.3 6,708 142
specialists are winning. 16 K's Denki Electrical Ibaragi 186,829 14.1 4,828 170
17 Five Foxes Women's Apparel Tokyo 179,920 7.4 22,909 975
SPECIALISTS REJOICE 18 Toys R Us Japan Toy & Hobby Kanagawa 179,718 2.5 7,904 134
19 Nafco Home center Fukuoka 175,000 4.4 161
Chart 1 shows the leading 50 specialty 20 Homac Home center Hokkaido 169,662 6.0 4,543 147
retailers by sales in FY2002. Even among spe- 21 Keiyo Home center Chiba 165,777 3.9 4,993 147
cialists, the gap between the large and small 22 Cawachi Yakuhin Drugstores Tochigi 164,060 10.6 10,661 113
is rapidly growing. As in the past, the largest 23 Edion Electrical Aichi 163,498 1,125 96
24 Laox Electrical Tokyo 159,424 -4.5 -1,512 66
electrical retailers dominate the rankings, but
25 Komeri Home center Niigata 154,363 12.5 9,581 560
with all five of the leading chains now moving 26 Alpen Sports Aichi 152,109 5.4 4,931 368
from strength to strength, the gap is set to 27 Chiyoda Footwear Tokyo 149,925 -5.6 3,579 1354
widen. Best Denki was the only one of the five 28 CFS Corp Drugstores Shizuoka 148,977 4.3 3,352 246
to record a sales decline last year, but the chain 29 Aoyama Shoji Men's Clothing Hiroshima 147,327 5.8 11,104 721
30 Kahma Home center Aichi 128,512 -2.6 3,779 105
is now moving forward with new stores and is 31 Denkodo Electrical Miyagi 120,521 1.5 3,472 111
expected to regain its direction very soon. 32 Sofmap Electrical Tokyo 117,579 -10.3 -358 41
Overall, fifteen of the leading 50 chains are 33 Kinokuniya Books & Stationery Tokyo 117,015 2.4 898 60
electrical retailers, and many of these chains 34 Don Quijote Discount GMS Tokyo 114,816 22.2 7,652 53
were leading the specialty sector ten years ago. 35 Maruzen Books & Stationery Tokyo 114,273 -1.4 2,050 32
36 Akachan Honpo Women's Apparel Osaka 107,788 -3.9 879 44
At that time Best Denki, Joshin and Laox were 37 Mujirushi Ryohin Other Tokyo 106,806 -5.1 7,091 265
the top players, but eight of todayʼs leading 11 38 Shimachu Home center Saitama 106,431 -3.2 13,492 52
electrical chains were, at most, minor regional 39 Matsuya Denki Electrical Osaka 102,048 -13.3 938 283
players 10 years ago. Laox itself ranks elev- 40 Sun Drug Drugstores Tokyo 102,021 13.4 7,381 228
41 Yellow Hat Home center Tokyo 100,953 -2.1 4,273
enth of the electrical chains and is now a lowly
42 Daiki (Dick) Home center Ehime 98,665 3.5 2,542 77
twenty-fourth in the rankings overall. 43 Tokyu Hands Other Tokyo 98,600 -1.6 20
44 Fuji Yakuhin Drugstores Saitama 93,894 10.6 230
SEE THE LIGHT! 45 Sankyu Electrical Fukui 92,021 -0.6 4,423 75
Ignoring the electrical chains, the picture 46 Tsuruha Drugstores Hokkaido 91,113 13.0 4,772 273
is even more striking. Of the top chains in 47 Mr Max Discount GMS Fukuoka 90,352 -5.5 1,623 42
48 Nitori Furniture Hokkaido 88,259 12.1 8,302 82
2002, footwear specialist Chiyoda, ranked 49 Xebio Sports Fukushima 88,218 4.8 6,280 131
twenty-seventh, is the largest retailer of any 50 Kitamura Cameras Kanagawa 87,175 -5.4 2,998 557
significance which would have appeared in Source: Company Reports; JapanConsuming. Note: Fast Retailing data for Sep. 2002. CFS Corp was previously Hac Kimisawa

12 • JapanConsuming
 FOCUS
CHART 2:
offer what consumers want. Even among these
THE LARGEST SHOPS IN JAPAN: TOP 25 DEPARTMENT STORES, 2002–03 more traditional formats, it is significant that
the four stores that did achieve sales improve-
Sales Sales
Sales YonY space Density Closing ments are relatively new or have received a
Company Store ¥mn % sqm ¥1000 Time Refit complete repositioning. Sogo Yokohamaʼs
1 Mitsukoshi Nihonbashi* 301,650 -1.3 117,546 2,566 19.30 increase in sales of 6.0% is partly due to a
2 Seibu Ikebukuro 270,814 -1.7 63,470 4,267 21.00 Y
3 Isetan Shinjuku 239,401 -1.4 64,296 3,723 20.00 Y
huge renovation and repositioning of the store,
4 Hankyu Umeda, Osaka 196,932 -1.2 67,143 2,933 20.00 Y but equally because, the storeʼs results were
5 Takashimaya Yokohama 175,333 - 70,037 2,503 20.00 Y even more abysmal in FY2001. Iwatayaʼs
6 Takashimaya Tokyo 164,943 -10.7 49,457 3,335 19.30 Y increase is largely due to a significant expan-
7 Takshimaya Osaka 154,976 -5.3 69,299 2,236 21.00 Y
8 Kintestsu Abeno 148,257 -3.8 73,097 2,028 20.00 Y sion in floor space upon acquiring a defunct
9 Tokyu Shibuya 146,493 -4.0 71,468 2,050 21.00 Y rival nearby, and both the Takashimaya stores
10 Matsuzakaya Sakae, Nagoya 134,381 -1.9 75,958 1,769 19.30 that are the other two to grow sales represent
11 Tobu Ikebukuro 134,125 -2.0 82,963 1,617 21.00 Y
12 Odakyu Shinjuku 114,814 -8.3 48,717 2,357 20.00 Y
the newest department stores in the country.
13 Takashimaya Kyoto 110,847 -1.6 68,231 1,625 20.00 JR Takashimaya in Nagoya was, until Daimaru
14 Hanshin Umeda, Osaka 107,708 -0.4 57,674 1,868 20.00 Y opened in Sapporo in March, the only totally
15 Sogo Yokohama 103,197 6.0 75,066 1,375 20.00 Y new department store in the country since
16 Keio Shinjuku 100,439 -3.6 41,294 2,432 20.00
17 Daimaru Kyoto 98,232 -0.2 50,656 1,939 19.30
the early 1990s, and its continued popularity
18 Daimaru Shinsaibashi, Osaka 89,378 -3.9 37,490 2,384 20.30 reflects the more modern, focused positioning
19 Nagoya Mitsukoshi Sakae, Nagoya 86,912 -2.9 48,801 1,781 19.30 Y that has been implemented there.
20 Iwataya Fukuoka 85,183 3.3 70,876 1,202 20.00 By sales density as well, department stores
21 Takashimaya Shinjuku 82,675 3.5 54,694 1,512 20.00
22 Daimaru Kyoto 82,379 -1.1 50,830 1,621 20.00 Y perform surprisingly poorly despite the fact
23 JR Takashimaya Nagoya 76,054 11.9 55,429 1,372 19.30 Y that they are generally high ticket retailers.
24 Hakata Daimaru Hakata, Fukuoka 74,964 -0.3 48,163 1,556 20.00 The average for the 25 leading stores was
25 Meitetsu Nagoya 74,144 -3.0 50,162 1,478 20.00
Source: Nikkei; JapanConsuming. Note: Mitsukoshi store includes Ebisu, Tama and Kichijoji stores
¥2.141 million per sqm. This compares to an
average for the leading 50 specialty chains
»» the top 50, already under its wing. The result listed above of ¥2.283 million. Indeed, the
of these were electrical retailers from the will be an increasingly concentrated group of leading 25 specialty chains average ¥3.227
old-school. Only Fast Retailing, with all its specialist retailers that command their own million per sqm, leaving department stores in
well documented problems of peaking too fast business in every respect. It is still such early their retail dust.
and too soon, stood out as the one new chain days that the change has really only just begun. General merchandise stores performed just
to see sales decline. Fast Retailingʼs figures, It is a trend that will only get stronger, as will as poorly (see Chart 3). Average sales densi-
announcing results as it does in October, is a the retailers with the vision to realize it. ties for the best 15 stores was only ¥1.157 mil-
year out of sync with the rest of the list. lion, and only four stores, three operated by
BIG STORE GLOOM Ito-Yokado and one by Aeon, improved sales
In the bottom half of the ranking, fortunes
are reversed, with only 12 chains recording At the other end of the scale, Chart 2 pres- density on last year. Ito-Yokado dominates
sales improvements. Again, it is the newer ents the largest retail stores in Japan by sales. the best of the GMS outlets now that Daiei is
chains such as Don Quijote, Sun Drug and Naturally, as in the past, all 25 are department firmly in decline. The upscale Himonya store
Nitori that are performing well. Indeed, these store outlets. Totally unlike the specialty retail- in southern Tokyo was the only Daiei store
three chains are among 13 that recorded ing described above, only four of the 25 stores to remain in the top 15. Aeon has two stores,
double digit sales growth last year, recession in question saw sales improve last year. both outside Tokyo, and Uny has three, all of
or no recession. The picture and the outlook are both which are its innovative and highly regarded
Of the companies that release profit fig- gloomy indeed. Fifteen of the stores in the list Apita format.
ures, only Laox and Sofmap recorded a pretax undertook some form of refit or refurbishment Once again, however, the specialist retail
loss last year. Eleven chains saw profits break last year and will be hoping for a much happier
the ¥10 billion mark, and Yamada Denki, 2003, but the fact remains that many no longer »»
Yodobashi Camera, Five Foxes, and, signifi- CHART 3:
cantly despite its other problems, Fast Retail- JAPAN’S BEST SELLING GMS OUTLETS, 2002–03
ing, can all count themselves among Japanʼs
Sales per Sales
most profitable retailers overall with more sqm YonY space
than ¥20 billion in profits. Rank Company Store Prefecture ¥1000 % sqm
1 Ito-Yokado Oicho Tokyo 1,459 -1.7 11,652
DON’T STOP ME NOW 2 Daimaru Peacock Senri Osaka 1,216 -5.4 9,104
In coming years we are set to see further 3 Ito-Yokado Uenagatani Kanagawa 1,175 -2.5 10,042
polarization between those companies with 4 Aeon Noda Hanshin Osaka 1,169 -2.6 1,150
clear forward vision and those that continue to 5 Tokyu Store Saginuma Kanagawa 1,168 -2.9 9,492
hope for recovery of past business structures 6 Ito-Yokado Funabashi Chiba 1,162 5.7 14,288
and customs. We are also likely to see some 7 Daiei Himonya Tokyo 1,161 -3.8 15,185
sub-sectors such as electrical and home center 8 Ito-Yokado Tsurumi Kanagawa 1,150 -2.8 9,040
9 Aeon Shin-Ibaragi Osaka 1,118 3.2 9,990
retailing enter a period of significant consoli-
10 Uny Kuwano Mie 1,115 -3.4 10,000
dation with an increasing number of company
11 Uny Nagoya South Aichi 1,108 -4.6 9,395
mergers and acquisitions. The home center 12 Ito-Yokado Kobuchi Kanagawa 1,107 2.1 13,188
sector is already moving in this direction. 13 Ito-Yokado Musashi Sakai Tokyo 1,091 3.6 18,429
While Cainz leads the sector at present, Aeon 14 Uny Apita Minato Aichi 1,079 -4.3 11,953
is moving to consolidate a number of smaller 15 Ito-Yokado Shizuoka Shizuoka 1,078 -0.9 10,300
regional chains with Homac and Daiki, both in Source: Nikkei; JapanConsuming.

JapanConsuming • 13
 FOCUS
CHART 4:
the brink of some major movement. Tesco
JAPAN’S BEST PERFORMING SUPERMARKETS, FY2002–03 and Carrefourʼs entry into the market has
Sales per Sales
not particularly worried domestic players as
sqm YonY area yet despite the smoke screens thrown up by
Rank Company Store Prefecture ¥1000 % sqm Aeonʼs PR, but the possibility of even the
1 Fresta Kure Station Hiroshima 3,652 3.2 832 smallest of the more efficient Tokyo food
2 Okey Myorenji Kanagawa 3,296 10.3 1,128 chains falling into foreign hands is enough to
3 Tokyu Store Yokohama Chikagai Kanagawa 3,232 20.6 1,561 push the big domestic distribution players into
4 Aoki Super Nagakute Aichi 3,111 1.8 931 action. JC fully expects to see major develop-
5 Kansai Super Takatsuki Osaka 3,022 -2.7 1,486
ments in food retailing, and particularly in
6 Kyosei Store Hachiyodai Chiba 2,817 -4.7 1,754
7 Nishitetsu Store Ohashi Fukuoka 2,712 10.4 958 Tokyo, over the next 12 months.
8 Summit Kasumigaseki Saitama 2,689 37.8 1,136
9 Okey Kokubunji Tokyo 2,638 5.9 1,269 MEDIUM SIZED, BUT NOT MEDIOCRE
10 Tokyu Store Toritsu University Tokyo 2,573 2.6 1,787 The conclusion to this brief look at spe-
11 Tokyu Store Kajigaya Kanagawa 2,523 -0.4 1,339 cialty retailers and large stores is simple. Big
12 Summit Kitami Station Tokyo 2,519 4.4 1,148 and small are out. Medium is in. Medium sized
13 Mammy Mart Kasukabe Saitama 2,503 7.8 1,350 retail formats specializing in limited types of
14 Matsubara Iwade Wakayama 2,488 -2.6 905 merchandise are clearly winning the battle to
15 Tokyu Store Kikuna Kanagawa 2,475 0.0 1,954
attract consumers.
Source: Nikkei; JapanConsuming.
Having said that, one stop shopping is
»» of the Nichiryu Group, belong to large, long not dead. Consumers still prefer to visit just
established wholesale buying clubs that will one location rather than many, and this is
formats continue to improve. Chart 4 shows
attempt to block any diluting of their channel especially true in Japan where travel time and
a similar ranking for food supermarkets. The
control. But the cracks are already appearing convenience of a store are generally as impor-
leading 15 stores, mostly from the Tokyo
with Aeon acquiring controlling stakes in both tant as prices. But at the same time, consumers
region, averaged ¥2.933 million last year,
Inageya and Kasumi in the last few months. increasingly expect depth and are willing to
higher than even for specialty retailers.
Other independent chains, notably Yaoko travel in order to get it.
Having said that, the range between the lead-
and Ecos, are seen as ideal additions to the More and more, consumers donʼt even
ing companies such as Fresta and Okey, and
ambitious empires being built by Marubeni have to go very far. The rapid expansion and
those below tenth in the rankings is already
(Maruetsu and Pororoca), Sumitomo (Summit success of these medium sized, specialist for-
more than ¥1 million per sqm. Again, another
and Mammy Mart), and Aeon (Inageya, mats means they are springing up very quickly
clear case of, “the best versus the rest.”
Kasumi, and its own Jusco and Max Valu). indeed all over the country. The key point is
SUPER CHANGES Mitsui is known to be keen to establish itself that they provide Japanese consumers with
The supermarket sector, as JC has pointed in food retailing as well, and there have been something theyʼve rarely enjoyed before: true,
out before, is now the hottest of all. Drugstores some strong rumors of the largest trading in depth, choice. JC
and home centers are other up and coming house moving to bring together a number of
retail formats, but it is the supermarket sector these players into a single supermarket con-
that will see the most rapid and far reaching glomerate.
changes in coming years. Chart 5, adapted Such predictions have been around for
and updated from Nikkei, provides a look the past couple of years, but we are now on
at just the main players in the market, most CHART 5:
of whom are based in and around Tokyo. FOOD SUPERMARKETS READY FOR CONSOLIDATION
The chart clearly shows that supermarkets
are where Japanʼs largest retailers and their Supermarkets in play
puppet masters the trading houses want to be. Hassha Group
Mitsui

As the sales density figures above show, food Marubeni Tokyu Store
Sotetsu
Rozen
is where the real action is, and with the sector York
Benimaru
so fragmented and undeveloped at present, all Tobu Store Odakyu Shoji
Ito-
Yokado
the large distribution companies are lining up York Mart
Nichiryu Group
for the bun fight. Even department stores are Life
Maruetsu Inageya
investing more in food floors in their latest Corporation

round of refurbishments. Daiei Sakae Okuwa Kasumi Max Valu (7)

As Chart 5 shows, all four of the largest
trading houses are connected, at least on the Seifu Heiwado Izumi Aeon Mycal

sidelines. At present Itochu and Mitsubishi are Mycal

the only houses without direct links to super- Arcs Yaoko Izumiya
Kyushu

markets, but Itochu owns Family Mart and is

currently building up a major presence in food Ecos
Mitsubishi
wholesaling, and Mitsubishi owns Japanʼs Carrefour
Summit Mammy Mart
second largest wholesaler, Ryoshoku, as well
Uny U-Store
as the second largest convenience store chain,
Lawson. Wal-Mart Seiyu Sumitomo
Capital Ownership

All of the chains in the center of the dia- Bankruptcy Rehabilitator

gram are possible takeover targets. Some, Tesco

C Two-
Network
Wholly owned subsidiary

like the four railway related companies in Supply, product & employee exchange

the Hassha Group and the six major members

14 • JapanConsuming
 RETAIL NUMBERS

Regions up, cities down

July was another poor month for the majority of department stores across DEPARTMENT STORE SALES (REGION & CITY)
the country. Overall, department store sales were down 2.3%, with only Nagoya July, 2003 Sales YonY Ratio Jul/Jun
and other Chubu stores, and Kyoto seeing any sales growth at all. In Nagoya, JR ¥m % % %
Takashimaya led the way, seeing sales jump 13.8% on last year. Hanshin Umeda By Major Metropolitan Areas
and JR Isetan in Kyoto both saw sales grow more than 10%, as did Daimaru in Tokyo 184,547 -4.0 34.7 10.7
Kyushu. Osaka 107,620 -1.5 20.2 29.2
These were the exceptions, however. Seibu was the company that really suffered, Nagoya 46,464 3.6 8.7 37.0
with the Ikebukuro store seeing sales drop by 17.8% and the group of four Seibu Kobe 20,538 -3.4 3.9 17.3
stores in Kansai also down 24.8%. Sogoʼs Hiroshima store still suffers and needs its Kyoto 30,341 0.5 5.7 25.5
up and coming refit to come online as soon as possible. On the other hand, with only Yokohama 39,154 -1.6 7.4 8.3
six exceptions, all regional stores saw sales grow in August. Total 428,664 -2.1 55.3 18.5
By Region
LEADING DEPARTMENT STORE OUTLET SALES Hokkaido 26,411 -7.7 6.0 8.3
July, 2003 Sales YonY Jul/Jun Tohoku 24,330 -4.5 5.5 10.0
Company Locations ¥m % %
Kanto 125,994 -2.1 28.6 12.9
Chubu 25,676 0.6 5.8 32.9
Tokyo Stores
Kinki 21,631 -6.4 4.9 19.9
Mitsukoshi Nihonbashi, Ebisu, Tama, Kichijoji 28,386 -0.5 10.4
Chugoku 38,714 -3.5 8.8 30.2
Isetan Shinjuku 22,026 4.0 16.6 Shikoku 16,518 -0.6 3.8 31.8
Seibu Ikebukuro 19,139 -17.8 10.3 Kyushu 67,187 -1.3 15.3 33.2
Takashimaya Nihonbashi 14,300 -7.7 2.6 Total 346,461 -2.7 44.7 20.2
Tokyu Shibuya, Higashiyoko 12,815 -8.8 10.8 National Total 775,125 -2.3 100.0 19.2
Tobu Ikebukuro 12,197 -2.4 8.2 Source: NMJ
Odakyu Shinjuku 10,802 0.8 6.0
Keio Shinjuku 9,014 0.5 -2.2
Takashimaya Shinjuku 7,668 -0.5 17.6
Matsuzakaya Ueno 6,367 -4.2 12.5 CATEGORY SALES FOR DEPARTMENT STORES
Matsuya Ginza 5,913 -0.4 12.1 AND CHAIN STORES
Mitsukoshi Ginza 5,770 -4.2 11.4 June, 2003 Sales YonY Jun/May
Daimaru Tokyo 5,360 1.5 9.0 ¥m % %
Seibu Shibuya 4,781 -4.6 12.2 Department Store Sales by Category
Kansai Stores (Osaka, Kyoto, Kobe) Men's wear 57,888 -3.1 11.8
Women's Apparel 154,086 -1.3 -8.1
Kintetsu Abeno & 6 other stores 28,329 -2.1 36.9
Other Apparel 37,125 -3.0 -10.4
Hankyu Umeda, Senri, Kawanishi 23,976 -2.6 28.0
Accessories 77,466 0.7 -6.0
Takashimaya Osaka & 3 others 21,118 -3.2 39.7 Foods 163,988 -1.2 26.4
Daimaru Shinsaibashi, Umeda 15,914 0.0 19.6 Household Goods 37,607 -9.0 -2.9
Daimaru Motomachi & 3 others 12,550 1.5 21.9 General Merchandise 90,444 -2.5 2.6
Hanshin Umeda 11,121 11.3 15.5 Services 4,851 -2.0 -5.6
Takashimaya Kyoto, Rakunishi 11,031 -0.8 36.5 Other 26,578 -6.0 -5.9
Daimaru Kyoto, Yamaka 8,546 -2.0 16.8 Total 650,033 -2.1 2.6
Sogo Kobe 5,579 -2.6 5.5 Chain Store Sales by Category
JR Isetan Kyoto 5,537 10.8 27.0 Foods 667,065 -1.1 -1.0
Apparel 167,798 -2.6 3.2
Keihan Moriguchi & 2 others 4,580 5.2 21.3
Household Goods 117,241 -2.3 -5.1
Seibu Takatsuki & 3 other stores 4,047 -24.8 3.7
Medicines & Cosmetics 37,864 2.2 6.4
Other Regions Furniture & Interior 28,866 -6.3 -0.7
Takashimaya Yokohama, Konandai 16,731 -4.2 11.2 Electrical Goods 19,629 -24.1 3.1
Matsuzakaya Nagoya 14,769 2.8 43.9 Sport & Music 49,841 -4.2 5.7
Yokohama Sogo Yokohama 9,523 1.8 -0.3 Services 8,724 -4.3 1.0
Izutsuya Kokura, Kurozaki 9,238 1.2 33.5 Other 87,478 -10.8 0.1
Iwataya A Side, Z Side 8,534 8.2 31.4 Total 1,184,506 -2.9 -0.2
Nagoya Mitsukoshi Sakae 8,117 2.8 27.4 Source: NMJ & JDSA

Daimaru Hakata & Nagasaki 7,944 10.5 27.9

JR Takashimaya Nagoya 7,683 13.8 29.7
Fukuya Hiroshima 7,625 0.1 74.5
Meitetsu Nagoya 7,600 0.3 44.8
Saikaya Kawasaki, Yokotsuka, Fujisawa 7,148 41.8 17.2 CURRENCY RATES
Tsuruya Kumamoto 7,108 -4.1 34.0
Currencies (as of September 30, 2003)
Tokiwa Oita, Beppu, Wasada Town 7,021 1.4 42.1
¥
Sogo Chiba 6,605 -2.9 7.9
Euro : 129.82
Yamagataya Kagoshima 5,756 1.2 39.4
UK Pound : 185.20
Marui Imai Sapporo 5,440 -3.2 10.2
US Dollar : 111.43
Sogo Hiroshima 4,946 -11.2 13.5
Source: x-rates.com
Mitsukoshi Sapporo & Sapporo Alta 4,851 -7.8 21.0
Source: Nikkei & Japan Department Store Association

JapanConsuming • 15
 RETAIL NUMBERS

Little cheer for chain stores in August

Despite several encouraging months, chain stores failed to perform
in the cold summer. Food sales have a nasty habit of relying on the
weather, and this month certainly proved it. Of the 20 leading chains,
only five saw sales increase, with two of these to a marginal degree.
Ignoring Daieiʼs freefall, Seiyu, Uny, Tokyu Store, Inageya and Tobu
Store all saw declines of more than 5%. Worse, with the sole exception
of Summit, all of the stores recording sales growth did so on the back
of considerable new store additions. Aeon alone opened 63,000 sqm of
new sales space in four new stores. Ito-Yokado, Izumiya, and U-Store
all added 9,000 sqm each.

July, 2003 Sales YonY Sales Space Jul/Jun Jul/Jun Sales Performance

Company ¥mn % Stores By Sq.m. By Store

1,000 sqm 1,000 sqm Stores (¥) (¥m)
1 Aeon 138,894 4.6 3,194 63 371 4 43,486 374
2 Ito-Yokado 128,381 -4.4 1,654 9 177 1 77,619 725
3 Daiei 122,160 -13.0 1,923 -10 265 0 63,526 461
4 Seiyu 61,356 -8.4 1,072 0 212 -1 57,235 289
5 Uny 56,862 -5.3 1,261 0 154 0 45,093 369
6 Marui 47,145 -0.3 489 0 31 0 96,411 1,521
7 Life Corporation 30,594 -4.4 496 0 190 0 61,681 161
8 Maruetsu 28,377 0.0 342 2 201 2 82,974 141
9 Izumiya 26,204 0.1 494 9 82 1 53,045 320
10 Heiwado 25,315 -2.6 564 1 87 1 44,885 291
11 Coop Kobe 25,045 -2.8 245 0 156 0 102,224 161
12 Izumi 24,946 -3.4 605 -1 70 0 41,233 356
13 Fuji 24,209 -0.8 566 0 82 0 42,772 295
14 York Benimaru 22,157 0.5 341 7 102 1 64,977 217
15 Tokyu Store 21,485 -6.6 256 -1 86 -2 83,926 250
16 Inageya 14,661 -7.4 187 -1 125 -1 78,401 117
17 Kasumi 13,258 -1.1 192 0 106 0 69,052 125
18 Summit 12,997 8.0 106 0 76 0 122,613 171
19 U-Store 12,389 6.4 283 9 70 2 43,777 177
20 Tobu Store 6,861 -10.2 113 0 48 0 60,717 143
Total 843,296 -3.7 14,244 87 2,691 8 59,204 313
Source: Nikkei and METI

METI Retail and Distribution Trade Figures

Department Stores Chain Stores Convenience stores Wholesale Sales Retail Sales Price Indices
Large Sales YonY Sales YonY Sales YonY YoY† Sales YonY Sales YonY Whs Rtl
store 2000= 2000=
Nos. ¥100m % ¥100m % Store Nos ¥100m % % ¥bn % ¥bn % 100 100
2000 Total 3,775 100,107 -2.4 126,206 -1.8 35,461 66,573 3.3 -1.4 480,856 0.3 139,132 -1.6 100.0 100.0
2001 Total 3,889 96,284 -3.8 127,093 0.7 36,176 68,788 3.3 -1.7 468,636 -2.5 135,892 -2.3 97.7 99.3
2002 Jul 3,895 8,835 -5.9 10,816 -4.0 36,598 6,395 -2.0 -5.5 36,877 -2.1 11,249 -5.2 95.8 98.2
Aug 3,913 6,353 0.1 10,836 2.3 36,814 6,428 2.2 -1.4 34,724 -4.0 10,453 -1.8 95.7 98.5
Sep 3,903 6,915 -1.2 9,707 1.6 36,930 5,791 1.3 -2.2 40,633 -4.0 10,363 -2.6 95.6 98.5
Oct 3,946 7,574 -3.7 10,181 1.7 36,922 5,870 1.7 -1.8 36,482 -1.2 10,555 -2.8 95.3 98.3
Nov 3,988 8,291 -0.8 10,625 3.3 36,967 5,658 1.8 -1.8 37,728 -0.2 10,837 -2.4 95.3 98.3
Dec 4,013 10,879 -4.9 13,221 -1.9 37,083 6,155 2.7 -1.0 41,204 -2.1 12,762 -3.4 95.2 98.3
2002 Total 4,013 93,692 -2.7 126,702 -0.3 37,083 69,800 1.5 -1.7 450,979 -3.8 130,798 -3.7 95.8 98.4
2003 Jan 4,030 7,779 -2.2 11,334 0.2 37,127 5,531 2.5 -1.5 32,422 0.3 10,285 -2.6 95.1 98.0
Feb 4,033 6,203 -0.4 9,278 3.7 37,406 5,285 5.7 1.5 35,027 0.7 9,869 -0.3 95.3 97.7
Mar 4,044 8,132 -3.5 10,283 2.0 37,324 5,917 1.0 -3.1 47,866 0.2 11,743 -0.9 95.4 98.0
Apr 4,053 7,077 -4.9 10,390 1.3 37,321 5,668 0.5 -3.4 36,185 -0.2 10,536 -3.5 95.2 98.3
May 4,059 7,118 -3.0 10,373 0.1 37,307 5,879 1.1 -3.0 35,302 -0.1 10,427 -2.4 94.9 98.5
June 4,055 7,297 -2.1 10,361 0.0 37,358 6,025 4.0 -0.1 37,215 0.9 10,429 -2.2 94.8 98.2
July 4,070 8,649 -2.1 10,584 -2.1 37,483 6,147 -3.9 -7.6 36,292 -1.6 10,905 -3.1 95.0 98
August 4,077 6,237 -1.8 10,738 -0.9 37,724 6,473 0.7 -3.4 34,487 -0.7 10,241 -2.0 na na
Sources: METI, BOJ, Nikkei and others Note: † Convenience stores second Year on Year column indicates like-for-like sales

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