The Japan NewsThanks to an increasing number of overseas visitors, particularly Chinese tourists on mass shopping sprees, department stores in Japan are being blessed with profits. As the 2020 Olympics are expected to bring more travelers to Tokyo, future strategies will be vital to retail operators. Isetan Mitsukoshi Holdings Ltd. President Hiroshi Onishi, a leader in the industry, speaks about his vision.
Q: Could you tell us about the most surprising request by overseas shoppers?
Hiroshi Onishi: Some customers insisted they wanted to take beef home — but raw! I guess their idea was to purchase the meat in our store just before flying home. They came up with such an idea because most Chinese visitors traveling from Japan can return home on the same day.
Q: How much do they spend?
A: [Some of them] would spend more than ¥10 million for a watch. That has happened more than once.
Q: A Chinese customer last month reportedly purchased tea utensils worth ¥6 million in Mitsukoshi’s Ginza store. How do you feel about it?
A: When LAOX opened a Ginza outlet, they sold a huge amount of Nambu Tekki ironware at prices such as ¥3,000 and ¥5,000. But they are Japan’s traditional artwork crafted by special technology, so I felt a need to offer such items at proper prices to overseas shoppers searching for truly outstanding Japanese products, as a way to show, “These really are Japanese souvenirs.”
Q: What is the ratio of foreign customers in your stores?
A: The number of overseas customers has been growing rapidly, accounting for more than 25 percent in Mitsukoshi’s Ginza store and 10 percent in Isetan’s Shinjuku store.
Q: What are popular shopping items for them?
A: Their desire for Japanese cosmetics is totally beyond my expectation. They also have high interest in non-Japanese brand names, especially after a case in China two years ago when fake goods were sold in a well-known luxury brand shop. This may have prompted them to feel it is safer to buy brand products in Japan.
Q: How do Japanese customers respond to the growing number of overseas shoppers?
A: We’re making it clear that our main target is local Japanese customers. Of course, we’re grateful for overseas customers coming to our stores, and feel the need to give them the service they’re looking for. But if we do so, our Japanese shoppers may say, “This is not my local place.” So, we’re going to open a duty-free shop, like the ones in airports, for overseas customers in the Ginza store in December or early next year.
True omotenashi born only on human-to-human basis
Q: Could you tell us about “Cool Japan” in your industry?
A: It may sound a little bit presumptuous, but we’d like to do what we do now globally in the future. Several years ago, when the Economy, Trade and Industry Ministry set up its Cool Japan office under the concept of introducing excellent Japanese products abroad, we came to realize that we weren’t properly presenting such items even to the Japanese domestically. Then we felt an urge to discover Japan’s superb products through our own senses and introduce them to our customers.
Q: The Mitsukoshi branch in Ginza has a selling space called “Japan Edition.” What is the concept?
A: Eventually, what I’m aiming for is to create a section called “Japan Luxury” to introduce products that are almost like no one has ever seen before. In Kyoto, there used to be woven fabrics and a wide variety of textile materials long before the Edo period. But unfortunately, as time went by, some of them disappeared. We’d love to bring them back and create something new using them.
Japan itself is a trend now, attracting many visitors from overseas, while the Olympics are coming to Tokyo. Under such circumstances, I believe a department store should be a retailer that understands and offers the beauty of Japan. One of our salesclerks told me once: “Working in a department store that is a stage representing Japan, I feel that I myself represent Japan, too. So my role is to offer omotenashi [Japanese-style hospitality] in a way that is not embarrassing as a Japanese person.”
Q: How do you define the best way to convey omotenashi?
A: Mitsukoshi, the nation’s oldest department store, with a 340-year history, traditionally has the ochoba first-class client system, in which we consult and accommodate various requests from customers. It would be ideal to have a salesperson for every client, visiting a customer’s house individually with items based on request. But physically it’s impossible. So we’re trying to realize such a function in shops as much as possible. Simple service with “Welcome” and “Thank you” greetings no longer works. What we do here is to have [genuine] communication with our customers, which would make them feel, “I’m glad I came here because I enjoyed the conversation with store staff.”
Q: Amid fierce competition, what will happen to department stores 20 years from now?
A: I anticipate department stores may be disappearing by then, if we remain the same. Of course, I’m strongly hoping it won’t happen, and we shouldn’t let it happen. But as there are all different retail categories nowadays — such as convenience stores, general merchandise stores, category killers, drugstores and e-commerce — and they are all growing, department stores have only a 4 percent share of the entire retail sector in Japan. It means whether or not we survive will be determined by consumers.
Q: Despite a declining and aging population, year-on-year department store sales have been positive for seven consecutive months. Isn’t this a sign of a comeback of the department store business?
A: No, not at all. Sales are, of course, important because they indicate customers’ evaluation, but if we only compare the figures with those from the previous year, we’re not going anywhere. Sales in what we call the “price line,” or a price range for domestic middle-class shoppers, are not increasing, but rather declining little by little each year. Even if we have profitable shoppers in our Shinjuku, Ginza and Nihonbashi stores, the price line always remains the most accurate indicator for the consumption situation.
Q: So, how are you going to survive?
A: To survive in a versatile retail industry, we have to further differentiate ourselves from other retail businesses by offering absolute values that cannot be found in other shops, and not in the sense that we merely sell expensive items. If we don’t create a compelling balance of price and value — thorough omotenashi, comfortable environment and space — there’s no reason for consumers to come to department stores.
Q: How about the department store business abroad?
A: In Paris, 70 percent of the customers in Galeries Lafayette [a major department store] are said to be Chinese, and as a result, it has naturally and gradually become like a store for Chinese customers. On the other hand, Printemps department store located next to it is crowded with local people. I’m not saying which is good or bad, but we don’t want to become a store that abandons local customers.
Q: How about operating the business outside Japan?
A: There aren’t actually many department stores that are successful outside their home countries. We’ve also had some outlets overseas, and the performance isn’t necessary the best.
Q: The company plans to open “Japan Mall” in Kuala Lumpur. How do you train local staff?
A: It is actually extremely difficult to teach them the concept of omotenashi. I worked in Malaysia for four years when I was in my 30s. I remember I used to show and explain to them, “This is how we do it in Japan,” but when they couldn’t do it in the same way, they would make excuses, saying it was due to a religious issue. I believe conveying 100 percent of your feeling is only possible based on a human-to-human relationships, not by simple top-down instructions. If it doesn’t work with the omotenashi spirit, the new mall cannot be called a “Japan Mall,” and we just can’t say as an excuse, “Oh, because it’s in Malaysia.”
Q: What does a department store mean to you?
A: How I view it has completely changed over the years. When I was in my 20s, department stores were said to be the gods of retailers. Being on top in the industry, they had different products, services and selling styles from others. It was a place that always made you feel you knew for sure you could find something new. With a spacious restaurant and a rooftop playground, families could spend hours together, and the whole experience was special. But as [the force of competition] has weakened, department stores have gradually become homogeneous with one another, losing their previous positioning in the retailer industry.
Q: What is your mission for the future?
A: What we need to do now is to return department stores to what they used to be to show customers and society how different we are. Rather than making customers purchase products, we must create an atmosphere that thrills visitors, making them expect something good will happen. That’s the start, I believe, because nothing will happen until you actually come to visit department stores.
After graduating from Keio University, Onishi joined Isetan Company Ltd. in 1979. He assumed the post of general merchandising manager for the Men’s Apparel and Accessories Department of Merchandising Headquarters. Since 2012, he has served as president and chief executive officer of Isetan Mitsukoshi Holdings Ltd.