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Regional department stores closing at accelerating rate

The Yomiuri Shimbun

By Chihiro Nakajima and Takuya Ono / Yomiuri Shimbun Staff WritersMore than 10 regional department stores are expected to close by the end of this year — Onuma Yonezawa store in Yonezawa, Yamagata Prefecture, was closed Thursday — with such closures becoming increasingly frequent nationwide.

The number of closures is expected to reach the double-digit range for the first time in nine years since 2010, when consumer spending plunged due to the financial crisis triggered by the 2008 collapse of U.S. investment bank Lehman Brothers.

Many stores in regional cities have been hit hard by population decline and intensifying competition with large commercial facilities. It is feared that the hollowing out of city centers and regional economies may intensify.

End of 76 years of history

Daiwa Takaoka, the Takaoka, Toyama Prefecture, outlet of the Hokuriku region Daiwa department store chain, will end its 76 years of history on Aug. 25. With a closing sale notice posted inside, the store is crowded with local residents who heard with regret that it would close down.

“It was always Daiwa for buying gifts for a celebration of a childbirth or marriage and for all life’s milestones. I wonder where I’ll go to buy things from now on,” said a 68-year-old self-employed woman, who was born and raised a five-minute walk from the store.

The store’s fiscal 2018 sales totaled about ¥3.9 billion, down to 30 percent of its all-time sales high in fiscal 1996.

With the extension of the Hokuriku Shinkansen Line to Kanazawa four years ago, an increasing number of people started visiting major department stores in Tokyo, which they can now get to in less than three hours.

On top of that, a shopping mall in the store’s neighboring area plans to greatly expand its sales floor space, making Daiwa Takaoka management think it was unavoidable to keep customers from abandoning the store.

Colet in Kitakyushu, which closed at the end of February, was hit hard by, among other factors, the construction of a large commercial facility in the neighborhood.

The store was originally opened as Kokura Sogo in 1993, with the operation later being taken over first by Kyushu-based Tamaya, then by Isetan.

Kitakyushu-based Izutsuya Co. opened the later-named Colet in 2008, but it was in the red for about 10 years.

Boni-moriya in Hakodate, Hokkaido, and Nakasan Aomori store in Aomori closed this year. Three stores are to be closed in August, and four stores including Isetan Sagamihara in Kanagawa Prefecture are to close in September.

Regional stores hit hard

Independent department stores and those with local roots have clearly fallen on hard times.

According to Tokyo Shoko Research Ltd., sales at 78 major department store operators in 2018 were practically flat, down 0.1 percent from the previous year.

However, among 35 department store operators excluding major and railway-affiliated companies, 27 operators, or 80 percent of them, saw sales decline, and 13 companies were in the red.

Regionally located department stores are particularly losing customers to suburban commercial facilities that provide a wide variety of items at reasonable prices.

According to the Japan Council of Shopping Centers, shopping centers’ overall 2018 sales nationwide rose 0.6 percent compared to the previous year, marking the second consecutive year of increase.

Department stores also face tough business conditions, including a declining population, the spread of online shopping and a scheduled consumption tax rate hike in October.

“While the market is shrinking, there is also a manpower shortage, so we see no light at the end of the tunnel. I think that [regional department stores] have passed the limit of what they can endure,” said Toru Nabeyama, Japan Economic Research Institute Inc. managing director.

Issues to solve

Many regional department stores are located in central urban areas or in prime locations in front of train stations. The issues that they need to tackle are maintaining staff and utilization of facilities after store closures.

Daiwa’s Takaoka outlet will continue employing all its 59 employees mainly at its branch in Toyama, located about 20 kilometers from the Takaoka branch, although some of the staff have to seek other employment because of the longer commute.

Yamako department store, a familiar facility in front of JR Kofu Station, is scheduled to close in September. The operator has yet to decide how to utilize its five-story building and the land after the closure.

Many regional department stores opened during the period of high economic growth, making it difficult to find tenants as the buildings have aged.

Attracting foreign visitors

Department stores in major cities such as Tokyo and Osaka, which attract a large number of foreign tourists, are generally enjoying brisk sales, while the situation of those in regional cities is becoming increasingly difficult, and there is a view that the gap between the two will further increase.

According to the Japan Department Stores Association, sales of duty-free items to foreigners at department stores in April rose 9.3 percent to ¥34.4 billion from a year earlier, a record high for a single month.

“Department stores in urban areas with large populations and foreign tourists can survive, but the situation in rural areas will worsen as they have no distinctly attractive features,” said Ryutsu Keizai University Prof. Yuji Yano, who specializes in distribution theory.Speech

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