Looking toward an era of 40 million visitors to Japan

The number of foreign visitors to Japan from January to November 2015 increased by 47.5% year-on-year to 17.96 million, and is expected to have broken the 19 million mark by the end of 2015. Driven by factors such as the depreciation of the yen, easing of visa restrictions, and the expansion of the consumption tax exemption system, inbound demand by foreign visitors to Japan has expanded rapidly. Reflecting this trend, bakugai (binge shopping by tourists) was selected in Japan’s Buzzwords of the Year contest in 2015.

While it is unclear if this trend will continue, there is no doubt the number of visitors to Japan will grow as a result of economic development and the overseas travel boom in China and Southeast Asia. The government has revised the goal for tourist numbers upward from 20 million people by 2020 to 30 million, and also has plans to further raise the number to 40 million people.

As part of efforts to capture the growing demand in future there are prominent movements by retailers to advance their capability to meet inbound demand, such as through the utilisation of information technology (IT) and the creation of tourist-only retail spaces. The consumption tax exemption system will also be revised to enable the effects to spread from the major cities to the rural regions.

A large number of airport-style duty-free stores will be opened in 2016. Unlike typical duty-free stores where shoppers are exempted from consumption tax, airport-style duty-free stores also provide exemptions from tobacco taxes, liquor taxes, and customs duties. This characteristic makes them a perfect device for attracting foreign visitors.

Although such stores can currently only be found in airports and seaports with the exception of Okinawa, they will be launched in Ginza Mitsukoshi, Tokyu Plaza Ginza, and Fukuoka Mitsukoshi, among other department stores, by the spring of 2016.

A duty-free retail space will occupy the entire 8th floor of Ginza Mitsukoshi. In addition to luxury brands and cosmetics, the strength of Isetan Mitsukoshi Holdings Ltd. in curating and offering uniquely Japanese products will be applied to its product line-up. This will allow it to take advantage of a different competitive edge from other urban duty-free stores located in Japan and overseas. The retail space will cover an area of 3,300 square meters.

During periods such as the Lunar New Year, Mitsukoshi Ginza branch achieves approximately 30% in duty-free sales as a proportion of sales for the entire department store. By capturing inbound demand in the form of large categories of equal rank, such as women’s apparel and food, the store has made the decision to expand the floor. According to President and CEO Hiroshi Ohnishi of Isetan Mitsukoshi Holdings Ltd., in light of the insufficient space of the eighth floor alone, the company has also suggested the possibility of opening a second store in the vicinity.

Furthermore, as duty-free sales at Isetan Shinjuku Store exceed 10% of sales for the entire department store, the company is also considering establishing another such store around the area of the Isetan Shinjuku Store.

Tokyu Plaza Ginza, which will commence operations at the end of March 2016, will open a Lotte Duty Free store across two floors, on the eighth and ninth floors. Other than luxury brands, watches, and jewellery, Lotte Duty Free is also expected to procure products by harnessing its knowhow from the operation of numerous duty-free stores in Korea.

Airport-style duty-free stores work together with airport management companies, and operate through a system whereby products purchased are received at the airport after the shopper completes embarkation procedures. While Japanese shoppers going overseas may also make use of the system, the respective companies introducing this system indicate they are creating retail spaces mostly tailored to foreign visitors.

While it may not be that simple to open an airport-style duty-free store, such ‘foreign tourist-only’ initiatives are likely to expand even further.

In 2015, Shinsaibashi Opa introduced a dedicated floor for inbound visitors, bringing together eight tenants including travel services, Laox, and a pharmacy. A dedicated salon has been established by Kintetsu Department Store Main Store Abeno Harukas, while Matsuya Ginza has established a cosmetics retail space tailored to foreign visitors in its annex. These represent keen efforts among the department stores to capture inbound demand.