Will showrooms be the saviors of department stores?
November 5, 2021
Department store sales in Japan, which peaked in 1991 at about ¥9.71 trillion, have been falling ever since, according to the Japan Department Stores Association. Twenty-nine years later in 2020, sales plunged by 25.7% compared to the previous year and fell below the ¥5 trillion barrier to about ¥4.22 trillion, partly due to the pandemic. It was the lowest level in 45 years, or since 1975, and sales more than halved across 29 years.
Department stores used to be the king of the consumption hierarchy in Japan until the bubble economy burst in the early 1990s. Since then, they have been deprived of a big share of the pie by the new stars of consumption, such as convenience stores, famous brands’ exclusive shops, various outlet stores, shopping malls and e-commerce. What will become of department stores? Is there any way to regain their past glory?
One way is basically having no physical shop, but operating a showroom for e-commerce brands. Sogo & Seibu Co. recently launched a good example of this.
The company opened Choosebase Shibuya on Sept. 2 and calls it an OMO (online-merge-offline) store. It is a business model connecting a physical shop (offline) and a cyber shop (online). Simply put, an OMO store introduces e-commerce brand products inside a department store, and consumers buy the products through a smartphone or computer.
Choosebase Shibuya, which has an approximately 700-square-meter floor space, comprises four areas. Two of the areas are devoted to 51 brands, many of them e-commerce brands. The third area is the first shop for Incein, an e-commerce brand operated by Fabric Tokyo Inc., which specializes in made-to-order clothes for working women. A customer can have her body measured in a 3-D scan box and order an outfit in her size and favorite design. The fourth area is a lounge with a cafe where customers can order a cup of coffee of their choice and wait for their products to arrive.
The store has a near-futuristic atmosphere, including the interior design. Slightly tapered walkways enhance a sense of immersion, and the blue color of the floor looks as if it is deliberately deprived of warmth. It reminds one of the color of the pre-dawn sky, and so do corrugated metal panels of the color gradation from silver to blue.
The main target of the store is the younger generations, who have mostly dismissed department stores. Another notable point about the store is that, although it is a showroom, customers can take home the products they have bought.
Meanwhile, Daimaru Matsuzakaya Department Stores Co. opened on Oct. 6 a new showroom inside the event space on the fourth floor of Daimaru Department Store’s Tokyo branch. The approximately 100-square-meter showroom, named asumise, has been set up to feature 20 e-commerce cosmetic and fashion brands selected on the inaugural theme, “Finding chance meetings that make society better.” The store’s layout will be renewed every three months. It is worth noting this store has adopted the style of not selling any products on site to lessen the pressure customers may feel that they have to buy something. Shop assistants for asumise are called “ambassadors” and devote themselves to singing the praises of brands to customers, not directly selling products.
Department stores gain rewards for showrooming the brands in the form of either a commission fee for sales or a display booth charge. Traditionally, department stores have done business by stocking products purchased from wholesalers and selling them to customers. In short, they have made profits through consumers’ purchases. Profits from the showrooms, however, come from participating brands, which is quite a different style of business operation compared to the old days.
This practice has long been common among developers in the United States, who have used it to raise the value of leasehold properties. Department stores have adopted this business style probably because they have concluded that wholesaler’s brands have no future.
Will they be successful in their adventures in e-commerce brands, which are popular right now? People involved with department stores are watching what will become of Choosebase and asumise with interest.
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