On 31 January 2023, the Tokyu Department Store fronting Tokyo’s ultra-busy Shibuya train station shut its doors for the very last time after operating continuously for 55 years, leaving many long-time shoppers a shopping bag full of memories for its long run there.

In the place of its old main store, the Tokyu Group will build a new retail development alongside L Catterton Real Estate, the real estate arm of luxury retailer LVMH. This redevelopment is part of the larger gentrification plan of Shibuya that seeks to change its image from one dominated by partying youths with little money to spend to a more inclusive shopping zone that can attract more high-spenders seeking out luxury products and experiences.

The unique decline of the department store

The closing of Tokyu’s Shibuya store is also representative of the overall decline in the fortunes of Japanese department stores. In the ten years leading up to 2021, the total sales of the country’s department stores declined from JPY 6.15 trillion to JPY 4.42 trillion, while the number of stores declined by 59, or a quarter of the total in 2011.

Two of Japan’s 47 prefectures are already without department stores, while 17 others are projected to lose their final stores in the coming years. The decision by Japanese retail giant Seven and i Holdings to offload its Seibu and Sogo department stores to a US investment fund in November 2022 have presented further risks of department store closures in the future.

The diversification of retail formats, and concurrently, consumer tastes, are popularizing the likes of fast fashion, e-commerce, and specialty boutiques, all at the expense of department stores.

Yet, the decline of Japanese department stores does not reflect the overall ill-health of the local retail scene. The Japanese retail market grew from 137 trillion to 150 trillion from 2012 to 2021. Many other retail outlets, from malls to specialty stores, have posted strong growth in the same decade that many department stores shut down.

The total revenue of shopping mall operator AEON increased from JPY 6.4 trillion in 2014 to JPY 8.71 trillion in 2022. That of major convenience store operator FamilyMart increased from JPY 345 billion to JPY 451 billion in the same period. Uniqlo owner Fast Retailing saw its revenue balloon from JPY 1.3 trillion to JPY 2.3 trillion in those ten years. The decline of the department store seems like an anomaly in the Japanese retail scene.

Image: Jezael Melgoza

The resulting replacement of the department store by other retail outlets has been visually clear in many provincial towns and cities. The closure of department stores, normally located near major public transport nodes, has in turn hollowed out city centers across the country, forcing residents to shift toward suburban shopping centers only accessible by cars.

The disappearance of the downtown department store also in turn took away foot traffic from nearby pedestrian shopping streets, further encouraging the suburbanization of cities accompanied by inner-city decay.

The reinvention of the department store operator

As the department store continues to lose out to other retail formats, their operators have embarked on corporate reforms that make them less reliant on retail for the bulk of revenues. Leading the pack are the retail arms of private public transport operators. The Tokyu Group, which also operates an eponymous railway network in the Tokyo metropolitan area, has rapidly shifted its focus from retail to its other businesses.

While the firm’s retail revenues declined by 16.9% from 2021 to 2022, over the same period, its transport, hotel, and real estate businesses respectively posted growth of 9.7%, 5.4%, and 16.5%. Hankyu, Tokyu’s counterpart in the Osaka-Kobe metropolitan region, has gone even further in its business diversification, establishing divisions in travel, international logistics, telecommunications, entertainment, as well as hotel and real estate development. 

Other department store operators have sought to become more nimble in their retail format, to replicate the success of latecomers. For instance, the major national chain Mitsukoshi, while closing several department stores in major cities every year since 2016, simultaneously expanded its network of small “satellite” stores in more provincial areas.

The decline of Japanese department stores does not reflect the overall ill-health of the local retail scene. The Japanese retail market grew from 137 trillion to 150 trillion from 2012 to 2021.

These satellite stores, sometimes only a single room in size, only sell a limited lineup of the chain’s most popular gift items, in a bid to expand the firm’s geographical reach while maintaining differentiation from other retail outlets. In some areas, the satellite stores of Mitsukoshi and rival department store operator Takashimaya have competed directly for customers.

As department store operators shift away from department stores, the future of this retail format in Japan is uncertain. Ever since the opening of Japan’s very first department store in Nihonbashi, Tokyo in 1904, it has accompanied the development of the country’s consumer culture and urbanscape.

The diversification of retail formats, and concurrently, consumer tastes, are popularizing the likes of fast fashion, e-commerce, and specialty boutiques, all at the expense of department stores.

As department stores slowly become a concept of the past in Japan, their operators will need to reinvent themselves constantly to keep up with the ever-shifting retail landscape of the future.

Featured image: Ramon Kagie