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Is the Turning Point for Department Sales Shifting? Current Sales Momentum of Cosmetics Outperforms Clothing

May 18, 2018.Tokyo, JP
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At the beginning of this year, news about the reorganization of major department stores in Japan and the expansion of cosmetics stores has continued. In February, Shinjuku Keio Department Store opened a cosmetics store for foreign consumers, followed by Yokohama SOGO Department Store’s announcement of a substantial expansion of cosmetic stores. The expansion of the cosmetic store in Osaka Hankyu Umeda was completed on March 1st.

The reason why major department stores are making such changes is due to the increase in foreign tourists visiting Japan, which has greatly promoted the sales in cosmetics. One of the reasons for the conversion of cosmetics stores publicly was to solve the inconvenience caused by the congestions in stores. It’s believed that the influx of foreign consumers in shopping malls is the biggest reason for the congestion. According to the data released by the Japanese Government Tourism Bureau, from January to December 2017, the sales of duty-free goods in Japan's department stores totaled to an approx. 270.4 billion yen, an increase of 46.3% over the previous year. The sales of duty-free products of all companies were higher than those of the previous year. In particular, the total sales volume of tax-free goods in the department stores of the Kansai region exceeded 10 billion yen in the month of October 2017. In January 2018, the monthly sales were 10.672 billion yen (according to the Bank of Japan Osaka). In addition to the overall domestic consumption in Japan, the total sales volume of Japanese cosmetics has grown consecutively for 34 months. Compared with cosmetics, clothing sales are slowly recovering, but the overall situation is still in a downturn.

Table: Trends in the growth of apparel sales and cosmetics sales in recent years (Information from National Association of Department Stores)

 

Mitsukoshi Isetan Group released a total sales of various departments for the second quarter of 2017, including 105.7 billion yen in apparel (composition ratio: 35.2%) and 32 billion yen in cosmetics (composition ratio: 10.7) %). In addition, in the three main shops of Mitsukoshi Isetan Group, the sales of tax-free goods at Ginza only reached 10.937 billion yen, accounting for 26.8% of the total sales (Note 1). In January 2018, Ginza's apparel sales totaled 2.113 billion yen, and sales of cosmetics and other miscellaneous goods reached 2.412 billion yen, which outweighed clothing.

For merchants, the sales of cosmetics not only benefited from the increase in foreign customers, but they had almost sold products at no price reductions, and their sales efficiency per square meter had exceeded that of any other goods. The needs in buying consumable items every 3 months is more provocative than the type of clothing that is not frequently purchased. The department stores that took note of this are still in the minority. The former sales strategy shows that items that are not sold, not only occupies precious space, but the manufacturers will in turn also reduce the production costs in order to cope with the inefficiency of the sales which will result in low quality products. The vicious cycle leads to customers who are pursuing high quality products and those who come to department stores left unsatisfied. Its best for major department stores that they should face this problem and take new actions to promote the sales of their products.

 

Note 1: The duty-free sales of Isetan Shinjuku Main Store accounted for 10.3% of the total sales, and Mitsukoshi Nihonbashi headquarters was 1.8%.

  • Minoru Mami

    Fashion weather forecaster

    Department stores are now demanding for cosmetics. The future is bright for cosmetic brands. In order to strengthen department stores that are already flourishing, it’s increasingly important to arrange for the top beauty sales staffs. Making clear divisions in strategies catered solely to foreigners and Japanese customers respectively is the next hurdle.

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