My Opinion Piece Featured in Luxury Society

Yesterday my opinion piece "Is now the right time to enter Japan's luxury market?" was posted and is now featured at the Luxury Socitey.  It is a membership only site and if you are a member please check it out.

As always, thank you for reading, Timothy

A Partnership Ended

Ending a partnership that began fourteen months ago but never really took hold, ABC-Mart Inc., announced yesterday their plans to sell their 24.3% interest in United Arrows Ltd. The stock sell which will occur today when United Arrows launches their own tender offer at 1,000 yen per share will earn ABC-Mart around 3.4 billion yen in profit from their purchase price of 670 yen in June 2009.

Michael Kors is Open

This past Friday, Michael Kors opened their first flagship store in Omotesando. The white interior store complemented with silver and brown is over 1,300 sqf with a zebra-print theme. The store carries the Michael Kors RTW, ACC and SLG as well as Michael Michael Kors RTW and ACC. The store opening in Omotesando will be followed by several shop-in-shops from February 2011.

Fast Retailing Does it Again

Just when you thought declining sales, excess inventory and weekly sales might portend a demise to fast-fashion, Fast Retailing comes along and does what they do best – open more stores.


This October Fast Retailing plans on opening a new g.u. store in Shinsaibashi Osaka. Not only will this new g.u. store replace an existing Uniqlo store that closed this August but it will also be the largest g.u. store to date. The new store will have 1,650 sqm, more than three-times a standard g.u. store and will carry exclusive and merchandise unique to this store only.

Fast Retailing is expanding all of their brands in Japan in order to drive sales for their global expansion of the Uniqlo brand.

Forever 21: How Did They Get that Prime Location?

Forever 21’s Japan expansion is taking retail too the next level.

With HMV closing, Forever 21 will take over their much sought after Shibuya location. Located next to Shibuya Seibu and across from the Loft and the Shibuya Coach flagship store this Forever 21 store will be their largest retail space to date. With 4,000 sqm of floor space the Forever 21 will be six floors and Forever 21's fifth location in Japan. The new Forever 21 store will open in January after renovations are complete. On opening day expect a long queue, fantastic opening-day sale numbers and hopefully a great giveaway item.

The Competition is Going Thermal

With Fast Retailing’s Uniqlo leading the way in thermal apparel sales, competitors see their chance to expand in an otherwise cold market.

Fast Retailing took charge of the thermal clothing market when they first introduced their Heattech apparel line under their Uniqlo brand in 2003. This year they are already forecasting sales to increase 40% to 70 million units with about 60 million units sold in Japan and the other 10 million units at their overseas locations.

Recognizing a good thing several other retail apparel makers are expanding their thermal apparel lines looking for a hot spot in the economy to increase sales.

The largest competitor Shimamura Co. plans on selling 30 million thermal apparel pieces this year, about three-times the number of thermal apparel items they sold in 2009. Uny Co., a general merchandiser also plans on selling 4 million thermal apparel pieces this year compared to 1 million in 2009. Ito-Yokado under Seven & I Holdings is another retailer looking to increase sales to 4.4 million pieces, an 80% increase from 2009. Other retailers looking for an increase in sales of the Thermal Apparel Market are Aeon Co., which is forecasting a double-digit increase from 2009 sales of 10 million pieces, followed by Gunze Ltd., which is looking to sell 5 million units in 2010, another 80% increase from 2009 and World Co. which are expanding their line from not only women’s thermal apparel but also to men’s and children’s and forecasting a sales increase in 2010 of four-times that of 2009.

With all this competition Uniqlo is already planning to increase their Heattech product assortment by around 60% to 333 items including additional colors and designs like leggings and tunics.

Let the thermal race begin.

Data Nikkei

Mark Lee Named Barneys CEO

Luxury Retailer Barneys New York has named former Gucci executive Mark Lee, as its new chief executive officer.


The 47-yeard old Lee, with over 25 years of experience in the retail luxury industry will begin his new CEO duties, filling one of fashions’ most-coveted positions on 1 September, less than two years after Howard Socal stepped down.

Mark Lee began his career in 1984 at Saks Fifth Avenue before moving up to top roles at Giorgio Armani and Jil Sander. In 1996 Lee joined Gucci before becoming president and CEO from 2004 through 2008.

The Dubai-based Dubai World is hoping Lee can turn around the fortunes of Barneys New York amid a rebounding luxury sector still recovering from steep spending cuts during the recession, even among the wealthy.

Another Uniqlo Store Opening in Osaka

Continuing their openings of “global flagship store” and saturation, I mean expansion in the domestic market Fast Retailing’s Uniqlo is opening a new global flagship store on Friday 1 October in Shinsaibashi Osaka. The 2,640 sqm store will be different than the other 800 stores in Japan as it will be have a unique exterior and interior design and have a larger product assortment of merchandise.

The Uniqlo global flagship store will be the fifth after global flagship stores in New York, London, Paris and Shanghai.

Uniqlo’s same-store sales grew .04% in July

J'aime Mon Carre in Tokyo

If you have not visited the Hermès - I Love My Scarf web site, you will definitely find it worth your time to do so. The J'aime Mon Carre - I Love My Scarf campaign is a good attempt at social media by Hermès. Hermès, not known for their playful and fun campaigns but well-known for their beautifully designed silk-scarves turns the page on their otherwise conservative advertising and adopts a solid social media strategy to pull the viewer in by showcasing beautiful people in Tokyo wearing Hermès scarves in a variety of different ways; sometimes straightforward and other times creative and flirty. I say a good attempt because although many would not expect a campaign like this at all by Hermès, they still miss the mark - Instead of using pre-selected and most likely paid models to model the scarves, Hermès should have solicited Japanese customers' own photos of themselves in the scarves to be shared and seen by all, like Burberry did with the Art of the Trench social media campaign - After all isn't this what true social media is all about - being social. With that said this is a good start for Hermès to enter social media. I hope going forward they and other retailers in Japan will try such campaigns and learn from them.

Is now the right time to enter and expand into Japan's luxury market?

Over the next few months several luxury brands are opening new shops in Japan; a few launching for the first time and some who have been in Japan for years with varying degrees of success. The question begs, is now really the right time to be launching and opening new luxury stores in Japan.

The fashion & luxury market in Japan is still recovering from a decline in sales from the luxury bubble burst at the end of 2007 and is *forecast to grow less than 1% in 2010 and will only really begin to recover at earliest in 2012 and only then after new strategies and channels (ecommerce, digital and social media) are developed and implemented for the Japan market.

Besides the recession and a decrease in the discretionary spending of Japanese consumers, there are several other obstacles which will make Japan a difficult market to enter for new luxury brands and for existing brands to expand. The existing landscape for luxury brands is oversaturated; retail shops are still shutting their doors and fashion brands are still closing down operations. The recent prevalence of online price comparison, exclusive shopping sites and auction sites as well as holiday shopping is making the market even more competitive, as well, many foreign brands are now switching their focus and capital investment away from Japan to China, who are now the world’s second largest economy, all of which will leave very little room for growth and profits. The priorities of the Japanese consumer is also changing and maturing. They are no longer so aspirational having to own every handbag covered with an initialed logo – they are now buying mostly fast-fashion items and incorporating them with one high-end to luxury-piece. The age of frivolous consumption in Japan is over just look at the following data: **Japan’s Q2 GDP grew by only 0.1%, far less than had been forecast, as well ***Japan’s unemployment for the month of June 2010 was 5.3%, meaning 3.4million people were out of work, the second highest since November 2009.

That being said there will always be a place in Japan for luxury brands with people lining up for a new store opening, but it is no longer about having that hot new it item - it is now about quality, heritage and craftsmanship. After all Japan is still the global fashion capital with every market copying and being influenced by their unique and creative style. Having a presence in Japan adds credibility and air of success – if you can make it in Japan then you can make it anywhere, though making it in Japan is now mostly just a springboard for launching into China.

*McKinsey

**Economist

***TradingEconomics

Fast-Cosmetics

With fast-fashion brands H&M, Forever 21 and Topshop still enjoying success and still expanding, several of the fast-retail chains are also expanding into cosmetics. Currently Forever 21 sells cosmetics in all four of its Japan stores. The cosmetics which are priced between 280 yen to 480 yen come in eye shadows, foundations, nail polish and more. Not to be outdone by Forever 21, newly expanding U.K.-based Topshop will also enter the fast-cosmetics market in Japan by offering cosmetics in their new Shinjuku flagship opening next month on 16 September. The offerings for Topshop will be eye shadow, lip stick, nail polish, and more and be priced slightly hirer at 945 yen to 3,150 yen, with beauty consultants present during special events.

With the popularity and increasing market of fast-cosmetics do you think we can expect to see cosmetics lines from H&M, Zara, and even Uniqlo?

Jeans, Leggings or Both?

Do you like wearing the skinninest of the skinny jeans but are constantly fighting to get them on and off?  If so, you may want to try Uniqlo's Jeggings.  Jeggings, a product that looks like skinny jeans and can stretch like leggings, was launched by Fast Retailing in about 800 Uniqlo stores in Japan at the end of July.  There are ten variations in different colors and styles at a cost of 2,990 yen.  By the end of this August Uniqlo's jeggings will also launch in stores overseas including the U.S. , China and elsewhere.

Uniqlo is not the first to bring jeggings to the market, as Abercrombie & Fitch have been selling them in their Ginza store since last year, though Uniqlo's price of 2,990 yen compared to A&F's price starting from 8,400 yen up to 16,400 yen is sure to sell more and undercut A&F's sales.

On the subject of Abercrombie & Fitch, did you know A&F blocks users in Japan from accessing abercrombie.com?  They can only view jp.abercrombie.com?  This is to block users from seeing the price of A&F products outside of Japan - usually half the price.

Isetan Mitsukoshi Going Their Own Way

With department store sales still in decline as well as customers and purchases per customer falling, Isetan Mitsukoshi is going its own way when it comes to improving and increasing sales.

While other department stores are of course cutting costs by restructuring workers and closing stores, as well as being creative and courting new tenants, i.e., Matsuzakaya & Forever 21 and Takashimaya & Uniqlo, Mitsukoshi is renovating its existing Ginza store as well as opening a new annex in Ginza. In fact Mitsukoshi is so sure that renovating existing stores will help reclaim customers and increase sales they also plan on renovating the Shinjuku Isetan store and Nihonbashi Mitsukoshi store both slated to be completed by 2012. The costs of the renovation for the Ginza Mitsukoshi store including upgrading and integrating the computer systems, is 42 billion and will realize a 50% increase in floor space – Mitsukoshi is projecting 63 billion yen in sales for the first year after it reopens next month on 11 September.

Isetan Mitsukoshi Holdings’ strategy is to dominate markets in major cities, i.e., Tokyo and Osaka by strengthening their flagship stores – a good strategy if it works though if sales do not increase as they project they will most likely lose out to competitors like J. Front Retailing and Takashimaya who have taken a more creative and less cost-incurring strategy to increase sales.

Do you think Isetan Mitsukoshi’s renovations will help reclaim customers and increase sales? Or is their strategy of just adding on to a non-performing business model just a band-aid on the real problems facing Isetan Mitsukoshi?

Uniqlo Going High-Street

Did you ever wonder why there is a Uniqlo store in Ginza? The answer is in order to fund their ever growing thirst for global apparel domination. In order to fund their costly overseas expansion Fast Retailing is opening Uniqlo stores in prime, high-street locations. Besides the Ginza store, Uniqlo will open up a small, 660sqm store in Tokyo Midtown in early September, where their new office is located. This will be the first time Uniqlo is going to be competing with high-end boutiques in the same shopping complex. Other sites include a 1,500sqm store in front of Osaka’ Uehommachi Station slated to open by the end of August. A 3,00sqm Uniqlo store will also open this October in Osaka’s Shinsaibashi, becoming one of the largest Uniqlo stores in Japan. Also in early September Uniqlo will open a 1,650sqm store in Seibu Department Store in Takatsuki, Osaka. Other prime areas of interest for Uniqlo are Kichijoji Atre in Tokyo’s Musashino and Kohrinbo 109 in Kanazawa.

Uniqlo’s Japan business accounts for 75% of its global business and with plans to increase their overseas sales to exceed their domestic sales they will not only need to open more domestic stores to fund their overseas operations but also overseas store to drive their overseas sales.

With Uniqlo opening new stores in prime, high-street locations, what’s next; Rodeo Drive, Omotesando Dori? And then, when are too many Uniqlo stores too many? After all once you exceed 800 stores domestically can every store really be profitable?

Mika Ninagawa x Seven

VFC’s Seven For All Mankind is collaborating with Japanese photographer Ninagawa, Mika to produce a line of t-shirts and jeans. Ninagawa, famous for her landscapes and still-life’s, used a combination of color and artistic creativity for the seven-piece line which will include printed jeans, denim shorts, and t-shirts selling from 12,600 yen to 27,090 yen. The line will launch along with the expected launch party on Wednesday 18 August at Seven’s Tokyo store in Daikanyama, with the line launching after in the US, China, Singapore, South Korea and Australia.

OIOI in Kyoto

In an earlier blog I wrote about Marui taking over the Hankyu department store in Kyoto, scheduled to close this month on 22 August. With the opening planned for spring 2011 and the department store in a prime location; located in Kyoto's trendy Shijo Kawaramachi shopping area with several universities nearby and convenient transportation, Marui is poised to answer the strong demand of Kyoto's youth demographic. Marui's new store will occupy a total of seven floors from the first basement floor to the sixth floor, covering about 8,700 sqm of retail sale space.

This will be the third department store for Marui in western Japan including those in Osaka and Kobe, and it will not be the last as Marui plans to expand into mainly large cities throughout Japan.

Topshop's Japan Expansion

Next month on Thursday 16 September Topshop will open their Japan flagship store. The new store located in Shinjuku will be 1,000 sqf and be the fourth store in Japan for Topshop after the Harajuku, Yokohama and Sapporo stores. The new Shinjuku Topshop will carry women’s wear, men’s wear, and cosmetics as well as have a shoe lounge on the second floor. This flagship will differ from the other Japan stores and reflect the premium, exclusive image of Topshop’s New York and London flagships. In addition the new flagship will have a personal shopping service – free of charge, and a permanent DJ booth and space for live music for showcasing DJs and bands. Expanding on their men’s wear, the Topman floor of Topshop will feature the new “Japan Collaboration”, a project introducing hot-and-new local men’s wear designers. For the Shinjuku flagship store Topshop is planning a limited range of items exclusively for the opening. In the tradition of new stores opening in Japan get ready for a long line – hopefully by then the weather will be a little cooler.

Mizuno Runs up Sales in Q1

Osaka-based Mizuno Corporation reported strong profits in Q1 lead by sales in the Americas of 15% and Europe at 14%. Mizuno’s Q1 net income was 1.2 billion, an increase of 23% from Q1 2009. Lead by the athletic footwear category sales increased by 800 million yen, with sales in baseball also greatly contributing. Overall group revenue for Mizuno increased to 41.1 billion from 40.9 billion in 2009. At the end of Q1 Mizuno finished with 129.8 billion yen in cash.

Data Mizuno Corporation

Yoox Profits Surge in Japan

The ten-year old etailer and ecommerce site manager Yoox Group SpA experienced a global Q2 increase in profits of 27% from 2009. Yoox, the Italian internet mail order etailer of men's and women's multibrand designer clothing and accessories, also manages the ecommerce sites of Emporio Armani, Robert Cavalli, Marni, Diesel, Valentino SpA, Dsquared, Dolce & Gabbana, Moschino, Jil Sander and Pucci among others.

With a monthly average of 8.1 million visitors to their web site Yoox reported a second-half increase in orders from 536,000 to 717,000 which helped vault sales 85.8% in North America and 51% in Japan. Japan is only one of two international warehouse hubs for Yoox; one in Tokyo and the other in New Jersey, USA.

Data Yoox Group SpA

Tom Ford in Ginza

Though I do not agree with the opening date of the new Mitsukoshi Annex in Ginza on 11 September, I am looking forward to one of their new tenants. According to a spokesperson at Mitsukoshi, Tom Ford will open up shop in the new Mitsukoshi Annex. Mitsukoshi, which has traditionally been weak in men's wear, is hoping the new annex, with more focus on men's wear will reverse this trend and strengthen their men's wear offerings. The new Tom Ford shop will be the third one in Japan for the luxury-designer, after Osaka Hankyu and Shinjuku Isetan.

A Good July for United Arrows

With growing customer traffic of 14.5%, United Arrows continued their same-store-sales growth for July with a 7.9% increase. Although their sales per customer dropped 5.8%, lower prices pulled in more customers resulting in the sales increase. Buoyed by the positive same-store-sales United Arrows’ stock price increased 7.5% from 1,088 yen to 1,170 yen. July was the second straight month of increase same-stores-sales after an increase of .08% in June.


Data Nomura Securities

Uniqlo's July Same-Store-Comps Rise...Barely

Uniqlo's July same-store sales increased compared to 2009, albeit only 0.4 %. This is still good news as Uniqlo experience a loss of 5.8% in June as well as losses in the double-digits in March and April. The same-store increase is only for Japan Uniqlo stores and does not include international business.

Uniqlo is having a tough time this year with same-store-sales results varying month-to-month with the start of the year sales decreasing 7.2% in January, then to increase in February, then only to fall again 16.4% in March and 12.4% in April before rebounding 3.1% in May to only fall again 5.8% June.

Can Uniqlo rid itself of excess inventory? Will Mother Nature finally calm down enough for people to want to go outside and into Uniqlo stores to shop? Has Uniqlo peaked and is their relevancy now in question? Stay tuned for these answers and more as we wait for same-store-comps for August…

Data Fast Retailing Co., Ltd.

Armani's Night Out in Tokyo

Giorgio Armani will help kick off Fashion’s Night Out in London next month.  Armani will host a cocktail at his Emporio Armani store on London’s New Bond Street to celebrate the U.K. event on 8 September.  The Giorgio Armani label in collaboration with Vogue Nippon will also host Fashion’s Night Out in Toyko on 11 September - the same day as the opening of the new Mitsukoshi Annex.  Additionally the Giorgio Armani brand will host Fashion Night Out events in  Paris on 7 September, New York and Los Angeles on 10 September and Taiwan on 11 September.  Unfortunately Giorgio Armani will not be able to attend every event in every city but the brand promises the event to be epic, splurge inspiring, and seriously stylish. 

Positive Growth for Aeffe in Japan

Aeffe, which produces and distributes collections for Alberta Ferretti, Moschino, Pollini and Jean Paul Gaultier reported sales growth in Japan of 1.6% for Q2.

Data Nikkei

Isetan is Number One in Department Store Sales in July

July sales at Isetan Mitsukoshi Holdings Ltd. increased 0.6% from the prior year for Isetan Department Stores - their first same-store increase in two years.

Sales at the other big three department stores did not fare as well as Mitsukoshi saw sales fall 9.1%, Takashimaya experienced a 1.9% decrease and Daimaru Matsuzakaya's sales decreased 1.5%.

Data Japan Department Store Association

Bulgari Japan's Slow Crawl into Profitability

With growth in all categories except watches and huge sales in both the U.S. and China, Bulgari is slowly trimming away their losses. Good news indeed though Bulgari Japan is still lagging behind the rest of the geographic markets worldwide for Bulgari. By region sales grew in Europe by 1%, including 2.7% in Italy, making up 34% of total worldwide revenue for Bulgari. Elsewhere Bulgari saw sales increase in the U.S. an amazing 53.4%, making up 14% of total revenue, and in Asia sales rose 26.2, not including additional sales in China of 29.7%, making up 44.8% of Bulgari's total worldwide revenue. Except for losses in the Middle East of 5.1% all regions experienced sales increases, even Bulgari Japan with their modest-growth of 1.2% showed signs of life though still continue to lag behind the rest of the world.

Overall these sales results are good for Bulgari and show that the cost containment and creativity investment strategies of CEO Francesco Trapani are indeed working, though they will need some tweaking for the Middle East and Japan markets.

Data Bulgari SpA, Milan Italy