By Maxim Tvorun-Dunn
Japanese Department Stores, or depaato have been a staple of modern Japanese consumer luxury retail and a spectacle in marketing and architecture since the 1920s. While being a key facet of urban life amongst turn-of-the-century modernity, department stores globally have found uncertainty in the digital age, hastened by recent pandemic events.
Are Japanese Department Stores Doomed or Set to Succeed?
In Japan in particular, department stores experienced a decline in sales between 30%-40% in 2020, with The Japan Times going so far as to declare that the “Death Knell” of depaato had been sounded. With such dramatic wording as “death knell”, further examination is certainly necessary.
Here, we examine both the fate and opportunities that exist around department stores, potential vendors, and marketers as times are changing. Finding the depachika (food halls found in the basement of most department stores) to be a defining feature separating Japanese department stores from their European counterparts, this article looks at case studies of Japanese food halls and their sellers.
The Underground Culinary Delights of the Depachika
The splendor of physical depachika is something which cannot be rivaled by photographs or adverts. Aisles and aisles of sweets, bento, and omiyage line endless marvelously lit cabinets. While perhaps its closest European equivalent may be the first floor of London’s Harrods, the prices for these goods are generally much fairer for the average consumer than, for instance, Harrods’ brand of elaborate pastries.
While a 2002 study found that Japanese department stores relied upon a tight market of well-known long term vendor partnerships, recent sales drops have led to opportunities for new tenants as firms look for attractive sellers. As such, this is a key moment for pre-packaged food producers in Europe to consider expanding into Japanese depachika. While broader sales figures across departments stores have dropped, does this open up room for effectively-marketed foreign brands to turn a profit in these elaborate settings, and how do online alternative marketplaces compare?
Retail Vendors at Japanese Department Stores
While the accounting behind an investment in Japanese department store retail is up to individual firms to decide; key to the question posed a moment ago is the phrase “effectively-marketed”. Let’s examine the current standard in depachika presentation and how global firms can seek to disrupt this market.
As previously stated, the immediate physical effect of food halls is massively impressive, and such a broad display of Japan’s penchant for beautifully arranged foods makes it difficult for even the stingiest customers not to purchase anything. Such a smorgasbord of edible arrangements, however, means it can be difficult for vendors to make their items stand out when equally elaborate competition is placed mere meters away.
Furthermore, the massive variety of items on display is bound to induce “overchoice,” the psychological principle that as decision makers are given more relatively equivalent items to choose from, the harder it will be to actually come to a decision. Sellers with deep pockets and close ties to department store owners attempt to overpower these issues by building elaborate stalls which clash with the standard depaato design; this is a strategy that can be recognised in most KitKat or Wittamer Chocolate stores found within Tokyo depaato.
Scholar Hendrik Meyer-Ohle finds potential room for improvement in the relationship between consumers and vendors in depaato, noting that department stores rely on a traditionally authoritative relationship, in which purchase decisions are advised to consumers, while effective contemporary marketing instead places the creation of meaning within sovereign customers.
In other words, traditionally department stores use their elaborate architecture and visibly differentiated marketplaces to impose a sense of what choices are appropriate for consumers based on their age, social standing, etc. This strategy is losing viability as consumers become increasingly educated and value independence of choice. Vendors seeking to disrupt the Japanese department store market may do so by finding new ways to empower consumers within the department environment, offering spaces and arrangements which target consumer groups more subtly.
Online Competition to Japanese Department Stores
Much of the decline in department store sales can be attributed to online competitors, notably Rakuten and Amazon. While online purchases lack the immediacy of physical food, assumptions of freshness, and elaborate displays, their convenience and low barriers-to-entry for vendors can make them attractive alternatives to depaato shopping.
One example of particular note is the food items sold via the Rakuten marketplace. Compared with Amazon’s small photo selections, the cakes and pastries on Rakuten are given elaborate long-scrolling displays which go into mouthwatering detail about each cake alongside highly photogenic pictures and diagrams. While this approach loses convenience points for hiding the point-of-sale buttons all the way at the bottom below the adverts, these screens come closest to an online equivalent of the Wonka Factory-like depachika.
While these types of online marketplaces offer innovative and convenient alternatives to retail food halls, this route is not without its drawbacks for merchants. From utilising private vendor information to develop in-house products, to putting in place plans to charge sellers for shipping costs, there remains to be some degree of risk to sellers. The ideal marketplace for any firm hoping to shake up the pre-packaged food industry in Japan is of course one that is operated in-house, but without massive clout this may be an impractical plan to rely on.
Avenues for Vendors in Japanese Department Stores
With an increase in Japanese department store vacancies, vendors with innovative ideas have a rare chance to reinvigorate the depaato market in Japan. While it’s true that department stores suffered huge losses during 2020, The Japan Times attributes these primarily to the temporary closures last spring as well as a general drop in tourism.
Thus, with risk of further closures greatly diminished and the recent greenlight for the rescheduled 2020 Olympics, a campaign effectively marketed to Japanese consumers, either online or offline, with an attempt to empower decision making may be a strong solution for vendors that can, in turn, revamp the industry.
Alternatively, feel free to get in touch and see how we can help your business make more effective decisions about navigating the Japanese market.