Japan’s first downtown ‘duty free shop’ is expected to open in the Mitsukoshi Department Store in Tokyo’s Ginza shopping district next year.

 

Senior industry sources told TRBusiness exclusively in Tokyo this week that the shop is scheduled to begin trading in the autumn of 2015 and will be operated by a consortium of Jatco, Narita International Airport Corporation (NAA) and Mitsukoshi Isetan Department Store Co – one of Japan’s famous leading department store operators.

 

Japan Duty Free FaSoLa Mitsukoshi Isetan Co will be formed this month and the shop will open in Autumn 2015,” said the senior source.

 

“The company’s office will be in Tokyo with its registered address at Ginza Mitsukoshi Department Store. The government still has not officially approved downtown duty free shopping. It’s still being negotiated by the companies. The Customs Department is in charge of this matter. At the moment there is no official answer from them.”

 

According to sources, it has been agreed that Jatco will be the major shareholder in Japan Duty Free FaSoLa Mitsukoshi Isetan with a 45% stake, while NAA and Mitsukoshi will each have 27.5% shareholdings.

 

Planning is underway at present for the downtown store, which will cover 3,300sq m and occupy the entire eighth floor in Ginza Mitsukoshi, which is currently used to sell household goods and also contains an exhibition area and a gallery. Duty free merchandise will include luxury fashion brands, watches, jewellery and perfume and cosmetics.

 

“Mitsukoshi needs airport company support for this project as they do not have duty free experience,” the source commented. “Also, only airports can pass duty free goods bought downtown to passengers on departure, so a partnership is needed; that’s why Jatco, which is a major shareholder in Tokyo International Airport Terminal (TIAT) at Haneda Airport, and NAA, which operates Narita Airport, joined this venture.”

 

The Ginza Mitsukoshi downtown duty free store will contain a showroom only and will not hold any duty free goods for sale. Jatco will hold a stock of duty free goods for customers leaving Japan through Haneda Airport, while FaSoLa, under NAA Retail Corporation, will hold stock at Narita.

 

 

Clockwise, and top: The Mitsukoshi Department Store in Tokyo’s Ginza district;  Japan Duty Free at Narita T2 (owned by JATCO); FaSoLa owned by the Narita Airport Corporation; and the Japanese Cabinet approving an increase in the number of tax free shops to 10,000 on Tuesday June 17, 2014. The separate ‘duty free’ joint venture described here requires additional Customs approval, which has been agreed in principle while systems are created for stock movement and a legal framework for the business.

 

 

Details of the shop design and layout are not being revealed while planning is underway. “We are planning the duty free shop now but we have not decided anything yet,” commented a manager in the downtown store’s planning department in Ginza Mitsukoshi. “The downtown shop will be developed by three companies, so we have not decided anything so far.”

 

Preparations are expected to take some time to complete as operating Japan’s first downtown store will require new stock management systems. This will also include vital software relay information to the airport collection centres to ensure customer purchases are waiting for collection when passengers check in for their departure flights.

 

Progress with Japan’s first downtown shop will be watched with interest by other duty free operators, retailers and other companies interested in opening downtown stores in future. Department store owners are expected to be interested as operating a downtown duty free store could help boost revenue from existing retail floor space.

 

“There are many Chinese shopping group tour coaches driving through Ginza every day and Mitsukoshi may want to get these coaches stopping outside,” the source said.

 

“The ground floor sells perfume and cosmetics in most department stores, the basement levels sell food and the first floor sells ladies’ fashion. These floors account for about 70% to 80% of department stores’ business.

 

“It’s difficult to get customers to visit other floors in a department store, so getting customers to visit the eighth floor is a challenge.”

 

[Just over 11.25m foreign arrivals visited Japan setting a new record in 2013 – up by 22.7%. South Koreans accounted for around 2.31m (+21.2%); Taiwanese 2.16m (+51%); and Chinese visitors 983,270 (-6.4%). The decline in Japan’s third largest inbound market was due to its ongoing territorial waters dispute with China. This business has now seemingly recovered].

 

 

JUNE 17 2014: “Today I have approved the draft of the new Action Program, which sets out the ambitious target of reaching 20 million overseas visitors by 2020, using the 2020 Tokyo Olympic and Paralympic Games as momentum.  As part of this, we will, for example, offer visa exemptions for Indonesian visitors. We will also further relax visa requirements for visitors from the Philippines and Vietnam. Additionally, in October this year, we will broaden the scope of consumption tax exemptions for foreign visitors to Japan to include all products. In line with this, we will double the number of tax-free shops in Japan to roughly 10,000 by 2020.”

SHINZO ABE, PRIME MINISTER, JAPAN.

 

TRBUSINESS DOWNTOWN SHOPPING TIMELINE IN JAPAN:

2012: Major Japanese airports wrote to the government requesting changes be made to Customs Department regulations to permit the introduction of arrival shopping [click here: http://www.trbusiness.com/index.php/regional/asia/11965-japan-formally-considers-arrivals-shops.html].

 

AUGUST 1 2013: The downtown issue surfaced again with a call to introduce duty free off airport shopping as part of the government’s commitment to breathe new life into its inbound numbers. [click here: http://www.trbusiness.com/index.php/regional/asia/13604-japan-considers-df-downtown-store.html].

 

JUNE 17 2014: Japanese Prime Minister Shinzo Abe announces ‘rule change’ to widen the range of goods available for tax free purchasing from fashion and electrical goods to include other product categories, such as cosmetics, beauty products and liquor and food items from October this year. [click here: http://www.trbusiness.com/index.php/regional/asia/15418-japan-plans-10000-tax-free-shops.html]