d of March, the government’s Ministry of Economy, Trade and Industry (METI), which measures monthly retail trade at large chains, reported that sales for January and February rose by 2.1 per cent and 4.6 per cent, respectively, compared with the same months a year ago. Department stores were up a stellar 13.5 per cent in February with three fewer stores in the database, so the improvement in productivity of department store space has been impressive. Supermarket and convenience store sales growth broadly mirrored the top line for all retail, with mid-single-digit gains in February. For large-scale home goods retailers, the slump continues though, with sales falling for the third consecutive month. Indeed, since the beginning of last year, sales at these chains have gone south in 10 of the 14 months. On the other hand, health and beauty is irrepressible, with drugstore sales rising in the double digits. Department stores keep their mojo Department stores are riding three waves simultaneously – the aforementioned improvement in confidence, the recovery of tourism that is driving duty-free sales at the large international entry and access points, and success in squeezing more value out of wealthy individuals. The last of these, in turn, is being achieved through a focus on both human interaction skills (a Japanese specialty) and digital technologies. The only slightly sour note is that the regional stores of most of the big players are lagging well behind those in the downtowns of the major urban hubs. For Takashimaya’s 14 luxury department stores, sales have been growing at a clip above 20 per cent, year-on-year, but heavily weighted to the Tokyo flagships (Nihombashi, Shinjuku and Tamagawa) and the Osaka and Kyoto stores. The other thing to note about Takashimaya is that sales are up far more strongly than customer traffic, so shoppers are spending more on each visit than they did previously. Isetan Mitsukoshi, another of the important Japan department store companies, is also reporting outlandish sales growth at three of its five stores in Tokyo (Ginza, Shinjuku and Nihombashibi) but its regional stores are recovering much more slowly. J. Front Retailing, which owns 15 Daimaru and Matsuzakaya department stores and operates 17 Parco shopping malls, has been able to spread its growth around a little more than the others. Its department store portfolio showed year-on-year sales growth of 14.2 per cent in March. The Shinsaibashi store (downtown Osaka) was up 42.7 per cent, and the other leading stores in the portfolio were in Sapporo and Kyoto. Womenswear has been a big gainer, with huge growth in sales, but menswear has gone in the opposite direction. Cosmetics, jewellery, electric appliances, restaurants and cafes, and delicatessen items have, along with women’s apparel, been the strongest growth categories. Tenants across the portfolio of J. Front’s Parco malls have been consistently enjoying year-on-year growth of 10-20 per cent, and some of them well above that. As in the company’s department stores, apparel, accessories, and restaurants and cafes have been standout categories.  J. Front has been focused heavily on squeezing more value out of affluent customers, including so-called ‘gaisho’ customers who are visited by a sales rep from the department store, rather than having to go to the store themselves. Making this work for the retailer requires a lot of sophisticated customer interactions, including relevant brand selection, virtual events, outstanding in-person communication and implementation of the most advanced digital technology. J. Front’s gaisho customers have their own dedicated website through which they are offered exclusive products, such as art that is in limited supply and would not ordinarily attract a customer of less than high wealth. The relationship that develops between retailer and customer is an unusually tight and high-value one, and J. Front estimated previously that revenue from this source will account for 30 percent of sales this year. Since the level of digitisation is high, gaisho can target both the ‘old’ and ‘new’ money customer. The focus on affluent customers with a taste for art and expensive whisky is part of the Japan department store’s ‘mission’, as they are perceived as vehicles for preserving and upholding Japanese art and culture. This is underpinned by periodic exhibitions and special events, a model that has been spreading beyond Japan and is now a staple of upscale shopping malls in Thailand (for example, ICONSIAM and Emsphere in Bangkok), Hong Kong and mainland China (the K11 art malls). For Japan though, it is further authenticated by the fact that a lot of the stores themselves are national heritage buildings. Specialty apparel: not so hot Not everyone in the apparel business is on a roll. Uniqlo and its sibling brands under Fast Retailing are struggling for traction in their country of birth. The slow pace of sales growth at Fast Retailing is something to take notice of because it’s the largest apparel retailer in Japan and the third-largest in the world after Spain’s Inditex and Sweden’s H&M. The retailer reported a same-store sales decline (including the online store) of 1.5 per cent in March, following on from a steeper 3.4 per cent loss over the six months to February. The glib explanation was “persistently cold weather” that hampered the sales of spring items. Bottom line: it’s a mixed bag  So it still isn’t the case in Japanese retail that all boats are rising. While a lot of the department and specialty stores are sitting nicely, many in the regional areas are only just bobbing in the waves. The mixed bag in retail reflects consumers’ persistently poor perceptions of the economy and their own prospects (evidenced by the consumer confidence numbers), with inflation inching up and wages stagnating. Department stores, for their part, are wise to focus on the crème de la crème, because the mid-market consumer is not a creature on which to rely. Further reading: Japan’s department stores: What’s left when the tourism tide goes out?