viour of younger consumers. Late last year – after five consecutive years of losses – Sogo & Seibu parent Seven & I Holdings (best known as the parent of the global 7-Eleven brand) bowed to shareholder pressure and sold the business to US investment group Fortress.  Since then, the new owners have set about reviewing the entire business model in an effort to restore profitability. Progress on the process is unclear, with the company discontinuing the release of monthly store sales data last March.   In June, however, plans were revealed for a reimagination of the giant store’s 10 floors and a move away from the traditional department store model segregated by different floors for men’s, women’s and children’s clothing.  “Seibu Ikebukuro will welcome all customers visiting Ikebukuro in unifying spaces where friends, couples and families can shop and enjoy time together,” the company announced in a statement. “With a variety of world-class brand shops and a high-quality interior and exterior design, the store will create a new face for the Ikebukuro area.” From next January, the 48,000sqm store will be reopened in stages, before a grand reopening is celebrated in summer. The primary focus points of the complex will be luxury, cosmetics and a basement deli section.  A new luxury precinct will bring together about 60 top international brands – again in mixed men’s and women’s shops – with a sales floor area 1.3 times larger than the existing footprint.   A cosmetics area will be home to about 60 domestic and international brands – including unisex brands that customers can shop for with their partners. That category will boast a footprint 1.7 times larger than the current cosmetics hall.  The basement deli section – considered the store’s main customer drawcard, attracting commuters using the adjacent railway station, where multiple suburban lines converge at Ikebukuro, the third-largest terminal station in the world – will feature about 180 stores, including new brands.  Mixing it up The most attention-grabbing aspect of the redevelopment is arguably the move away from gender-based apparel sections.  “As lifestyles diversify, department stores are entering an era where they are required to evolve,” a spokesperson for the company said, adding that the end result of the transformation would be “tailored to customer needs while retaining the excellent services of traditional department stores”. Michael Baker, former head of research at the International Council of Shopping Centers, who now resides in Asia and is a correspondent for Inside Retail, reads the move as the store “going with the flow” recognising consumer trends and having many unisex specialty brands inside the department store envelope. “Department stores have been trying to emulate specialty stores for years because they know that is how people like to shop. Separate floors for gender and kids are a historical artefact of the huge size of the traditional department store,” he explains.  “Modern department stores are built small for a reason: the department store companies realised they had to edit way, way down and bring the different components closer together to compete with newer formats.” He has seen the delineation of gender in stores elsewhere in the world in modern department stores that typically have smaller footprints, resulting in more compact display spaces.  “The problem is that these older multi-level stores just have so much space to fill. It is really tough. There is just so much space in these big buildings. If they were ideally suited to the modern shopper, then they would still be building them.” He wonders how shoppers will respond to the change at the Ikebukuro Main Store.  “I don’t know how the traditional department store customer would like this transformation. But the problem is that the department stores can no longer rely on those traditional customers because, well, that creature is dying out. They have to target the younger cohorts as well.” Baker suggests adopting a property developer’s perspective to understand the modern challenge: “When a mall developer takes back a vacant department store space, they don’t replace it with another department store, like-for-like, they chop the space up and rent it thematically to specialty stores, food & beverage, for example. This has been done many times in America.  “In Thailand, a great example of this is the Isetan redevelopment in Bangkok’s CentralWorld. It is fantastic. So when you look at what a department store company is trying to do internally with these huge buildings, they are really just doing variations of that same idea that mall operators have been doing for years.” The future of Japanese department stores Sogo & Seibu are not the only Japanese department stores facing something of an existential crisis as the world of retail evolves.  Baker believes the traditional, older Japanese department stores should think less about reinventing themselves and more about taking greater advantage of their natural assets.  “Many are in heritage buildings, well integrated into public transport hubs, great at customer service – the Japanese are justly famous for their social skills – and increasingly expert with their digital capabilities.” He says this combination of skills in customer interaction and digital is driving ‘gaisho’ sales – where the store associate goes to the customer rather than the customer going to the store – targeting high-net-worth individuals.  “A lot of these customers are younger ‘new money’ customers,” he continues. “Aside from that, department stores at the international ports of entry and in other tourist locations are doing really well, particularly with duty free sales to tourists.  “On top of that, Japanese department stores are woven into the cultural heritage much more than department stores elsewhere in the world. They are living art galleries.” With 196 department stores trading in Japan currently, Baker predicts about 10 per cent will close over the coming five to 10 years, reflecting the large schism that has developed in performance between the flagships in the ‘magnet areas’ and the regional stores, some of which will need to be closed. Meanwhile, in South Korea The challenges facing department stores in Japan are not unique. Much has been reported over the past few decades about US chains reinventing themselves, merging and shedding underperforming stores in a bid to keep up with consumer preferences for stand-alone branded boutiques – and online shopping.  In South Korea, as in Japan, operators are responding by focusing on experiential retail offerings, high-net-worth individuals – and attracting younger generations of consumers, especially those from the Millennial and Gen Z generations, born between the early 1980s and early 2000s.   For example, as Ashley Song of The Korea Bizwire reported in July, at the Lotte Department Store in Jamsil, Seoul, global audio brands Geneva and JBL Luxury have opened dedicated listening rooms in the 10th-floor audio section. Here, shoppers can experience high-end sound systems in home-like environments.  Broadly speaking, Korean stores are strengthening their Food & Beverage offer and stalking breakthrough fashion labels that cater to customers in their teens and 20s through online channels, offering them a physical retail platform. Those brands include Emis, where shoppers queued for more than 90 minutes before its store opened at Shinsegae Department Store in Gangnam, Seoul. Its signature hats sold out on the first day. Lotte Department Store’s main branch in Seoul is undergoing its most extensive renovation since it opened in 1979, Song reports. An old-style men’s fashion area is being transformed into a more spacious home for international menswear labels with fewer brands afforded larger display areas, creating a more relaxed, spacious shopping environment.  Lotte World is now home to a 500sqm tennis equipment store, complete with an actual tennis court. “Experiential stores are a competitive advantage that can’t be replicated online,” a Lotte spokesperson told The Korea Bizwire. “We expect to see more of these hybrid spaces combining products and experiences in the future.”  The strategies seem to be working.  Shinsegae Department Store in Gangnam created a dedicated space for young fashion brands it dubbed New Street, which opened last September and features on-trend domestic brands like Wooalong and Birthdaysuit, which are marking their department store debuts. During the first three months of New Street trading, 84 per cent of visitors were new customers for Shinsegae.  “By renovating our young fashion sections and introducing numerous K-fashion brands, we’ve successfully attracted young fashion demand that had been concentrated online for years,” said a Shinsegae spokesperson.  “This has helped us secure future customers by bringing in younger generations who previously didn’t visit department stores.” This story first appeared in the August 2024 issue of Inside Retail Asia magazine.