The Journal The Authority on Global Business in Japan

The struggles of the Japanese economy are well documented. Despite five consecutive quarters of growth—the longest stretch since 2005–2006—domestic consumers continue to pinch pennies. But as a luxury market, and a destination for inbound tourists looking to shop, the country is clipping right along.

In 2015, Japan was the world’s second largest luxury goods market at nearly $23 billion, as reported by consulting firm Bain & Company. And in 2016—while the luxury market in the Americas shrank 3%, Asia (excluding Japan) shrank 3%, and Europe shrank 1%—Japan grew 10%.

TOURIST-POWERED
Driving this surge are the more than 24 million tourists who visited Japan in 2016, up from 19.7 million the year before, according to the Japan National Tourism Organization.

Bain & Company’s research found that about 40% of sales for Japan’s most exposed brands are to tourists. In 2016, these visitors spent ¥3.75 trillion—an increase of 7.8% from the year before. While positive, the increase represents a sharp drop compared with the jump from 2014 to 2015, when spending rose 71.5%. To keep the train going, Japan must continue to evolve and make itself attractive to inbound shoppers—particularly as the yen appreciates.

The Japanese government has set a goal of attracting 40 million overseas visitors annually by 2020, and is taking steps to hit this target through measures such as the easing of visa requirements for Chinese tourists. Meanwhile, real estate developers are doing their part to attract more inbound shoppers through multi-use projects that center on world-class brands and luxury experiences, but also tie in to the local community.

GINZA SIX
Efforts to attract shoppers from abroad got a boost on April 20 with the opening of Ginza Six, the massive mixed-use development on the site of the former Matsuzakaya Ginza department store and adjacent land.

A joint project involving Mori Building Co., Ltd., Sumitomo Corporation, J. Front Retailing Co., Ltd., and L Catterton Real Estate of the LVMH Group, the 148,000-square-meter, 19-story structure covers two city blocks in the heart of Tokyo’s most prestigious shopping district.

Six of the floors are below ground and 13 above. Retail spaces cover the second basement up to the sixth floor, while office space is located on floors seven through 12. Shops and offices share the 13th.

“It is the largest redevelopment project ever conducted in Ginza’s history of some 100 years,” Koichi Kurihara, executive officer of Mori Building Co., Ltd. told The Journal. “Conducting this kind of redevelopment in an area with such high-level usage is extremely rare.”

In planning and developing the complex, Mori drew upon its experiences from two of the company’s other large mixed-use projects. “We expect this [complex] to advance the Ginza area like Roppongi Hills and Omotesando Hills did for their respective areas,” said Kurihara.

Inbound shoppers play an important role in the success of these Mori properties, but the hope is to continue boosting the numbers. “The percentage [of overseas visitors] varies by facility from less than 10% to around 25%,” Kurihara estimated. “We expect international shoppers to account for about 20% of overall sales at Ginza Six.”

The nationalities of inbound shoppers also vary, he said, but Chinese tourists, including those from Hong Kong, make up the majority—an important point as Chinese visitors accounted for 39.4% of the ¥3.75 trillion luxury market revenue in 2016.

DESIGNED ATTRACTION
In bringing together the tenants of Ginza Six, the partnering companies worked hard to attract brands that will appeal to those looking for current Japanese trends and cutting-edge worldwide trends in one place.

Of 241 stores in Ginza Six, 121 are flagship stores—and for 12 brands the location marks their first entry into the Japanese market.

“We primarily selected brands that are enthusiastic about launching flagship stores at Ginza Six,” Kurihara explained. “We particularly looked for brands with strong identity and the power to offer high-quality lifestyles, backed by reasonably priced, global-standard quality and service.”

Japanese architect Yoshio Taniguchi—who designed the Museum of Modern Art in New York City—made capturing and drawing out the history and beauty of the Ginza area the heart of his design. The façade of Ginza Six is a canvas that allows retailers to attract shoppers even as trends change. The simplistic array of curtains facing Chuo-dori can be easily replaced, allowing each store to create a unique image and update it with the times. The façade can also reflect the changing of the seasons, thereby conveying to visitors one of Japan’s great loves.

“For tenants who take pride in operating in the prestigious Ginza location—including with their flagship stores—we will help them tackle new challenges and initiatives by providing them with a world-class venue and atmosphere,” Kurihara said.

CULTURAL TOUCH
In addition to shopping, Ginza Six makes one of Japan’s most important traditional art forms easily accessible to visitors. The B3 floor is the new home of the 480-seat Kanze Noh Theater and houses its cypress stage, which was moved from its outdoor home in a Shibuya residential area and reassembled inside Ginza Six.

Growing out of dance and festival dramas performed at shrines and temples in the 12th and 13th centuries, Noh became a distinctive art form in the 14th century and is one of the world’s oldest extant forms of performance art. Meaning “talent” or “skill,” Noh comprises five types of plays in which actors convey stories related to Japanese culture and history.

With the famed Kabukiza nearby, the inclusion of the Kanze Noh Theater in Ginza Six broadens the opportunities for tourists to experience Japanese culture and marks the return of the Kanze School to the district it called home from 1633 to 1869.

TOURIST FOCUS
Highlighting the importance of shoppers from abroad, Ginza Six includes a tourist center that provides information and serves as a checkpoint during disasters. About 3,000 people can take refuge at Ginza Six—1,000 at the Noh Theater—and emergency information will be provided in multiple languages.

In a tie-up with convenience store chain Lawson, Inc., the facility also serves locals through the first Travel Lawson. Unlike the average Lawson, this location sells food and goods curated from around Japan, putting local everyday items such as rice and soy sauce from the nation’s 47 prefectures and territories within easy reach of area residents—something that will also be attractive to visitors from abroad. Halal items for Muslim tourists are also available.

HEART OF TOKYO—AND BEYOND
Mori isn’t the only developer connecting tourists with luxury brands and cultural immersion. Mitsui Fudosan Co., Ltd. has created a must-visit destination at the traditional center of Tokyo with Coredo Muromachi—whose name literally means “core of Edo” (the former name of Tokyo).

Opened in 2010 and expanded in 2014, Coredo Muromachi is well-known to Tokyo residents and tourists. Unlike the demographics of Roppongi Hills and Omotesando Hills, Mitsui Fudosan told The Journal that the complex receives a majority of visitors from North America and Europe, followed by China, Taiwan, and South Korea.

“The shops with ‘Made in Japan’ goods, accessories, and interiors are popular among tourists from abroad,” said Aya Sakamoto, planning group project leader in Mitsui Fudosan’s Nihonbashi Urban Planning and Development Department. “These shops provide easy access to masterpieces from across Japan—cutlery, lacquered works, gold-leaf crafts—as well as washoku [Japanese cuisine] such as sushi, yakiniku, yakitori, pickles, obanzai cuisine from Kyoto, and traditional Japanese sweets known as wagashi.”

Like Ginza Six, Coredo offers cultural experiences. Through the Nihonbashi Information Center, tourists can participate in tea ceremony, crafting classes, geisha entertainment, and culinary tours.

Mitsui Fudosan is also making a play for tourist yen beyond Tokyo with its LaLaport and Mitsui Outlet Park shopping mall developments, which are located across the country.

“We ask travel agencies to visit these properties as a part of their plans,” explained Sakamoto, “and we link up with hotels to help tourists.”

STAYING THE COURSE
The addition of Ginza Six to Tokyo’s well-established destinations such as Coredo Muromachi, Roppongi Hills, and Omotesando Hills puts Japan in position to offer new luxury and cultural experiences to the influx of visitors expected between now and 2020.

The ambitious thinking on the retail front is a needed weapon in the battle for shoppers in the region. Although tourist numbers are increasing, spend is slowing—particularly among the lucrative Chinese demographic. The bakugai (explosive buying) that has made Chinese tourists famous in recent years may be over. Then again, there are many factors at play, such as the value of the yen and declining price differential of goods between Japan and China. Winds shift, and the evolving efforts of Japan’s real estate developers are charting a course to help meet the country’s ambitious goals.

Christopher Bryan Jones is Editor-in-chief of The Journal. Originally from Birmingham, Alabama, he has lived in Japan since 1997.
Of 241 stores in Ginza Six, 121 are flagship stores—and for 12 brands the location marks their first entry into the Japanese market.