Has the Death of the Department Store Reached Japan?

Has it finally come to an end for the department store in Japan, which has been around longer than most?

News of the impending closure of the Seibu store in Shibuya, the busy district of central Tokyo that is home to the famous Scramble Crossing, marks the end of an era. The arrival of Seibu in 1968 triggered a battle for control of the stores and is credited with transforming the area from a stagnant black market into the home of a world-famous youth subculture.

With Shibuya in the midst of a two-decade reconstruction, many thought Seibu would be one of the few surviving landmarks. But the owners, Fortress Investment Group, failed to renew their contract with the landowners and will close their doors in September after nearly 60 years.

The store is in trouble everywhere. Even the term itself has a bit of a Mad Men era feel to it. Saks Global is in bankruptcy protection and Debenhams in the UK has closed. Now these trends appear to have come to Japan: although sales have returned to pre-Covid levels, this is largely thanks to tourists buying duty-free, and revenues remain well below half their 1990s peak.

It’s not hard to see why. Worldwide e-commerce retail sales are predicted to grow 14% annually, rising to $5.5 trillion by 2027, and Japan is no exception. “The landscape is rapidly changing in Asia, where department stores like Sogo and Takashimaya once dominated,” and younger consumers are “turning to digital platforms,” according to a report from market researcher Kadence. Temu and Shein aside, perhaps even depaato will no longer be able to compete with Amazon and its local rival Rakuten.

A few years ago, I wrote about how the history of the Sogo-Seibu chain is a chronicle of Japanese capitalism, from Sogo’s bankruptcy in 2000 and its subsequent merger with Seibu to the sale of Seven & i Holdings Co. to foreign capital at the instigation of activists in 2023. Perhaps the move to digital is a sign of a new chapter.

Department stores in Japan are often affiliated with railway operators, who base them around transportation hubs with closed masses. But Seibu is a little different. Railroads and stores were part of the post-war empire of tycoon Yasujiro Tsutsumi; but after his death they were divided between his sons Yoshiaki and Seiji. The former controlled the trains, while his half-brother controlled the department stores.

The two had a rivalry that would put the Succession to shame: Seiji would at one point go on to lead a retail group that now includes Muji, FamilyMart, and Intercontinental Hotels, while Yoshiaki would be listed as the richest man in the world for years thanks to his real estate holdings. Both would face significant legal issues that would lead to the collapse of the Seibu group. Seiji took the Seibu department stores to an area where the business had no rail presence: Shibuya, dominated by Tokyu Corp., which controls residential railroads west of Tokyo.

Seibu’s entry triggered a decades-long battle for dominance. To attract the growing baby boomer industry, it released ads featuring Woody Allen and highlighting youth culture. Tokyu fought back, and the competition helped create stores that would attract the Shibuya subculture that captivated the country and then the world.

However, with increased competition from Shibuya, Seibu’s sales dropped. The upper floors were often deserted, even as the surrounding streets were teeming with tourists. Tokyu won by abandoning the department store model: It closed both of its Shibuya stores in favor of newer mixed-use buildings combining department stores, office space, and hotels.

But I don’t believe this marks the end of the brick-and-mortar store. Across Tokyo, new developments such as the Takanawa Gateway, a mixed-use project led by the East Japan Railway Company, are attracting shoppers’ attention. On a recent trip to Ginza to find a pair of Swiss brand On sneakers, I found a line of close to 100 people waiting to buy tickets to enter the store later. In the US, the slow death of shopping malls is now being reversed, thanks to the “malmaxxing” of Generation Z. Younger generations are returning to analog, reflecting their devotion to vinyl records, movie cameras and board games.

“There will be no progress if you do the same things as everyone else,” Seiichi Mizuno, then Seibu manager, said in 1987. “You must constantly try to grasp something new and have the courage to step forward.”

Shibuya may be losing an important point. But in a world where artificial intelligence is pervasive, the personal touch of human pleasure will be more important than ever. The growth of agency shopping will be bad news for generic retailers. But those who create an experience may find themselves in more demand than ever before. That’s exactly what the store offers at its best: hand-picked, human-selected, things you’d never know you needed until they laid eyes on you.

More from Bloomberg Opinion:

This column reflects the author’s personal views and do not necessarily reflect the views of the editorial board or Bloomberg LP and its owners.

Gearoid Reidy is a Bloomberg Opinion columnist covering Japan and Korea. He previously led the breaking news team in North Asia and was deputy Tokyo bureau chief.

This article was generated from an automated news agency feed without modifications to the text.