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TOKYO (Reuters) – After more than three centuries in business, Onuma department store in the northern Japanese city of Yamagata began bankruptcy proceedings this year, one of many distinguished department stores across the country. in a desperate situation.
Known for their elegant food halls, luxury items, impeccable service, and, at their peak, rooftop attractions to entertain families, Japan’s department stores have seen a slow and long decline as shopping habits have changed.
Now, the coronavirus pandemic, much like it has forced US retailers like Lord & Taylor and Neiman Marcus out of business, is driving nails into coffins for some, particularly those in regional areas.
Last month, 146-year-old Nakago closed the doors of the last remaining store in Fukushima city, also in the north, while Izutsuya Co Ltd, a chain in the southern city of Kita Kyushu, closed one of its two main stores.
“Everyone agrees that it is very disappointing, but the truth is that people have not been shopping in these stores lately,” said Shuhei Yamashita, a retail consultant who hopes to buy the Onuma department store from creditors and turn it around.
This year, with consumers wary of shopping and tourism decimated amid the pandemic, sales have plummeted. Industry sales fell a fifth in July from a year earlier and lawmakers fear more store closures and bankruptcies are inevitable.
Even before this year’s troubles, Japanese department stores have struggled to stay relevant, selling items like $ 10,000 kimonos and fancy dinnerware to maintain their cachet even as consumer tastes have turned to more casual items. At the same time, consumers have done much of their shopping online.
Both industry-wide sales and the number of stores have fallen 30% since 1999. Some of the country’s 203 department stores have also dramatically reduced floor space by bringing in other tenants.
Large national chains and stores in major cities have not been immune. Isetan Mitsukoshi Holdings Ltd, for example, closed several stores over the past decade and said in March that it would close a Mitsukoshi store in central Tokyo next year.
Yet it is the outlook for regional stores and the implications for their local economies, already ravaged by decades of deflation, anemic growth and an exodus of young people in search of better jobs, that is causing the greatest concern.
Policymakers worry that store failures could sow seeds of crisis, exacerbating the pain felt throughout the local economy to the point where beleaguered regional lenders will not be able to cope with the surge in delinquent loans. .
“The closures will affect property prices, employment and many other aspects of an already weakening regional economy,” said a government official with experience in regional finance, who spoke on condition of anonymity.
Japan’s Chief Cabinet Secretary Yoshihide Suga, the pioneer to become the country’s new prime minister this month, has made revitalizing regional economies a key political priority.
But whether any of the government’s promises of $ 2.2 trillion in stimulus to businesses affected by the pandemic make it to department stores remains an open question, with some government officials and politicians saying privately that the money should be funneled into more industries. viable.
EVERYTHING HAS CHANGED
In Yamagata, the future of Onuma department store remains unclear. Although Yamashita’s company wants to keep the store running, creditors could choose to sell to a higher paying bidder.
Some locals seem resigned to Onuma’s failure, saying it has been unable to keep up with changing lifestyles, including the rise of online retailers and faster transport links to larger cities.
“Infrastructure, transportation, lifestyles, information, culture, values, everything has changed,” wrote Takashi Inoue, president of a metal processing company in Yamagata, in a blog while lamenting the bankruptcy of Onuma.
For now, Yamashita’s company is helping to keep the store open until the end of September, although the food hall is closed and shoppers are limited to searching for bargains on household items and clothing that it has collected at various warehouses.
Still, Yamashita does not lose hope that creditors will be convinced of his plans to renovate the store.
“It is a place that people loved,” he said. “It will be a shame if it becomes a taller building.”
(Information from Ritsuko Ando and Leika Kihara; additional information from Takaya Yamaguchi, Yoshifumi Takemoto, and Kaori Kaneko; Edwina Gibbs editing)
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