Tax-Free Sales at Department Stores Drop 40.8% in May, as Foreign Tourists Curb Spending

Yomiuri Shimbun

2 days ago

Visitors to Japan have been key customers for department stores, but now they are tightening the purse strings. Foreign visitors spent about ¥42.5 billion at department stores nationwide in May, down by a massive 40.8% from the same month last year, the Japan Department Stores Association announced Tuesday.
Department stores will try to adapt, such as by offering an app exclusively for overseas customers, but it remains uncertain whether sales will rebound.
May was the third straight month for tax-free sales to fall from a year earlier. The number of foreign shoppers fell 5.4% year on year, to about 536,000, dropping below the previous year's level for the first time in three years and two months.
With sales for luxury brands and other high-priced items sluggish, average purchases per individual dropped by 37.4%, to about ¥79,000.
Foreign visitors are believed to have found shopping in Japan less of a bargain after the recent rise in the yen and price hikes by high-end brands, which were prompted by a surge in raw material costs. Some also argue that Chinese tourists went on fewer shopping sprees due to the slowdown in the Chinese economy.
From January to March, visitors to Japan spent about ¥222,000 on average, up 5.2% from the same period last year, according to a survey by the Japan Tourism Agency. That suggests that overall consumption by foreign tourists has not declined.
However, during that quarter, Chinese visitors spent significantly less on total purchases, with the average dropping by 13.7% to ¥256,000.
'The decline in the average spending per Chinese customer is particularly noticeable. Inbound tourists are diversifying their spending, and they are changing the types of shopping that they value,' said Yoshiharu Nishisaka, managing director of the department stores association.
In the hopes of drawing back foreign customers, department stores are taking targeted measures.
Isetan Mitsukoshi Holdings Ltd. launched an app for overseas customers in March. At its stores, the company encourages visitors to Japan to sign up for the app, offering discount coupons in return.
Takashimaya Co. issues VIP membership cards to its top customers at its Singapore store. The cards grant priority treatment when buying tax-free at branches in Japan, a perk meant to encourage them to visit.
In April, the Daimaru Umeda department store began stocking plastic models and other items related to the Mobile Suit Gundam anime series. 'Japanese content such as anime is enormously popular overseas, and many customers visit us for these sorts of items,' said an employee from parent company J. Front Retailing Co.
'The real question for department stores is how to get foreign customers to stop in,' said Naoko Kuga, a senior researcher at the NLI Research Institute. 'They need to have a steady outreach to overseas customers.'