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In-depth Aging Consumers Reshaping Japanese Market
Redefining How Japan’s Department Stores Cater to Older Consumers
An Interview with Mitsukoshi Isetan Holdings CEO Ōnishi Hiroshi

Department stores in Japan are adjusting to the rapid graying of the population. sat down with the CEO of the Mitsukoshi and Isetan department stores, Ōnishi Hiroshi, to find out more about how his retail chain is meeting the changing lifestyle needs of today’s senior citizens.

Ōnishi Hiroshi

Ōnishi HiroshiPresident and CEO of Mitsukoshi Isetan Holdings. Born in Tokyo in 1955. Graduated from Keiō University’s Faculty of Business and Commerce. Joined Isetan in 1979, where he held various executive posts. Appointed president of Isetan and Mitsukoshi in June 2009 prior to assuming current position in February 2012. Author of Mitsukoshi Isetan: Burando ryoku no shinzui (Mitsukoshi Isetan: The Essence of Brand Power).

Varying Approaches Taken by Department Stores

INTERVIEWER I am interested in the issue of how the aging of Japan’s population will alter its structure of consumption, and how this in turn will influence the retail world. But before touching on those issues, could you give an overview of the general situation facing department stores?

ŌNISHI HIROSHI Currently the GDP of Japan stands at around ¥500 trillion, of which the retail industry accounts for somewhere between ¥140 and ¥150 trillion. More specifically, e-commerce totals around ¥15 trillion in sales, while drugstores and convenience stores have annual sales of roughly ¥10 trillion. Department stores used to also register around ¥10 trillion in sales a year, but the changing situation has knocked that figure down to around ¥6 trillion. In other words, department stores only account for about 4% of all retail sales. In short, department stores no longer hold the position they once had as the centerpiece of Japan’s lifestyle culture.

But Mitsukoshi Isetan has been trying to show the way forward for department stores, and at present we enjoy a 20% to 25% share of the ¥6 trillion in department store sales.

INTERVIEWER The experience of going to a department store with family members or on a date is completely different from stopping by a convenience store. Have we reached a point today where older, established department stores are on the way out? Or will their status remain even though their volume of sales has fallen?

ŌNISHI There is considerable difference in opinion among retailers and companies. In our own case, we have tried to avoid becoming ensnared in a price war, based on our view that department stores offer a special experience to shoppers. Some other department stores, however, have attempted to price themselves competitively compared to other types of retailers. Basically, department stores are no longer all on the same page, so to speak. And without consensus among ourselves in defining the role of department stores, there is no way to maintain our status.

Two Strata of Senior Citizens

INTERVIEWER In relation to those issues, I’m curious how you view the aging of Japanese society from your perspective in the retail industry. I think Japan is becoming a society where fewer consumers are part of the income-earning segment of society and more are living off their savings.

ŌNISHI I have a real sense of crisis now that Japan is entering an era where a quarter of the population will be 65 or older. But I think that members of that age group can be roughly divided into two types: there are the baby-boomers, who represent a significant portion of those 65 or over, and then there are those who are older than that generation. The baby-boomers tend to have more interests as consumers and want to maintain their lifestyle even if they are no longer working, so there are a lot of things that department stores can offer them.

But when it comes to those a bit older than the baby-boomers, there is no question that their spending power has waned. As a market, that segment seems to have shrunk. I think that instead of just showcasing product to 65-and-older consumers, department stores need to engage in all sorts of other initiatives, such as proposing travel options or financial products that suit their lifestyles. In our case, we also have a credit-card subsidiary, so we are involved in such services as insurance and financial products. And in the years ahead we may try to expand the scope of our activities in those sectors.

Consumer needs for products related to travel are particularly high, with premium-priced products in that sector being popular. Another interesting development is a so-called healthcare mall set up by one of our subsidiaries last year that includes not only healthcare facilities, but also such features as a sports gym. It functions as a sort of hub for interaction and communication, including the provision of services related to culture and other areas.

At the same time, though, it is hard to be profitable without also selling tangible products. In the case of retirees, business-related products like suits will be hard to sell, but there are opportunities, for example, when it comes to clothing or jewelry purchased for a trip. In other words, we need to strike a good balance between offering our customers goods as well as services.

  • [2015.12.04]
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