Across the board, the business performance of Japanese department stores entered a period of struggle after peaking in the 1990s. An important reason for this is that department store operators had adopted a style of management in which business partners were relied upon to run significant parts of store operations. Commoditization of department store offerings, falling profitability, and erosion of selling power ensued, and the industry lost its ability to respond to diversifying customer values.
Japanese department stores have traditionally used four approaches to fill their stores with merchandise. Leasing store space to suppliers so they can sell directly to consumers is common in Asia. It is the least risky way to provide customers with a merchandise selection, but it also makes it impossible to promote the uniqueness of the department store brand. The next least risky approach is one in which purchase by the department store is recognized only when sale to the customer takes place; goods on display in the store, in other words, belong to the supplier until they are sold to a consumer. Here, too, selling is left to the merchandise supplier, so profit margins are low. Consignment sales, the third approach, also earn low margins as a concession for the ability to return unsold merchandise to the manufacturer. These three ways of securing merchandise are the most commonly used in Japan. The fourth - the one used most often by US and European department stores - is the outright purchase of merchandise. Taking this route produces the highest profit margins, but entails significant inventory risk, so Japanese department stores have long regarded it as a last resort.
Searching for a different way – one that would enhance profitability, differentiate the brand, and create value - Isetan Mitsukoshi embarked on a transformation of its purchasing system in 2011. Through this endeavor we set out to improve our grasp of what customers truly want and then swiftly lead the translation of that understanding into unique products. This approach is one in which we have products made exclusively for us based on concepts using fine materials that we secure and provide to our partner manufacturer. Doing this requires excellence in product development capabilities and selling power, and our performance – with sales from this new purchasing approach already accounting for about 15% of total net sales as of fiscal 2014 - indicates we are meeting the challenge.
One of the Isetan Mitsukoshi brands to emerge from our new purchasing system is our NUMBER TWENTY-ONE line of women’s shoes. These shoes have drawn a strong following because they incorporate customer input. Their sales performance has been particularly strong at the Isetan Shinjuku Main Store and the Mitsukoshi Ginza Store, where they account for roughly 10% of sales by volume.
South Korea’s Shinsegae Department Store began selling NUMBER TWENTY-ONE shoes in February 2015. Behind this milestone in the development of the NUMBER TWENTY-ONE brand is the support of Shinsegae Department Store management, which recognizes the effectiveness of Isetan Mitsukoshi’s new product purchasing system. Meeting with a stronger-than-expected reception by South Korean customers, some of the NUMBER TWENTY-ONE shoe models offered by Shinsegae sold out in only two weeks.
NUMBER TWENTY-ONE shoes were added to the merchandise lines of Isetan stores in Shanghai and Kuala Lumpur in March 2015, and plans are now to develop this brand more widely in Asia and other parts of the world, as well.
On Making Products
A critical element in the creation of NUMBER TWENTY-ONE shoes is listening to customers. This, of course, refers to Isetan Mitsukoshi *Stylists taking in the comments of customers, but it also includes me - the merchandise buyer – visiting stores and asking customers what they want when it comes to women’s shoes.
Once the general design direction is decided, the next step is to select manufacturers and designers. Individual manufacturers and designers offer different strengths, and putting together teams of the best combinations of these professionals is one of the buyer’s most important jobs.
*Isetan Mitsukoshi refers to salespeople as “Stylists” to denote their detailed knowledge of merchandise and their expertise in helping customers select the best products for their needs.
The Trial and Error behind 8cm High Heels
Listening to customers and determining that a significant number were having a hard time finding the right pair of high heels led us to eventually make shoes with 8-centimeter heels, a height that normally few women will wear. But we set out for ourselves the goal of making shoes that accomplish the contradictory functions of showing off a beautiful silhouette and being comfortable. The process of trial and error – wherein the manufacturer made countless prototypes, which Stylists then wore to provide feedback – was long. But after six months - twice the normal amount of development time – we had created shoes that were outstanding in terms of both style and comfort, and are now among our bestsellers. The endeavor was grueling, but at the end we got a product that incorporates dedication from everyone involved and is loved by customers.
Success Factors and the Road Forward
The success of the NUMBER TWENTY-ONE brand rests on the increasing number of manufacturers who understand and support what we are doing, the growing variety of shoes we can offer, and quality that just gets better. Equally important are Stylists enthusiastic about participating in product development by learning what customers want.
Looking ahead, we are excited about working with artists and other well-known personalities to create new products, and about delivering value that will have customers in Japan and abroad choosing NUMBER TWENTY-ONE as their favorite brand of shoes.
Joined Isetan in 2005. Took up his current position in 2012 after stints as a Stylists, assistant buyer, and assistant sales manager for lady’s accessories at the Isetan Shinjuku Main Store. As an Isetan Mitsukoshi buyer, Yoshisato Munetomo has visited 13 countries to work with suppliers and manufacturers.
Our company has made shoes mainly for boutiques and apparel manufacturers. This was the first time for us to make products for a brand being managed directly by a department store.
In making shoes for Isetan Mitsukoshi, we pay particular attention to quality not only because of the numbers of customers who come to Isetan Mitsukoshi department stores but also because many of these customers have a very discerning eye when it comes to shoes. While paying careful attention to fit, we focus on creating shoes with a silhouette and style that will make customers choose them above all of the other brands displayed. We also strive meticulously to express the intent of the designers who work with us.
When we get an order, it takes 90 days to turn out a finished product. There are many steps involved in making shoes and each one is performed by a different craftsperson. Every pair of shoes, therefore, passes through the hands of numerous people on the way to completion. Furthermore, to ensure that customers can count on wearing our shoes over the long term, we perform numerous inspections and ultimately deliver only products of impeccable quality. As professional shoemakers, nothing gives us more pleasure than to have customers sense the caliber of our handcrafted products, and regard them as something special.