Japan retailers target new big spenders: tourists

Tue May 20, 2014 5:10pm EDT
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By Chang-Ran Kim and Ritsuko Shimizu

TOKYO (Reuters) - In ageing Japan, retailers are waking up to a hot new demographic: foreign visitors.

Driven by government tourism promotions and lately a weaker yen, the number of inbound travelers has quietly doubled in the past decade to top 10 million for the first time last year. In 2013, they spent $14 billion on everything from powdered green tea to Prada handbags, to rare, red-coral rings.

With a doubling to 20 million visitors targeted by 2020, the year of the Tokyo Olympics, the growing flow of cash is welcome for Prime Minister Shinzo Abe as he seeks to nurse a recovery in consumer spending through a national sales tax hike. It's also sending retailers scrambling to tap into the so-called "inbounds" windfall through marketing channels from social media to street signage.

"Until now, we've been rather passive with 'inbounds'," said Hideyuki Murakami, executive officer of department store operator Isetan Mitsukoshi Ltd (3099.T: Quote). "But as their numbers surge, we'll need to really step things up - whether it's with language, facilities or product selection."

Japan's department stores association on Tuesday said duty-free spending at 46 stores across the country spiked 54 percent in April to 6.09 billion yen ($60 million) compared with the same month a year ago, while overall sales at 241 department stores nationwide slipped 12 percent to 417.2 billion yen. Visitors have surged particularly from Thailand, which along with Malaysia received visa exemptions for short-term stays last July.

Many spend freely on their trips. Yijia, a 16-year-old from Shanghai who asked to be identified only by her first name, showed off a 90,000 yen ($890) haul from Mitsukoshi's swank Ginza store that included a pair of Kenzo designer shoes.

"I love coming to Japan to eat and shop," said the high school student, on her third visit to Japan with her mother. "Everyone loves the food in Tokyo, including French cuisine."

The 1.42 trillion yen ($14 billion) spent by "in-bounds" was up more than a third from 2012, according to the Japan Tourism Agency. That's less than half a percent of Japan's total private consumption, yet it still offers retailers welcome relief from the hangover of the April sales tax increase to 8 percent from 5 percent, now discouraging local shoppers.   Continued...

Chinese tourists carry packages of Panasonic Corp's washlet along Tokyo's Ginza Shopping district May 16, 2014. REUTERS/Yuya Shino