On January 21st, JR Mitsukoshi Isetan, which has been performing poorly since its opening in May 2011, announced a reduction in its sales floor space. According to the announcement, 33,000 square meters will be renovated into a specialty shopping arcade integrated with the neighboring fashion building, Lucua.
JR Osaka Mitsukoshi Isetan's sales floor space is 50,000 square meters, so this will be reduced by less than 40%. Opening in the spring of 2015, combined sales with Lucua are expected to reach 80 billion yen. However, since the current combined annual sales of Lucua and JR Osaka Mitsukoshi Isetan are less than 70 billion yen, considerable ingenuity will be required to achieve this goal.
Experts point to various causes for JR Osaka Mitsukoshi Isetan's difficulties. "Isetan's product lineup didn't resonate with Osaka's Mitsukoshi fans, who were mostly elderly," "The independently curated sales floor wasn't well-received by Osaka consumers," "The product strategies and brand lineup were incomplete," and "Umeda was over-stored." The combination of all these factors likely contributed to this outcome.
However, more than that, I feel that this was the limit of the Osaka market size.
Compared to the May 2011 opening of JR Osaka Mitsukoshi Isetan and Lucua, the current concentration of commercial facilities around JR Osaka Station is striking. JR Osaka Mitsukoshi Isetan's most recent annual sales were approximately 30 billion yen, far from its initial target of 55 billion yen. Even so, the combined sales of JR Osaka Mitsukoshi Isetan and Lucua were around 67 billion yen, and this market did not exist around Osaka Station before May 2011. Daimaru Umeda store has increased sales by approximately 20 billion yen since its expansion and renovation in 2011. Furthermore, Grand Front Osaka, which opened in April 2013, is on pace to exceed its sales target of 40 billion yen. Adding these figures together, a market of just under 120 billion yen has emerged around JR Osaka Station over the past three years.
Looking at these figures, it's amazing how such a new market has been created in a market like Osaka, where the population continues to decline and the market is sinking.
It's true that JR Osaka Mitsukoshi Isetan could have increased its sales a little more depending on how it handled it. Still, I wonder if the target set for the first year was a little too high. It's too late now, but I feel that if the initial target had been set, the image of such a slump would not have been created.
