CONSUMERS

Bucking an Industry Collapse through Service

by

W. David Marx

|

This is the featured image caption
Credit: This is the featured image credit
The Hankyu men’s department store in Osaka simultaneously creates an air of exclusivity and privilege while removing perceived consumer barriers, offering both education and rewards. The Hankyu men’s department store…

Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.

PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.

In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”

The Fondation Cartier pour l’Art Contemparain building in Paris

The Hankyu men’s department store in Osaka simultaneously creates an air of exclusivity and privilege while removing perceived consumer barriers, offering both education and rewards.

The Hankyu men’s department store in Osaka simultaneously creates an air of exclusivity and privilege while removing perceived consumer barriers, offering both education and rewards.

TOKYO – The department store (hyakkaten) has always been the most prestigious and central retail channel in the Japanese marketplace. Shoppers pay premium prices for goods in return for a refined retail atmosphere and superior customer service. Uniformed women stand at the front door bowing to each entering customer while immaculate sales staff awaits at every corner. Inimitable politeness has been the cornerstone of the hyakkaten service model.

But the pre-eminence of the department store may now be over. In the last decade, the entire sector has descended into crisis. From a height of ¥9.18 trillion ($96.8 billion) in 1996, the most recent tally of department store sales from 2008 only reached ¥7.32 trillion ($77.2 billion), according to a recent Nikkei Marketing Journal survey. In the same study, a mere twelve locations out of 239 — just 5% — showed a growth in net sales for 2008.

In the midst of consumers’ move away from department stores, there has been a notable exception: Hankyu Men’s The menswear-only wing of the sprawling Hankyu department store complex in Osaka opened in February 2008 — right on the brink of luxury meltdown. Hankyu Men’s put together the most expansive and diverse menswear boutique in the country, making a western-region rival for Tokyo’s Isetan Men’s Beyond the usual suspects — Paul Smith, Armani, and Comme des Garçons — Hankyu Men’s offered the world’s first men’s-only Louis Vuitton boutique and the first Japanese location for Tom Ford.

Consultant Kensuke Kojima of Kojima Fashion Marketing summed up the conventional wisdom on his blog: “On the cusp of a global depression, Japan is currently in the grasp of the god of poverty. This isn’t the right mood for high-fashion and fashionistas.” And Kojima was right about the year ahead: 2008 was a terrible one for both the luxury business and apparel sales.

Yet Hankyu Men’s managed to beat its own revenue projections by 6%, making ¥26.5 billion ($279.5 million) in net sales for its first year. This was a 51% increase in sales over the previous menswear department within the main Hankyu building. And thanks to Hankyu Men’s, Hankyu’s Osaka flagship was only down a mere -0.1% for the year for 2008 — a year when the industry average was -6.2%. Hankyu is having a tougher time in 2009, but it is still surpassing its main rivals. In June 2009, Isetan’s main branch was down -11.4%, while Hankyu’s was down only -0.6%.

“Department store service developed on the idea of ‘politeness’, but now every store — even cheap little shops — offer the same level of politeness,” explains Kenji Okazawa, general manager of sales at Hankyu Men’s. “The new value we can add is through education. That way customers can realise the value in the higher prices.”

At the heart of the store’s success is a brand new service model for the Japanese department store: providing consumers with knowledge and attention that in turn builds a loyal customer base and unfurls a welcome mat to a wider swath of the market. Although other department stores and menswear boutiques in Japan are beginning to offer similar services, Hankyu’s approach simultaneously creates an air of exclusivity and privilege while removing perceived consumer barriers. It offers both education and rewards.

Hankyu Men’s has been greatly successful with its personal shopping service. This fee-based service enables shoppers to pick out new wardrobes with a specialised staff trained in styling and colour coordination. Clients must first become members (for ¥3,000 — or $32 — a year), and pay an additional fee per session. After a long interview about preferences and sizing, they can call on the personal shopping staff at any time to request advice on buying new clothes.

This generates collateral revenue for the use of the service in addition to higher sales from these members than had they shopped without the service. Instead of just buying a single item, most are purchasing full outfits as a set, significantly increasing expenditure per customer.

Most notably, the service removes barriers to fashion shopping — whether they be the vagaries of personal style, knowledge of new trends, or limited time. This essentially activates a “latent demand” in the market — turning non-fashion consumers into dedicated Hankyu shoppers. These customers now have solid relationships with the sales staff and would think to go nowhere other than Hankyu Men’s. And as a consequence of this relationship, the staff has greater opportunities to explain and justify the higher prices of premium brands – meaning they have more time and clout to preach the luxury gospel.

Hankyu Men’s also holds a seminar series called “Nice Guy Making” where aforementioned staff teaches male customers the history of men’s fashion and basic styling rules over four sessions (for a fee of ¥10,000 — or $105). In these sessions, men are encouraged to build a “permanent wardrobe” rather than just keep up with the latest trends.

Those customers who purchase over certain sales targets receive automatic membership to Hankyu Men’s Member Lounge, located in the middle of the third floor. The lounge is a large space with plenty of seating, outfitted with a free drink bar, a large collection of books on art and fashion, and with a constant video stream of the catwalk shows. Members are allowed to bring one guest to the lounge, creating the perfect date opportunity for many young men. This ability to stop in at any time makes the VIP customers think twice about shopping elsewhere.

One room of the lounge is also full of samples from brands around the store. This may seem odd, considering that men can freely sample any of the same products by walking around the regular retail floor complex; but Okazawa explains that it was established in response to a peculiarity in Japanese men’s consumer behaviour: “Most guys are very loyal to a single brand and feel strange about browsing at other brands when the other sales staff is looking on. So this is a way to let them look at other labels without feeling like they are betraying their favourite.”

Hankyu Men’s also throws lavish parties in the building twice a year, inviting the VIP members and other loyal customers. There is an open bar, live music, fashion shows, and talks with designers. But the real appeal for most men is the ability to roam freely the whole building. “A lot of our customers tell us that they are normally scared of going to the (high-end) third floor. But this party lets them go there more casually,” says Okazawa. Customers who did not receive an invitation often buy tickets at the door.

The secret to Hankyu Men’s success is using a high level of service not just to brand the space as a premium shopping experience, but to use service as a way to activate latent demand for luxury goods as well as to educate customers to understand why they should buy premium brands. Okazawa clarifies, “Our entire strategy is about repeat customers. And even though department stores are all taking a hit this year, our strong customer base is helping us weather the recession.”

Hankyu Men’s has demonstrated how modern Japanese luxury consumers no longer see an added value in the mechanical politeness of yesteryear. Many would rather build personal relationships with the store staff and enrich their service experience. The department store’s ability to anticipate and respond to this shift has helped it to fare much better than the competition.

W. David Marx, Tokyo Correspondent

W. David Marx
W. David Marx

Communications Manager, YouTube, Japan-Pacific Region

I am a bilingual expert on Japanese consumer behavior and the Japanese fashion history past and present.

CONSUMERS

Bucking an Industry Collapse through Service

by

W. David Marx

|

This is the featured image caption
Credit : This is the featured image credit
The Hankyu men’s department store in Osaka simultaneously creates an air of exclusivity and privilege while removing perceived consumer barriers, offering both education and rewards. The Hankyu men’s department store…

Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.

PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.

In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”

The Fondation Cartier pour l’Art Contemparain building in Paris

The Hankyu men’s department store in Osaka simultaneously creates an air of exclusivity and privilege while removing perceived consumer barriers, offering both education and rewards.

The Hankyu men’s department store in Osaka simultaneously creates an air of exclusivity and privilege while removing perceived consumer barriers, offering both education and rewards.

TOKYO – The department store (hyakkaten) has always been the most prestigious and central retail channel in the Japanese marketplace. Shoppers pay premium prices for goods in return for a refined retail atmosphere and superior customer service. Uniformed women stand at the front door bowing to each entering customer while immaculate sales staff awaits at every corner. Inimitable politeness has been the cornerstone of the hyakkaten service model.

But the pre-eminence of the department store may now be over. In the last decade, the entire sector has descended into crisis. From a height of ¥9.18 trillion ($96.8 billion) in 1996, the most recent tally of department store sales from 2008 only reached ¥7.32 trillion ($77.2 billion), according to a recent Nikkei Marketing Journal survey. In the same study, a mere twelve locations out of 239 — just 5% — showed a growth in net sales for 2008.

In the midst of consumers’ move away from department stores, there has been a notable exception: Hankyu Men’s The menswear-only wing of the sprawling Hankyu department store complex in Osaka opened in February 2008 — right on the brink of luxury meltdown. Hankyu Men’s put together the most expansive and diverse menswear boutique in the country, making a western-region rival for Tokyo’s Isetan Men’s Beyond the usual suspects — Paul Smith, Armani, and Comme des Garçons — Hankyu Men’s offered the world’s first men’s-only Louis Vuitton boutique and the first Japanese location for Tom Ford.

Consultant Kensuke Kojima of Kojima Fashion Marketing summed up the conventional wisdom on his blog: “On the cusp of a global depression, Japan is currently in the grasp of the god of poverty. This isn’t the right mood for high-fashion and fashionistas.” And Kojima was right about the year ahead: 2008 was a terrible one for both the luxury business and apparel sales.

Yet Hankyu Men’s managed to beat its own revenue projections by 6%, making ¥26.5 billion ($279.5 million) in net sales for its first year. This was a 51% increase in sales over the previous menswear department within the main Hankyu building. And thanks to Hankyu Men’s, Hankyu’s Osaka flagship was only down a mere -0.1% for the year for 2008 — a year when the industry average was -6.2%. Hankyu is having a tougher time in 2009, but it is still surpassing its main rivals. In June 2009, Isetan’s main branch was down -11.4%, while Hankyu’s was down only -0.6%.

“Department store service developed on the idea of ‘politeness’, but now every store — even cheap little shops — offer the same level of politeness,” explains Kenji Okazawa, general manager of sales at Hankyu Men’s. “The new value we can add is through education. That way customers can realise the value in the higher prices.”

At the heart of the store’s success is a brand new service model for the Japanese department store: providing consumers with knowledge and attention that in turn builds a loyal customer base and unfurls a welcome mat to a wider swath of the market. Although other department stores and menswear boutiques in Japan are beginning to offer similar services, Hankyu’s approach simultaneously creates an air of exclusivity and privilege while removing perceived consumer barriers. It offers both education and rewards.

Hankyu Men’s has been greatly successful with its personal shopping service. This fee-based service enables shoppers to pick out new wardrobes with a specialised staff trained in styling and colour coordination. Clients must first become members (for ¥3,000 — or $32 — a year), and pay an additional fee per session. After a long interview about preferences and sizing, they can call on the personal shopping staff at any time to request advice on buying new clothes.

This generates collateral revenue for the use of the service in addition to higher sales from these members than had they shopped without the service. Instead of just buying a single item, most are purchasing full outfits as a set, significantly increasing expenditure per customer.

Most notably, the service removes barriers to fashion shopping — whether they be the vagaries of personal style, knowledge of new trends, or limited time. This essentially activates a “latent demand” in the market — turning non-fashion consumers into dedicated Hankyu shoppers. These customers now have solid relationships with the sales staff and would think to go nowhere other than Hankyu Men’s. And as a consequence of this relationship, the staff has greater opportunities to explain and justify the higher prices of premium brands – meaning they have more time and clout to preach the luxury gospel.

Hankyu Men’s also holds a seminar series called “Nice Guy Making” where aforementioned staff teaches male customers the history of men’s fashion and basic styling rules over four sessions (for a fee of ¥10,000 — or $105). In these sessions, men are encouraged to build a “permanent wardrobe” rather than just keep up with the latest trends.

Those customers who purchase over certain sales targets receive automatic membership to Hankyu Men’s Member Lounge, located in the middle of the third floor. The lounge is a large space with plenty of seating, outfitted with a free drink bar, a large collection of books on art and fashion, and with a constant video stream of the catwalk shows. Members are allowed to bring one guest to the lounge, creating the perfect date opportunity for many young men. This ability to stop in at any time makes the VIP customers think twice about shopping elsewhere.

One room of the lounge is also full of samples from brands around the store. This may seem odd, considering that men can freely sample any of the same products by walking around the regular retail floor complex; but Okazawa explains that it was established in response to a peculiarity in Japanese men’s consumer behaviour: “Most guys are very loyal to a single brand and feel strange about browsing at other brands when the other sales staff is looking on. So this is a way to let them look at other labels without feeling like they are betraying their favourite.”

Hankyu Men’s also throws lavish parties in the building twice a year, inviting the VIP members and other loyal customers. There is an open bar, live music, fashion shows, and talks with designers. But the real appeal for most men is the ability to roam freely the whole building. “A lot of our customers tell us that they are normally scared of going to the (high-end) third floor. But this party lets them go there more casually,” says Okazawa. Customers who did not receive an invitation often buy tickets at the door.

The secret to Hankyu Men’s success is using a high level of service not just to brand the space as a premium shopping experience, but to use service as a way to activate latent demand for luxury goods as well as to educate customers to understand why they should buy premium brands. Okazawa clarifies, “Our entire strategy is about repeat customers. And even though department stores are all taking a hit this year, our strong customer base is helping us weather the recession.”

Hankyu Men’s has demonstrated how modern Japanese luxury consumers no longer see an added value in the mechanical politeness of yesteryear. Many would rather build personal relationships with the store staff and enrich their service experience. The department store’s ability to anticipate and respond to this shift has helped it to fare much better than the competition.

W. David Marx, Tokyo Correspondent

W. David Marx
W. David Marx

Communications Manager, YouTube, Japan-Pacific Region

I am a bilingual expert on Japanese consumer behavior and the Japanese fashion history past and present.

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