What: Japanese and South Korean department stores are undergoing significant transformations to remain relevant and profitable in the face of changing consumer behaviors, demographic shifts, and economic challenges.

Why it is important: These changes reflect broader trends in global retail, highlighting the need for traditional department stores to adapt to survive.

Department stores in Japan and South Korea are implementing major changes to address declining profitability and changing consumer preferences. In Japan, the Seibu Ikebukuro Main Store, under new ownership by US investment group Fortress, is undergoing a significant redesign. Key changes include moving away from gender-segregated floors to create unified shopping spaces, expanding luxury and cosmetics sections, and enhancing the popular basement deli section.

These changes reflect a broader trend among Japanese department stores to leverage their strengths, such as heritage buildings, integration with public transport, customer service, and digital capabilities. Some stores are focusing on 'gaisho' sales, targeting high-net-worth individuals, and capitalizing on duty-free sales to tourists.

In South Korea, department stores are focusing on creating experiential retail offerings, such as audio listening rooms and tennis courts in-store. They're also strengthening Food & Beverage offerings and introducing young, trendy fashion brands to attract Millennial and Gen Z consumers. These strategies aim to provide experiences that can't be replicated online and to attract younger generations who previously shopped primarily through online channels.

Despite these efforts, experts predict that about 10% of Japan's 196 department stores may close in the next 5-10 years, particularly regional stores underperforming compared to flagship locations.

The success of these transformations could determine the future viability of the department store model in these countries and provide valuable lessons for retailers worldwide grappling with similar challenges in the evolving retail landscape. By adapting to changing consumer preferences and leveraging their unique strengths, these department stores are striving to remain relevant in an increasingly digital and experience-driven retail environment.

How department stores are reinventing themselves in Japan and Korea