TOKYO -- Bic Camera will open its first location in Tokyo's vibrant Akihabara shopping district as soon as June with a product lineup tailor-made for foreign tourists, widening a strategy that has begun paying dividends elsewhere.
"We're making inbound sales" -- revenue from foreign tourists -- "a key source of earnings," said corporate planning chief Toru Abe of the Japanese electronics retailer's foray into Akihabara, a mecca for electronics enthusiasts worldwide. The district is one of the most popular destinations in Japan among visitors from overseas.
Bic Camera already has an ideal foothold in the area: a branch of subsidiary Sofmap that will be refashioned into a Bic Camera store. The site boasts roughly 5,000 sq. meters of floor space, more of which will be given over to goods popular among foreign shoppers, including cosmetics and pharmaceuticals, in the remodel. By bringing more such customers through the door, Bic Camera hopes to move more high-priced electronics as well. The location's overhaul is expected to roughly double revenue there.
The retailer's shares gained 11% between last Wednesday, when the foray into Akihabara was reported, and Tuesday. Such rivals as Yodobashi Camera, Yamada Denki and Edion already have stores in the area, making for intense competition. But "around 16% of Bic Camera's sales come from products other than electronics -- a fairly high share," according to a Japanese securities analyst. "The depth of the company's lineup and its methods for displaying merchandise give it an appeal not found elsewhere," the analyst said.
The popular image of "inbound demand" at electronics stores involves tourists walking out with stacks of rice cookers and other appliances. But Bic Camera's focus on more diverse goods has proved a skillful strategy. At the store in Tokyo's Yurakucho district, for example, the third floor is occupied mainly by goods such as medications and cosmetics. Sales of those goods began to pick up last year, according to sales staff on the floor, who say space given over to such products has grown 50% over the past six months. Sake is another hot seller among shoppers looking for gifts to bring back home.
"We began growing our lineup several years ago to appeal to young women in this country," said Masanari Matsumoto, a senior public relations official. But shoppers recognized "the quality of the products, and now they're very popular among visitors from Asian nations," he said. This matches a broader shift in tourist spending from high-price goods to more affordable everyday items.
Bic Camera's strategy is beginning to show results. Same-store sales to foreign customers remained below year-earlier levels through last December, due to a drop-off in appliance purchases. But such sales began growing again in January, helped by weakening in the yen. Per-customer sales are expected to rise above year-earlier levels in May.
The chain is heading to other tourist hot spots as well. A store developed in cooperation with Japan Airport Terminal opened Friday in Tokyo's Odaiba area. "We plan to boost non-electronics' contribution to sales, primarily through duty-free sales," corporate planning head Abe said.
More conventional operations are faring less well. Bic Camera's standalone operating profit dropped 17% year on year in the six months through February to 6.5 billion yen ($58.7 million). A 10% drop in sales of pricey digital electronics such as cellphones and computers, long the company's mainstay, dealt a heavy blow. Operating profit at subsidiary Kojima climbed.
Bic Camera plans to make up for this shortfall in the second half of the year ending in August, growing sales of profitable home appliances to widen its gross profit margin. But "home appliances sell mainly in the suburbs," a Japanese brokerage analyst said. "Many Bic Camera stores are near train stations, spelling slimmer growth in appliance sales than for the company's rivals," according to the analyst. Investors would like to see innovation in the company's core electronics business complement the inbound-demand strategy.