TOKYO -- Business clothing retailer, Aoyama Trading plans to reduce its total floor space by up to 50% at 400 of its stores, in response to customers' growing preference for more casual attire as the coronavirus pandemic forces more people to work from home.
The Japanese company will trim its sales floors at around 60% of its stores and hopes to attract shared office operators and other business into the freed-up space. The move comes as more people work remotely during the pandemic, leading to a drop in demand for suits, ties and other business attire.
The change is Aoyama's first major review of its suit business since the company was founded in 1964. The prolonged COVID-19 outbreak has dented earnings, with the company forecasting a net loss of 29 billion yen ($280 million) for the year ending March. It is offering voluntary early retirement for around 400 employees and planning to close roughly 140 stores to stanch the flow of red ink.
That will leave the clothing chain with around 700 stores. Of those, 400, or 60% of the total, will reduce their floor space by 30% to 50% by March 2024. The aim is to trim labor costs, as well as shrink Aoyama's inventory of suits by about 20 to 30%. The company hopes to attract shared office operators, convenience stores and restaurants to the empty spaces to maintain revenue.
The company also plans to open a new type of store that carries no inventory, but instead sells custom-tailored suits.
Aoyama is not the only seller of business clothing that faces drastic change. Rivals like Aoki Holdings and Konaka are also taking a hard look at their operations and trying to develop new business models, as flexible work styles prompt consumers to become more conscious of what they wear, rather than opting for the standard-issue suit.
Aoki will enter the shared office business in February, and turn some of its outlets into shopping complexes with fitness centers. The company already operates more leisure-focused venues, including internet cafes and gyms, than it does suit stores. Aoki forecasts operating profit from its entertainment business will overtake its suits business by March 2023. Konaka, meanwhile, has launched a rental car business that uses parking lot space at its suburban outlets.
Another purveyor of business clothing, Haruyama Holdings, has accelerated development of new retail complexes adjoined to its suit sales floors. These offer related services, such as haircuts and dry cleaning. The retailer plans to double the number of these combination outlets to about 100 by 2023.
The market for business suits in Japan has declined over the years. According to a household survey by the internal affairs ministry, average annual spending on suits peaked in 1991, at 19,043 yen ($183) but had plummeted to 4,716 yen by 2019. The cost of suits as a percentage of their price is fairly low, and the business generates stable profits, leading retailers to become rather set in their ways.
However, the spread of the coronavirus has hit the industry hard. Monthly spending on suits dropped 50% to 1,313 yen during the eight months through November 2020, compared with the same period the previous year. Aoyama Trading President Osamu Aoyama has said: "The suit market will not return to normal, even after the coronavirus ends."
Meanwhile, casual attire has grown more popular during the pandemic, with major retailers like Uniqlo and Workman cashing in on the trend.
Uniqlo has focused on casual shirts and jackets that can also be worn in business settings. After the Japanese government began its "Cool Biz" energy conservation drive in 2005, which promoted the idea of cooler, casual dress at the office, Uniqlo has become more popular with consumers, causing headaches for suit sellers.
Japanese companies are also rethinking rigid dress codes, hoping this will encourage more free thinking among their employees. Sumitomo Mitsui Banking Corporation scrapped its dress code in 2019. Workers can now dress as they like at the head office. Telecom operator KDDI also got rid of its dress code, which previously mandated suits and ties for men, taking into consideration LGBT employees and equal treatment for female and male workers.
Demand for suits has also fallen overseas, where telecommuting is more common than in Japan. Last year, U.S. menswear retailer Brooks Brothers filed for bankruptcy.
