EDITORIAL | Sogo & Seibu Sale Bares Challenges Faced by Japan's Big Stores

On August 31 members of the Sogo & Seibu labor union walked out in what was the first strike at a major Japanese department store in 61 years. Their action forced the Ikebukuro flagship store to close for the entire day.

Behind the walkout was the labor union's opposition to the Sogo & Seibu subsidiary's sale to a US investment fund. Distribution industry giant Seven & i Holdings, which had owned the department store subsidiary, sold it effective September 1.

The labor union's opposition was based on concern about changes to the sales floor configuration at the company's Seibu Ikebukuro flagship store. Furthermore, it was concerned about maintaining the company's current employment levels.

In Need of a Vision for Department Stores

Prolonged labor-management conflict only damages corporate value and drives customers away. Management should settle the disputes with the unions as soon as possible.

The department store industry continues to face a challenging business environment as store closures spread from rural to urban areas.

With consumer values diversifying, what kind of vision for the future can department stores adopt? We would like to see Sogo & Seibu provide such a clear vision.

Sogo & Seibu's flagship department store in Tokyo's Ikebukuro district. (©rs1421 via Wikimedia Commons)

Addressing Union and Community Concerns

Fortress Investment Group, the US investment fund that acquired Sogo & Seibu, aims to restructure the company. It plans to start by selling the land belonging to the Ikebukuro flagship store to Yodobashi HD, a major electronics retailer.

The fund also intends to invest more than ¥20 billion JPY (~$137 million USD) to renovate several stores to increase competitiveness. That plan also includes the Ikebukuro flagship store.

Fortress Investment Group executive and Japan representative Akio Yamashita commented, "We will work with Seven & i to support the management of Sogo & Seibu to maintain Sogo & Seibu's workforce to the extent possible."

We hope that the company will prove true to its word and strive to protect jobs and relieve the concerns of employees.

Unpopular New Ideas

Seven & i Holdings agreed to sell the department store subsidiary to Fortress Investment last November. However, the planned sale was repeatedly postponed after plans to renovate the Ikebukuro main store were revealed. That plan included opening a large Yodobashi electronics store on the lower floors.

In response, the local government in Toshima Ward and the labor union protested. They argued that the department store would "lose its brand value" if the changes went through.

However, with the plan to sell remaining unchanged, the union went on strike. It is unfortunate that talks between labor and management ended in failure.

*Tokyu Department Store - Bunkamura, in Shibuya before it was closed in 2023. (©ITA-ATU-via Wikimedia Commons)*

Department Stores in Trouble

Sogo & Seibu is not the only department store chain that saw its business deteriorate during the COVID-19 pandemic. Tokyu Department Store's main store in the central Shibuya district of Tokyo closed its doors in January. According to the Japan Department Stores Association, over the last two decades or so the number of department stores in Japan has declined by roughly 40%.

Seven & i Holdings originally purchased Sogo & Seibu out of a desire to expand its business operations. However, its general merchandise supermarket division (Superstore Operations Division) was slumping due to competition from specialty stores. Therefore, in March 2023, Seven & i announced restructuring to reduce the number of stores in its Ito-Yokado subsidiary by 30%.

With the rapid expansion of internet sales, retailers are challenged to be resourceful and ingenious in creating new value from the customer's point of view.

(Read the editorial in Japanese.)

Author: Editorial Board, The Sankei Shimbun