By  on January 2, 2007

TOKYO — Japanese retailers are getting serious about the Web.

Driven by the outlook for significant growth in Internet retailing, including via cell phones, more and more stores are strengthening their online operations to generate sales and increase their customer bases.

Most department stores have been slow to grow their Web operations, but now are recognizing its potential. Online department store sales in Japan grew by 2.5 times in the eight years to fiscal 2005, to 12.1 billion yen, or $103.4 million at current exchange. But the figure is a mere 0.2 percent of all department store sales, according to the Japan Department Stores Association.

The association, in launching a new marketing-oriented portal site on the Internet in support of its 96 member companies, noted e-commerce is becoming a "growing sales channel" for department stores and an important focus of the industry.

While department stores have been slow to expand into e-commerce, the overall market continues to boom. According to the latest market research report on e-commerce by the Ministry of Economy, Trade and Industry covering the 2005 calendar year, the Japanese business-to-consumer e-commerce market was worth an estimated 3.5 trillion yen, or $30 billion. This translated to an e-commerce rate of 1.2 percent in Japan, against 2.4 percent in the U.S., according to the report, which is based on a survey of 331 enterprises and 1,000 consumers.

The same report estimates Japan's business-to-business market in 2005 at 140 trillion yen, or $1.2 trillion, in a narrow definition of e-commerce, and 224 trillion yen, or $1.91 trillion, in a broad definition.

E-commerce is taking on diverse forms. Takashimaya, for one, is poised to expand aggressively online. The company has created a new unit called "e-business group" with plans to start a new transactional Web site, tentatively named "E-Department Store" early this year to promote a range of global brands. Takashimaya is aiming for online sales of 10 billion yen, or $85.5 million, in fiscal 2009.

Meanwhile, Daimaru Department Stores has started selling cosmetics whose brand names are less known online at its new Web site, "Marucollet."

Parco Co., a major retail promoter that operates 18 shopping complexes throughout Japan, has unveiled plans to open an online shopping mall, "Parco City," this spring. The company expects to attract 150 "tenants" offering a variety of product lines, including women's, men's and children's wear. Parco is teaming with Digital Direct Inc., a direct-marketing subsidiary of Mitsubishi Corp., on the project.One business model here is a collaboration among retailers, Internet companies, trading firms, fashion magazines and other media. Take magaseek corp., an online sales company in which Itochu Corp., a leading trading firm, has a stake. The Internet company proved so successful that it is listed on the Tokyo Stock Exchange. The key is linking marketing with fashion magazines to lure traffic and readers. In the project, magaseek is working with such popular fashion magazines as Ray, CanCam, With, More and Lee.

A similar Internet marketing company is Stylife Corp., which listed on the Osaka Stock Exchange last year and is a spin-off from the trading company Nichimen. Stylife posted sales of 3.59 billion yen, or $30.7 million, in fiscal 2005, growing 3.3 times in the five years since it made its debut in 2000. The site offers such brands as Next, Red Clover, Libertine and No-Name.

Then there is ZozoTown, a virtual shopping town established on the Internet by Start Today Co. last year that reportedly will generate sales in excess of 10 billion yen, or $85.5 million, in the fiscal year ending in March. A viewer can visually walk around the town to shop at various stores on the site, which offer such brands as American Rag, Hysteric Glamour, R. Newbold, Diesel, Aquagirl and Odette é Odile.

Another strategy is evidenced by Tokyo Girls Collection, which is touted as Japan's largest consumer fashion show. Visitors can immediately purchase what they see at the show by using their cell phones to connect to the Internet. The show, which is sponsored biannually by Xavel Inc., attracted more than 18,000 young women in September to a Tokyo Olympic gymnasium. Xavel, by marketing the show via various media, is establishing TGC as a brand name, and has launched a Web site, Fashionwalker.com, that offers brands such as Earnest Sewn, Betsey Johnson, BeneFit, Rock & Republic, Strawberry Fields and Silver Jeans.

Along with online, TV shopping is another channel that continues to grow. Jupiter Shop Channel, the largest TV shopping channel in Japan, reported an increase in revenues in 2005 for the ninth consecutive year to 76.1 billion yen, or $650 million, a jump of 51 percent from the previous year. The company also has started two Web sites, one for computers and the other for cell phones, to enhance sales.

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