By  on August 8, 2007

TOKYO — Isetan is on an expansion drive in China, with the goal of eventually operating 10 stores in the country.

The impetus for growth is the Mei Long Zhen Isetan in Shanghai, which opened in 1997. The store is performing extremely well and is one of five units Isetan currently operates there. The others are in Shanghai Huating, Tianjin, Jinan in Shandong Province and Chengdu in Sichuan Province. The company plans to open a Shenyang store in Liaoning Province this year and another store is slated to bow in Beijing in 2008.

The Mei Long Zhen store opened on West Nanjing Road four years after Isetan unveiled its Huating Isetan location in Huaihai Zhonglu, the first foreign-financed department store in China. The Mei Long Zhen unit, which is 161,450 square feet, doesn't carry any food. Rather, it's narrowed its focus to specialize on fashion. Mei Long Zhen's target customers are senior executives of foreign-affiliated companies, the top echelon of employees of national companies and top Chinese government officials. The monthly household income of the target customer is about 8,000 yuan to 10,000 yuan ($1,056 to $1,320).

Frequent shoppers, who make up 26 percent of the store's business, are between 32 and 36 years old. Consumers between the ages of 27 and 31 account for 21 percent of sales and the 37- to 41-year-old age group makes up 20 percent. The 20- to 29-year-old age range is gaining strength, the company said.

With these demographics in mind, Mei Long Zhen is expanding its selection and strengthening services aimed at younger shoppers. "There are more groups of new rich, such as businessmen for rising IT companies and entrepreneurs in their 20s," said Akifumi Morita, managing director of the Mei Long Zhen Isetan. "Also, more people born after the one-child policy started in 1979 have had foreign experiences. They're good department store customers and we would like to cater more to this group."

Morita said changes in customer preferences include an awareness of foreign brands. "There are definitely people who will buy overseas brands even if they are more expensive," Morita said. "However, a growing number of consumers will buy items that have good quality and don't insist on luxury brand logos. They are our new target customers."Onward Kashiyama Co. Ltd.'s 23-ku line has some of the attributes Isetan is looking to offer its new consumers. "We'd like to carry items that have a certain quality level and trendiness, and also have an accommodating price range," Morita said.

Isetan offers a variety of sizing as a strategy to gain customer loyalty. In March, the retailer adopted Size Site by Onward Kashiyama, a well-received system, which features tall and large sizes in addition to the standard small, medium and large. Size Site applies to brands such as ICB, Kumikyoku and 23-ku.

Isetan's club card strategy is another point of difference in the market. The Mei Long Zhen unit has 45,000 club members and added 15,000 new names last year. The client management system raises the level of sales and has been closely watched by Chinese competitors.

With such business endeavors, sales at the Mei Long Zhen store are expected to keep ticking upward. For the year ended Dec. 31, 2006 — the most recent figures available — sales were 8.95 billion yen, or $75.2 million, a 107 percent increase over the previous year's 8.36 billion, or $70.3 million. Pretax profits, which have also been growing steadily, reached 786 million yen, or $6.6 million, in 2006, up from 643 million yen, or $5.4 million, the previous year. Profit as a percentage of sales was 0.8 percent at the Mei Long Zhen store, compared with a 5 percent rate at Japanese headquarters. The Mei Long Zhen unit's consolidated profit was the sixth highest of Isetan's 29 consolidated subsidiaries.

Since most of Isetan's clients and Japanese apparel companies are based in Shanghai, Mei Long Zhen plays an important role in communicating the company's goals and acts as a contact for business negotiations. It also has an educational role; it's where Isetan trains staff when it opens new stores in China.

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