rates, accounting for close to a quarter of the revenue from the company’s department store business. This year, Isetan-Mitsukoshi projects sales to return to pre-pandemic levels and even beat the record set in 2018. The company’s other stores – especially the regional ones – are not nearly as successful and Isetan-Mitsukoshi overall had a brutal time during the pandemic, with sales plunging 27.1 per cent in 2020. In 2021, there was a recovery of sorts but sales still remained almost 18 per cent below the pre-Covid level. The problem was not ust trading restrictions but also the absence of foreign visitors, who before Covid-19 contributed heftily to duty free sales. The Shinjuku flagship has been one of the department stores feeling a substantial impact from the international tourism restrictions: duty free sales were more than 10 per cent of total store sales in 2019 but by the time most entry restrictions were finally lifted on 11 October this year, they were down to an anaemic 5 per cent.  That is all about to change, as Japan finally relented and opened its borders, no longer limiting visitors to those coming in on package tours. The effect has been, anecdotally at least, almost immediate, with visitors pouring in to take advantage of the weak yen, snapping up watches, jewellery and other luxury items. That’s good news, although it also causes some unexpected issues. When duty free sales are strong, foreign customers, particularly those having a last splurge before heading out to the airport, are apt to open up and repack their luggage on the sales floor, which Japanese customers reportedly find disconcerting. (This was one of the factors leading to the introduction of dedicated tax-free checkouts.) The Chinese are still missing Despite the border opening, there is a fly in the ointment – the continued absence of visitors from mainland China. They would ordinarily be fueling a feeding frenzy on Japanese luxury goods. It isn’t known when they will become more than a rarity again. The Japan Tourism Corporation states that, in 2019, more than 30 million people visited Japan. Shopping accounted for about one-third of the money that tourists splashed in the country, on average. Thirty per cent of tourists were from China, and compared with visitors from other countries, they spent disproportionately high amounts on cosmetics, perfumes, electronic goods, watches and jewellery. Ahead of the industry Even without the Chinese big spenders, however, things are not exactly dire for the big high-end Japan luxury department stores. Sales at Isetan-Mitsukoshi’s Tokyo metro stores are up 33.3 per cent in the April-October period, which is the first six months of the company’s FY2023. Sales at domestic stores outside of Tokyo are up 11.3 per cent and for the combined company they’re up 23.8 per cent. This suggests that Isetan-Mitsukoshi’s sales growth is outpacing the industry. The government’s Ministry of Economy, Trade and Industry (METI) states that, as of September this year, there were just over 192 department stores in Japan. In the first nine months of the year, they generated 3.8 trillion yen ($40.7 billion), up 13.2 per cent from 3.4 trillion yen in the first nine months of 2021. But a better reference point is the corresponding period of 2019. If the current pace of sales growth is maintained, sales for the year will come in at 5.6 trillion yen, still more than 10 per cent below 2019. That’s an awful lot of ground still to make up to get back to square one. Headwinds Clearly, the absence of the Chinese travellers is making a hurtful impact. But that isn’t all. The executive office at Isetan-Mitsukoshi is well aware of the broader challenges still facing the company and the department store sector generally. In a recent business strategy document for investors, the company didn’t hold back. It faces decreasing spending on clothing by Japan consumers, increasing casualisation of fashion, a falling birth rate, ageing demographics that particularly affect the traditional department store customer, the declining impact of mass marketing, difficulty attracting new customers, and the trend toward non-contact transactions – a killer for high-end department stores with a strong face-to-face service culture. In an attempt to attract younger customers who are driving this last trend, the company is increasingly using Instagram as a marketing tool. Meanwhile, the company doesn’t have too many open doors for expansion overseas. It already has units operating in China, Singapore, and Malaysia, but was recently forced to close a longstanding store at Central World in Bangkok after nearly 30 years in business. The headwinds facing Isetan-Mitsukoshi may sound like a familiar litany of problems facing department stores around the world. However, the format is still extremely popular in Japan and in Asia generally. Most still operate on the concession model rather than direct operation of their own in-store boutiques. This has its advantages, they don’t get saddled with unnecessary inventory costs. It also means the brands themselves can control their own pricing, merchandising and selling. It was this lack of control that caused brands elsewhere in the world (for example in the US and Australia) to aggressively expand their own mall boutiques to reduce reliance on the department store channel. But for Japan and other countries in East and Southeast Asia accustomed to a heavy inflow of Chinese visitors in ‘normal’ times, the continued absence of Chinese tourists remains a challenge. With China’s zero-Covid policies making travel planning from the country extremely fraught, many analysts think expecting a return to normalcy, even in the second half of 2023, is optimistic. If so, duty free counters at Japan’s department stores just won’t not feel the same.