Xymax Real Estate Institute

RESEARCH REPORT

Fact-Finding Study on Store Strategies during the
COVID-19 Pandemic
Findings from questionnaires and interviews with commercial operators

December 18, 2020

Xymax Real Estate Institute (hereinafter, “Xymax REI”) has been conducting various questionnaire surveys ofcommercial operators since 2016 on a continuous basis in partnership with the laboratory of Lecturer Kosei
Ishida of the Department of Architecture at Waseda University (*1).
In this 4th survey that was conducted between September and November 2020, we studied throughquestionnaires and interviews how commercial operators’ policies on store strategies have changed from before
the outbreak of the novel coronavirus (COVID-19) amid the drastic transformations of their businessenvironments due to the pandemic. Such strategies include the opening, closing and renovation of stores, which
are the core of real estate strategies. The survey covers approximately 5,600 commercial operators with annual
sales of 3 billion yen or more that operate or control multiple stores in the retail, restaurant, entertainment andservice sectors (*2). Valid responses to the questionnaire were obtained from 515 companies (response rate:9.3%) and interviews were conducted with 14 companies.
This report summarizes the details of operators’ store strategies as well as their changes and future directions.
We hope these survey results will assist in the formulation of effective store strategies during times “with” and“after” COVID-19.
*1 Questionnaire surveys of commercial operators (With the laboratory of Professor Yukio Komatsu from 2016 to 2019)
1st survey: Repair of Retail Buildings Fact-Finding Study 2016, released on November 29, 2016
https://www.xymax.co.jp/english/research/images/pdf/20161129.pdf
2nd survey: Fact-Finding Study on the Opening & Closing of Commercial Outlets 2017, released on September 29, 2017https://www.xymax.co.jp/english/research/images/pdf/20170929.pdf
3rd survey: Fact-Finding Study on Real Estate Strategies of Commercial Outlets 2018, released on November 29, 2018https://www.xymax.co.jp/english/research/images/pdf/20181129.pdf
3rd survey: Fact-Finding Study on Information Management of Commercial Outlets 2018, released on November 29, 2018https://www.xymax.co.jp/english/research/images/pdf/20181129_2.pdf*2 Target respondents: See the last page of the report for the survey overview.

Key Findings●In terms of the degree of willingness to open new stores, “Open new stores only in prime
properties” had the largest percentage both before Corona (2019) and with/after Corona (fromnow to next year), indicating that operators are willing to take up prime properties.
●In terms of new store opening policies, “Place emphasis on existing store-opening area orproperty format” was the most popular both before and with/after Corona. However, a certain
number of operators intend to “review the store-opening area or property format” as sales atstores located in cities and sightseeing destinations have continued to show weakness compared
to stores located in the suburbs and residential areas due to the pandemic.
●The policies for unprofitable stores are mixed between industries and business formats or
between operators in the same business format, depending on the degree of impact of COVID-19.

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute●Stores with strong sales have not shown significant changes in policies between before andwith/after Corona. Compared to unprofitable stores, more operators have set a policy ofrenovating their stores.
●In terms of business strategies, the percentage of “applies (somewhat)” was large in general, withthat with/after Corona being larger than before Corona for all strategies.
●In terms of the impact of changes in social conditions on store strategies, “Prolonged impact of
COVID-19” was the top reply, while the top changes in consumer behavior and values that werefelt by operators were “The rising trend of consumption for staying at home will continue” and“Telework (WFH, etc.) will continue to expand.”Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute

1. Industry and Stores (Profile of Respondent Operators)
The most common industry/format of the respondents’ core business was retail (food and non-food) (Figure1). The percentages of the industries or business formats were roughly in line with those of all operators towhom we sent the questionnaire.
Figure 1: Industry/Format of Core Business (Single Answer; n=515)

In terms of the number of stores in Japan, many operators in the restaurant industry run multiple stores of 50
or more (Figure 2). Asked where stores were located in terms of the eight areas of Hokkaido, Tohoku, Kanto,
Tokai, Hokuriku/Koshinetsu, Kansai, Chugoku/Shikoku, and Kyushu/Okinawa, 80% of the operators in the retail(food) industry were community-based, with stores located in one area (Figure 3). On the contrary, a large
percentage of restaurant and service operators operated over a broad area, with around 50% of such operators
having stores in three areas or more.
Figure 2: Number of Stores in Japan(Single Answer; n=514)

Figure 3: Area of Stores(Multiple Answer; n=513)

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate InstituteThe standard store size was small among restaurant operators, at less than 150 tsubo (1 tsubo = 3.3 sqm)
among more than 90% (Figure 4). The most common format of existing stores was the roadside stand-alone
store in all industries and business formats (Figure 5).
Figure 4: Standard Store Size
(Single Answer; n=505)

Figure 5: Property Format(Multiple Answer; n=512)

2. Store Strategy: Comparison between Before Corona (2019)and With/After Corona (from Now to Next Year)We asked operators’ policies on store strategies by defining ‘before Corona’ as 2019 and ‘with/after Corona’as from now to next year. The following are the results of interviews with operators after confirming the changes
in the strategies between before and with/after Corona.

2-1. Degree of Willingness to Open New Stores
We first asked the degree of operators’ willingness to open new stores before Corona and with/after Corona(Figure 6). Although the percentage of “Aggressively open new stores to increase the number of stores” halved
from 12% to 6%, the overall percentages remained largely unchanged, with “Open new stores only in prime
properties” dropping slightly from 51% to 50% and “Do not open new stores in principle” unchanged at 35%.
Figure 6: Degree of Willingness to Open New Stores (Single Answer; n=515)

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute

Figure 7 shows operators’ degree of willingness to open up stores by industry and business format. This
indicates that among restaurant operators, “Aggressively open new stores to increase the number of stores”
decreased from 22% to 7% and “Open new stores only in prime properties” dropped from 65% to 56%, while“Do not open new stores in principle” rose sharply from 9% to 30%.
Figure 7: Degree of Willingness to Open New Stores (By Industry/Business Format) (Single Answer)

The most popular comment by operators, regardless of industry or business format, obtained throughinterviews and the comments section of the questionnaire was that many properties are expected come onto
the market due to the closure of stores by other companies and that the operators intend to snatch up prime
properties aggressively. This suggests that many multi-store operators have strong intentions of opening storesin prime properties even during the COVID-19 pandemic. There seems to be a trend of operators focusing onprime properties since many believe that sales and customers will not return to previous levels even after the
pandemic has abated.
On the other hand, a restaurant operator who replied they will not open new stores in principle with/after
Corona mentioned that they have already opened stores in areas where they should have a store and that they
will focus on capital investment in existing stores for the time being. Another restaurant operator said that theirstore-opening and renovation plans for this term have been put on hold due to the impact of COVID-19 andthat they were concerned about their situation a year from now since they cannot do anything unless their sales
and profits recovered.

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute2-2. Policy in Store Strategies
We then classified operators’ store strategies into the four groups of “new store openings,” “unprofitable
stores,” “stores with strong sales,” and “business strategy” and asked operators’ policies before Corona (2019)
and with/after Corona (from now to next year) concerning specific options in each group.
<New store openings>
In terms of new store openings, the most popular policy with the largest percentage of “Applies” and “Applies
somewhat” was opening stores with an emphasis on the existing store-opening area or property format for both
before and with/after Corona. However, the percentage dropped more than 10 points for with/after Corona(Figure 8).
Figure 8: Policy in Store Strategies <New Store Openings> (Single Answer; n=515)

A trend seen across the nation in both the interviews and comments was that the recovery of sales at stores
located in cities and sightseeing destinations was weak compared to stores located in the suburbs and residential
areas. This seems to be significantly affected by the spread of work-from-home and other forms of telework due
to work style reforms, the evaporation of inbound tourists (foreign tourists visiting Japan), and the change inthe flow of people as people have refrained from traveling across regions and prefectures in Japan since thedeclaration of a state of emergency. As many operators have commented that they will review their dominant
strategy based on consumption trends going forward, we expect such actions to accelerate in the future.
In terms of securing labor, while operators in almost all industries and business formats faced a chronic
shortage of labor before Corona, many operators said that the recruitment environment had improved and that

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
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reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institutethe turnover rate was substantially lower than before. However, the common perception toward the outlook oflabor seems to be that the improvement in the recruitment environment and the drop in turnover rates are oneoff and that the situation will become severe as before once the pandemic has ended. Other comments included,“It is important to create an environment that ensures safety and security not only for customers but also for
employees since reputational damage will be huge if someone becomes infected at the store.”<Unprofitable stores>
In terms of policies concerning unprofitable stores, “Carry out rent reduction negotiations” was the policy thatapplied to operators the most, with the percentage of “Applies (somewhat)” replies increasing quite substantiallyfrom before Corona to with/after Corona (Figure 9). This was followed by “Close store (regardless of whether
closing own store, early termination of leased store or expiry of contract),” which applied or applied somewhat
to more than 50% of the operators.
Figure 9: Policy in Store Strategies <Unprofitable Stores> (Single Answer; n=515)

Interviews with operators revealed that a relatively large number of operators had continuously carried out
rent reduction negotiations and closures of unprofitable stores from before and that the closure of stores did
not increase due to COVID-19. However, a restaurant operator said that there have been (mass) store closuresin the industry as a whole since the breakeven ratio of the industry was high at the 90% level and operators were
not able to secure profits with the sales level under the pandemic.

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate InstituteFurthermore, a retail operator who operates stores mainly in shopping centers said that they will keep theinitial contract term of fixed-term leasehold contracts unchanged from before in consideration of investment
recovery, but will consider shortening the contract term when they renew the contract to hedge against risk,
and make decisions on closing stores due to changes in market conditions as quickly as possible and supplementwith new store openings, relocations and store space expansions.
These suggest that operators’ policies for unprofitable stores are mixed between industries and businessformats or between operators in the same business format, depending on the degree of impact of COVID-19.
<Stores with strong sales>
For stores with strong sales, “Fully (partially) renovate own sales floor” did not see a significant change
between before Corona and after Corona, but the percentage of “Applies (somewhat)” was more than 50% forboth before and after Corona (Figure 10). The percentage was around 20 percentage points higher than for thesame policy for unprofitable stores (Figure 9).
Figure 10: Policy in Store Strategies <Stores with Strong Sales> (Single Answer; n=515)

According to interviews with operators, few operators aggressively carried out renovations, capital
investments and repairs to ensure safety and security for customers as a countermeasure against COVID-19. A
majority of operators said that they changed their regulations such as installing partitions, reducing the numberof tables, ventilating, and restricting the number of customers to avoid the three Cs (confined spaces, crowded
places, and close contact with people) (in line with industry guidelines).” It seems that the measures mentioned
above are currently the mainstream.
------------------------------------------------------------------------------------------------------------------------<Reference> The restaurant industry is showing marked changes in policy
When we look at operators’ store strategies by industry or business format, operators in the restaurant
industry showed larger changes in the percentage of “Applies (somewhat)” replies than the national average in“Place emphasis on existing store-opening area or property format” for new store openings, “Carry out rent
reduction negotiations” and “Close store (regardless of whether closing own store, early termination of leased
store or expiry of contract)” for unprofitable stores, “Fully (partially) renovate own sales floor” for stores withstrong sales (Figure 11).

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute
Figure 11: Comparison between National Average and Restaurant Industry(Single Answer; Overall n=515; Restaurant Industry n=54)<New Store Openings> Place Emphasis on Existing Store-Opening Area or Property Format<Unprofitable Stores> Carry Out Rent Reduction Negotiations<Unprofitable Stores> Close Store (Regardless of Whether Closing Own Store, Early Termination of
Leased Store or Expiry of Contract)<Stores with Strong Sales> Fully (Partially) Renovate Own Sales Floor

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
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reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate InstituteAccording to interviews with restaurant operators, their attitudes toward new store openings include thefollowing: “We are refraining from opening up stores in urban areas, which require high rent, under the current
sales figures and number of customers due to the pandemic,” “We will review the balance of openings of storesin the suburbs and stores in cities,” and “Recently we have been gathering information on reasonable properties
in Tokyo, which are appearing on the market.” Comments on existing unprofitable stores include “We will
negotiate a rent reduction as the first step but if discussions end unsatisfactorily, we have no choice but to close
the store (by applying the early termination clause)” and “We might see (mass) store closures in the near term,
regardless of the size of store.”
The impact of changes in consumer behavior was also significant. Comments included, “The percentage of
take-aways, which used to be around 20%, rose to more than 60% at one point. An eat-in store format no longer
meets the needs of consumers. It is necessary to ensure that the flow of eat-in and take-away customers within
the store does not overlap. Going forward, we intend to increase openings and renovations of drive-throughstores, stores specializing in take-aways and deliveries, and multi-industry stores” and “We are having difficulty
generating sales especially during the night hours due to customers staying at home and an increase in
consumption for staying at home. (As with bar chains) we are considering changing our store format to capture
lunch needs.”-------------------------------------------------------------------------------------------------------------------------

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
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reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
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RESEARCH REPORT｜Xymax Real Estate Institute<Business strategy>
In comparison to new store openings, unprofitable stores and stores with strong sales, the percentage of“Applies (somewhat)” is larger for business strategy in general, with the percentage higher with/after Corona
than before Corona in all policies (Figure 12). This is probably because many operators think they must
accelerate the policies, which they had carried out before, due to their experience of the COVID-19 pandemic.
Figure 12: Policy in Store Strategies <Business Strategy> (Single Answer; n=515)

Comments obtained from the interviews with operators include: “We will strengthen initiatives to encouragecustomers with high levels of digital literacy to use social media such as Twitter and Instagram” and “Social
media help us obtain new fans of our stores as they enable us to offer not only store and product information
but also real-time congestion information and to hold mini-events, as well as approach consumers throughmulti-faceted branding measures such as introducing our environmental conservation activities.”
Comments from restaurant operators included, “E-commerce demand has increased due to the pandemic. In
particular, we have been seeing more orders from the provinces, where we don’t have many stores. We also saw
a large number of orders for online-only menus that we do not sell at our store” and “We are considering selling
meal kits at our store that can be cooked easily at home.”
Furthermore, several operators commented as follows: “DX (digital transformation) will become essential in
the industry as a whole, and all of the policies (in Figure 12 above) will become important,” “Our problem is that
we don’t have the personnel who can create a “grand design” for DX,” and “We are currently verifying the cost
performance of DX and carrying out introduction demonstrations at each division and department. It might benecessary to ask for the advice of outside experts.”

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute2-3. Measures Implemented in Response to COVID-19
The most popular measures implemented by operators in response to the outbreak of COVID-19 were
“Request rent reduction,” “Apply for central/local government support for operators” and “Request loan fromfinancial institutions,” followed by “None in particular” (Figure 13).
Figure 13: Measures Implemented in Response to COVID-19 (Multiple Answer; n=515)

Looking at this by industry and business format, “rent reduction,” “applying for support measures,” and“requesting loan” were popular especially in the restaurant and entertainment industries, with theimplementation rate exceeding 60%. “Request rent reduction” was outstandingly popular in the restaurant
industry at 91%. “None in particular” was popular in the retail (food and non-food) industry, while it accounted
for 6% in the restaurant industry and 0% in the entertainment industry. This suggests that industries and businessformats hit significantly by the pandemic are implementing various measures (Figure 14).
Figure 14: Measures Implemented in Response to COVID-19 (By Industry/Business Format)(Multiple Answer; Excerpt)

In the interviews, some operators commented on rent reductions that there was a request from the developer
to extend the contract in exchange for accepting a rent reduction and that the property side was keen on
preventing an increase in vacancies as much as possible. Another operator commented that the support
measures by Japan’s central and local governments were too weak compared to other countries.

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
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RESEARCH REPORT｜Xymax Real Estate Institute2-4. E-Commerce
As for the current percentage of e-commerce sales, “None (does not offer e-commerce)” accounted for 45%,
while the most common (40%) percentage of e-commerce sales was “Up to 10%” among operators that offerede-commerce. The sum of operators with more than 10% of e-commerce sales was only 14% (Figure 15).
Figure 15: Percentage of E-Commerce Sales (Single Answer; n=515)

We also asked operators whose e-commerce sales ratio in Figure 15 was from “Up to 10%” to “More than50%” about the change in e-commerce sales from the previous year. 49% said the ratio “Increased significantly”
or “Increased,” suggesting that e-commerce has become more widespread due to the pandemic (Figure 16).
Figure 16: Year-on-year Change of E-Commerce Sales Percentage (Single Answer; n=276)

When we asked in the interviews with operators about the future development of e-commerce, a retail (food)operator commented, “Online and physical stores are becoming more integrated, as can be seen in alliances
between IT companies and food supermarkets. Perishable food has a low e-commerce ratio and was still a ‘blue
ocean,’ but sales at online supermarkets are rising due to the pandemic. Consumer awareness is changing, andwe must keep a close eye on the developments going forward.”

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
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reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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3. Changes in Social Conditions and in Consumer Behavior andValuesIn this chapter, we examine to what degree the changes in social conditions and in consumer behavior andvalues affect operators’ store strategies.

3-1. Changes in social conditions
We asked operators about the impact the 11 social conditions we listed have on their strategies for opening,
renovating and closing stores with/after Corona (from now to next year). The change that the largest percentage
of operators thought has an effect was “Prolonged impact of COVID-19” (Figure 17). More than 80% of
operators in all industries and business formats replied that this social condition has an impact.
Figure 17: Change in Social Conditions that Affects Store Strategies (Single Answer; n=515)

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
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reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
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RESEARCH REPORT｜Xymax Real Estate Institute

In Figure 17, the percentage of operators who replied that “Work style changes such as telework and workfrom-home” and “Decrease in foreign tourists” affect their store strategies was 47% and 24%, respectively.
However, the percentages for the same social conditions were prominently high among operators in therestaurant industry, at 74% and 67%, respectively. This indicates that the industry has been significantly affectedby the change and decrease in the flow of people (Figure 18).
Figure 18: Change in Social Condition that Affects Store Strategies (By Industry/Business Format)(Single Answer)
Work style changes such as telework and work-from-home

Decrease in foreign tourists

According to the interviews, the attitude toward the prolonged impact of COVID-19 among many operators
was that the best they could do was to review their store strategies flexibly by capturing the changes in future
developments, the market and consumer behavior. With regard to the decrease in foreign tourists, many
operators seem to be thinking that the overall impact is not so large, although stores with a high ratio of sales
to inbound tourists are hard hit. Several operators also commented that it would take a reasonable amount oftime until inbound tourists return to Japan and that they wished for an early development of vaccines and drugs(against COVID-19).

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
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reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
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RESEARCH REPORT｜Xymax Real Estate Institute3-2. Changes in Consumer Behavior and Values
We asked operators about their thoughts on the 12 changes in consumer behavior and values we listed. The
sum of “Agree” and “Somewhat agree” exceeded 80% in “The rising trend of consumption for staying at home
will continue” and “Telework (work-from-home, etc.) will continue to expand,” which symbolize the COVID
pandemic (Figure 19). The difference between industries or business formats was small for the above twochanges.
Figure 19: Changes in Consumer Behavior and Values (Single Answer; n=515)

According to the interviews, many operators do not expect to see sales and customers return to previous
levels even after the pandemic has abated as consumers’ lifestyles have changed. Among them, one operator
said that consumption in stores and consumption for staying at home are not a trade-off but co-exist, and thata strategy of approaching both types of consumption will become more important. To be specific, an operator
commented, “What is important for physical stores is how to improve added value to encourage customers tovisit the store, while ensuring the safety and security of customers, and the necessary approach to consumption
for staying at home is to diversify customer contact from the perspective of CX (consumer experience). To that
end, the issue will be to re-establish the business model based on DX (digital transformation).”Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
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reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute

4. Comments Obtained from the Interviews and Questionnaire(Excerpt)
In addition to the comments we introduced earlier, we have compiled operators’ comments obtained fromthe interviews and the comments section of the questionnaire into different categories as follows:

4-1. Changes in Store Strategies<New store openings>
・ We cannot exclude new store openings in considering our growth strategy, but we must scrutinize theprofitability from a medium/long-term perspective, instead of opening stores haphazardly. (Retailsector)・ There has been an increase in inquiries from shopping centers due to the pandemic. (Retail)・ We were forced to suspend business due to the shutdown of shopping centers, although our industry
was not subject to the government’s request for a shutdown. We plan to increase stand-alone stores.
(Service)・ We usually open around 10 new stores each year, but our store opening plans for next year have been
postponed due to the pandemic. Next year we will invest in IT, such as in accelerating smartphone
payments, introducing automated cash registers and accommodating online purchases. (Retail)・ The recovery of sales has been weak at stores in urban centers. We intend to wait and see for a while,
carry out “scrapping-and-building” depending on the developments and shift to opening stores inlocations where sales and profits can be expected. (Retail)・ We must respond to the changes in customers’ flow and taste by renovating existing stores and opening
stores in a new format, since we will not be able to address the changes with our exisitng store-opening
areas and business formats. (Restaurant)<Unprofitable stores>
・ The decline in consumer confidence, the shift to casual clothing and the increase in telework due to thepandemic all work against us. We will increase closures of unprofitable stores. (Retail)・ We have no other choice but to pursue a contracted equilibrium since the flow of customers away fromconvenience stores to food supermarkets, drugstores and home centers will not stop for a while. Ourbasic approach will be to suspend new store openings and increase store closures. (Retail)・ We had continued and kept stores even if they were a little unprofitable, to create jobs in the community.
However, from now on we must eye the possibility of withdrawing stores more vigorously.
(Entertainment)<Stores with strong sales>
・ With the increase in vacant floors at shopping centers, we intend to relocate or expand our store space
to increase the size of our stores and increase our product line-up, keeping an eye on how rival tenants
act. (Retail)・ Our challenge will be to renovate our stores and review our selling methods in view of infection
prevention, so that customers can visit our stores safely and with a sense of security. (Service)・ We replaced ventilation equipment and changed our desk layout to accommodate social distancing so
as to prevent the students of our private-tutoring schools from infection. (Service)

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
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reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
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RESEARCH REPORT｜Xymax Real Estate Institute<Business strategy>
・ We hope to increase contactless customer contact such as online customer service as much as
possible—not to mention expanding e-commerce—but we face issues in personnel and skills, which
are hindering us from carrying out such measures immediately. (Retail)・ Although we plan to introduce e-commerce, we do not expect it to be able to make up for the loss ofsales due to the pandemic. There is no decisive solution for restoring sales to pre-Corona levels.
(Restaurant)
・ Since the sales at our stores in urban centers of major cities across Japan have not yet recovered, weface difficulty in continuing paying expensive rents. Going forward, we will reduce our store area byaround 30% and place emphasis on store efficiency by utilizing online measures. (Retail)・ Following the decline in sales as customers stay at home, we have re-acknowledged that enhancing ouronline sales website is an urgent issue. We will make investments in this area. By strengthening out-ofstore sales and other measures, we must embrace a business structure that enables us to continue
growing even if customers visiting our stores decrease. (Retail)・ With our e-commerce ratio reaching 50% due to the pandemic, we intend to strengthen this area andalso open a cross-border online sales website. (Retail)・ We must establish a contactless business model, such as introducing online business meetings. We
believe conventional showrooms and stores will begin to change as well. (Retail)・ We are focusing on sustainability and have developed a recycling machine for apparel, which we are
installing in our stores. (Retail)・ We have introduced an AI robot that checks selling prices and best before dates. We will continue todigitalize to reduce invisible fixed costs. (Retail)・ We will increase capital investment to provide services that reduce contact opportunities, such as pickup services at the parking lots of our stores. (Retail)・ Restructuring our supply chain has been an issue from before the pandemic. In addition to improving
operations and cost performance, it is important whether the supply chain can enhance ourmanagement competitiveness or distinguish us from our competitors and lead to branding.
(Entertainment)
・ In terms of increasing our sales channels, we intend to reinforce the roll out of a traveling supermarket
by partnering with administrative authorities, based on our policy of making the store approachcommunity residents and not just having consumers visit our stores. (Retail)・ To maintain and expand our business scale, we must open stores more than we close. We will carry out
in-depth market research to prevent spending more than can be recovered, with top priority inproperties with everything included and M&As. (Entertainment)

4-2. Changes in Social Conditions and in Consumer Behavior and Values<Changes in social conditions>・ The entire society has become more dependent on digital. Furthermore, as demand from inboundtourists, which had been strong, disappeared and we have suddenly been forced to depend only on
domestic consumption, we believe there will be an even greater focus on the decline and aging of the
population. (Retail)・ The digital shift will progress rapidly. The consumers also demand that. Perhaps only the companies
that can respond to consumer needs will be able to continue growing. (Retail)・ In terms of securing personnel, we feel that the situation is good now as the overconcentration in Tokyo

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institutehas relaxed and large companies have suspended or reduced recruitment. (Service)・ Securing personnel remains a major managerial issue, since our sector cannot embrace digitalization
rapidly and customers have been returning lately. (Entertainment)
・ We think that e-commerce using smartphones will expand with the spread of 5G. In addition to thesimplification of payment through fintech that uses smartphones, new initiatives such as drive-throughs
and take-aways are being implemented actively. However, simplicity is essential in Japan, where thepopulation is rapidly aging. We expect to see further evolution of systems that enable payment just by
swiping a smartphone. (Retail)・ Although some say that physical stores will no longer be needed, stores where shoppers can buy foodand other items on the spot will definitely be necessary. We think an upgraded version of physical storesthat combines the latest technologies will emerge. Unfortunately, I think the store that is currently theclosest to that kind is Amazon. (Retail)・ We have found out how immensely the stopping of the movement (traveling) of people affects theglobal economy. As a means of personal mobility, cars are an extremely safe transportation device inthe face of viruses, and will be essential in daily life and business going forward. (Retail)・ In response to an increase in remote work due to the pandemic and the development of a sharing
business, in which consumers use what they need when they need it, we believe a new store systemthat incorporates these trends will emerge. (Retail)・ Natural disasters occur frequently each year, with their impact becoming more prominent. We must
introduce resilient operations and diversify our business. (Retail)<Changes in consumer behavior and values>
・ We believe it is crucial to switch to a business model that addresses the needs of the times, asconsumers’ lifestyles are about to undergo drastic changes due to the prolonged pandemic (e.g.,
staying at home, working from home, using e-commerce, using home delivery). (Retail, restaurant,
entertainment, service)・ Since consumer behavior is expected to weaken due to the decrease in wages caused by the pandemic,
as well as the decrease in disposable income following the consumption tax hike, it will be important
to develop products that address such changes. (Retail)・ The food supermarket industry is seeing a rise in sales due to stay-at-home demand. However, we
believe price competition will intensify as consumers’ financial conditions worsen due to the pandemic.
(Retail)・ We do not expect the number of customers and foreign tourists to return to pre-Corona levels evenafter the pandemic has abated. Customers’ values may become polarized, which may lead to foodsupermarkets being weeded out based on prices, even amid fears that prices might rise despite theailing economy, or being required high quality. (Retail)・ We feel that the raison d’etre of drugstores as an infrastructure for residents of local communities has
been re-acknowledged and improved in the wake of the pandemic. Drugstores’ advantage of providing
a one-stop service for consumers to purchase foodstuff, daily supplies, hygiene products and drugs islarge. We intend to reinforce our communication with consumers through hands-on experience andconsultation. (Retail)・ The value of physical stores going forward may be the provision of services that can only be provided
face-to-face and not by a machine. There will be no future unless we do the basic things such as
welcoming guests with a smile and serving dishes that can only be eaten at the store. (Restaurant)

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute・ While people have been able to experience many things at home due to the spread of consumption
for staying at home, many must also be feeling a sense of being constrained. Connecting with otherpeople is unchangeable, and face-to-face conversation and communication with people will become
more valuable than before. We will think about what kind of stores to create so that we can facilitate
this. (Restaurant)
・ Fitness clubs in the provinces have been more affected than those in the cities. Many members in their
60s to 80s have suspended or terminated their membership. Programs that can only be experienced ata certain place, such as swimming classes, and programs for children accompanied by parents haveremained robust. Fitness programs for adults will increasingly go online. (Entertainment)
・ Cinemas and pachinko parlors have been used in the same way since the old days. Although films can
now be rented or viewed online, pachinko cannot go online under current laws. If pachinko becomes
online in the future, it will change pachinko parlors dramatically. (Entertainment)
・ The basic style of private-tutoring schools has traditionally been one teacher to two students. The needfor receiving online tutoring at home has increased due to the pandemic. It is difficult to secure
profitability with online tutoring because it will be one teacher to one student. We must pursue atutoring style that is a hybrid of physical and online. (Service)
・ Each person has their own style of traveling, and therefore we must make minor adjustments andtunings to address each customer’s needs. One of the values of a travel agency is to be a good mentor
for customers when they travel to an unfamiliar or inconvenient place. It is difficult to leave everything
to AI. Going forward, there will be fewer physical stores due to the spread of online customer service.
(Service)
・ Office-casual wear will become even more casual and more emphasis will be placed on functionality,
as fewer people go to work in the office. We expect sporty fashion styles to become even more popular.
(Retail)・ With the criteria of choosing houses changing significantly due to telework, there has been a shift ofdemand from houses in urban centers or close to railway stations to large houses in the suburbs. We
will identify future changes in the market and consider areas or floor plans to be marketed. (Service)・ The pandemic has brought about changes to the trends of users of car-sharing services, which are usedby an unspecified large number of people. There has been a rise in subscription and lease users. (Retail)・ Fewer people are going out at night. I think the time has come to rethink the business hours of stores.
(Retail)・ Meetings that seem to be aimed at gathering in Tokyo will probably continue to decrease. While it isrational, a society with less exchange between people may not generate the same kind of results thatit used to. (Retail)・ Even if work can be done through the web, I think people’s desire to enjoy fun experiences such as
shopping, travels and concerts with their five senses and not through the web will remain unchanged.
(Retail)Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

20

RESEARCH REPORT｜Xymax Real Estate Institute

5. Summary
The questionnaire and interviews have revealed the reality of store strategies during the COVID-19 pandemic.
Many commercial operators are under an unprecedented severe business environment, and operators havebeen engaged in the restructuring of their business portfolio, not only by opening, closing or renovating stores
but also by reviewing their business strategies, in a bid for survival and growth.
A characteristic of the COVID-19 pandemic, unlike previous economic depressions, is that it has both a positive
and negative impact on sales and the number of customers depending on the industry and business format aswell as on the store-opening area and property format within one operator. In order to address the changes insocial conditions and in consumer behavior and values and to re-establish or re-define business models, it will
be necessary to accelerate initiatives in DX and CX, which had been key ideas from before the pandemic, torethink the definition and improve the performance of physical stores. In addition to this, we believe that efforts
to increase contact points with consumers will intensify through strategic partnership beyond the borders ofindustry or business format. The skill of such strategies might become the key determinant of the survival of
operators.
Xymax REI intends to continue its research on shopping venues and stores to publish useful information.

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

21

RESEARCH REPORT｜Xymax Real Estate Institute

Survey Overview
PeriodSeptember – November 2020

TargetOf retailers (food and non-food), restaurant operators, entertainment providers, and service providers*1
aimed at personal consumption, 5,555 business operators with net sales of 3 billion yen or more in thelatest survey year*2*3*1: Industries and business formats that operate stores in shopping centers, commercial buildings, or roadside stores,
which are currently Japan’s main shopping venues, based on Japan’s industry classification by the Ministry ofInternal Affairs and Communications*2: Target companies of the service industry are beauty & barber, travel, education, insurance, and real estatecompanies that operate stores in general shopping venues.
*3: Targets were extracted based on data by Tokyo Shoko Research.

No. of valid
responses

Questionnaire: 515 companies (response rate: 9.3%); interview: 14 companies

Geographicalcoverage

Nationwide

MethodQuestionnaire survey by post or online, and interview

Surveycontents

I.
II.

Business and stores: Profile of respondent operators
Store strategies: Comparison between before Corona(2019) and with/after Corona (from now tonext year)
III. Changes in social conditions and in consumer behavior and values
IV. Comments obtained from interviews with operators and the questionnaire (excerpt)

The percentage mix in the charts contained in this report are rounded off to the whole number and therefore may not add up to 100%.

For further inquiries please contact:
Xymax Real Estate Institutehttps://soken.xymax.co.jp | E-MAIL: info-rei@xymax.co.jp

Fact-Finding Study on Store Strategies during the COVID-19 Pandemic 2020
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

22