hocolate lovers. It’s mostly to do with low global stockpiles, which in turn is related to bad weather in West Africa where dry winds are turning the cocoa leaves yellow and causing the pods to wilt. It isn’t just the chocolate itself that’s at risk: the cost of the packing materials where the sweet stuff reposes is through the roof as well. It all adds up to a nasty bite to the pocketbook of consumers everywhere who are looking to shower one of the world’s favourite romantic gifts on their loved ones. In Japan, as usual, the retailers think of ingenious ways of getting around it. Department stores, which have traditionally been one of the favourite retail go-to places for high-end chocolates, have had to think a little bit out of the box (or out of the square if you prefer). They’ve varied their products to offer more items that include or coated with chocolate but aren’t necessarily choc-a-block with it. So, for example, chocolate-infused curries, baked goods and other more obscure and innovative items are on the menu. Chocolate isn’t everything A worldwide scarcity of cocoa isn’t the only thing that’s bothering Japan’s department stores though. Around July last year, it started to get much harder to generate significant revenue growth against very high base-year numbers, and it isn’t going to get any easier in the first half of this year. While the average monthly growth rate in the first six months of last year was 10.8 per cent, in the second half it was just 2.3 per cent. So after a nice tourist-driven bounce, department stores got a reality check. The big city flagships were able to keep up the pace on the back of tourism growth but lesser stores in national department store portfolios were beginning to drag their feet. By January, they were starting to have to really buckle in. Luxury chain Takashimaya exemplified the trend: in January its flagships in Tokyo (Nihombashi and Shinjuku) and Kyoto enjoyed year-on-year sales growth in the double-digits, as did e-commerce, but elsewhere things dropped away sharply across the 14-store chain, a likely harbinger of things to come. METI report  More broadly across formats, the government’s Ministry of Economy, Trade and Industry (METI), which issues a detailed monthly report on retail trade at large chains, said that sales for December rose by 3.7 per cent compared with the same month a year ago. That brought growth for the whole year 2024 to 2.5 per cent, a return to more normal historical trends after a 5.6 per cent mini-bubble in 2023. Unlike the narrow department store sector, the second half performance did not see a material decline in growth because the broader set of retailers for the most part are not so dependent on tourism.  Supermarkets finished the year with 3 per cent sales growth in December, making it +2.7 per cent for the year. Convenience stores slumped (-0.9 per cent) in December but eked out a 1.2 per cent gain for the year. Large-scale appliance stores finished strongly with 4.8 per cent growth (2.1 per cent for 2024). Drugstores also had an outstanding December (+9.6 per cent) as the temperatures descended and the flu season started. Sales for drugstores increased by 6.9 per cent for the year as a whole. Consumer confidence is weak and getting worse. One of Japan’s major problems is that it remains mired in a crisis of consumer confidence, which has only been partly masked by the rise of tourism. In December, the government’s confidence index fell to its equal lowest of the year, 36.2 on a scale of 0-100. But the decline in sentiment didn’t stop there: in January it sank even further, to 35.2. With an ageing population, weak income growth and some inflationary pressures over the past couple of years, there is no real trigger for improvement except tourism, which has been a revelation with arrivals reaching 36.9 million in 2024, up a whopping 47 per cent from 2023. The government is targeting 60 million arrivals by the end of the decade. Offsetting that is immigration (a non-event), and demographic profile (the population is getting long in the tooth). So the outlook from a retailer standpoint is somewhat muted. Uniqlo’s momentum carries over into 2025 METI doesn’t report on sales at apparel specialty stores but Fast Retailing provides a good indicator with monthly sales reports for its 786 physical Uniqlo stores in Japan and its e-commerce business. The company ended 2024 strongly and its momentum held going into 2025. In January, same-store sales grew by 8.6 per cent despite customer numbers being slightly down, meaning average transaction values grew by a robust 11.2 per cent. According to the company: “Same-store sales increased year on year in January as the cold weather helped generate strong sales of thermal ranges, and our New Year sales and new product sales also performed well.”  Meanwhile, Ryohin Keikaku, the parent company of Muji (649 stores in Japan), reported very similar results to Fast Retailing in January: same-store sales were up 11.3 per cent (including e-commerce), customer traffic was down materially, and average transaction values rose in the mid-single digits. Sales of apparel were particularly strong, attributed by the company to low temperatures. There are other indicators too that specialty stores are gaining market share. J Front, a department store retailer and mall operator, said that specialty apparel sales at its 17 properties were up over seven percent in December and accessories and general merchandise both increased in the double-digits. The data doesn’t lie: as consumers become more value-conscious, the value-oriented specialty stores are siphoning off market share from the department stores, which are focussing on extracting more from tourists and from their affluent and loyal domestic customer base.