As their stars fade, the retailers are setting out to reinvent themselves-in the burbs.

It's something that torments all fading divas: trying to keep up appearances knowing full well that the ``gift'' has gone.

For Japanese department stores, the day of humiliating exposure came in November, when the Cabinet Office announced it was dropping department store sales from a key economic index. Government economists have replaced them with overall retail sales, which also cover supermarkets and convenience stores, to help monitor economic conditions.

Cue the fat lady.

Shigeaki Wada, president of Millennium Retailing Inc., the holding company of Seibu and Sogo department store operators, acknowledged that it was time to pass on the tiara.

Department stores have been demoted from lead actors to a supporting role in the retailing sector, he said.

It's a big-time reality check, and one that may prove a savior for industry veterans.

How's that? Now that it is all out in the open, department stores can end the theatrical posturing and face facts.

Large stores of buttoned-down staff peddling everything from shoe polish to canary cages at expensive prices just don't cut it anymore.

Department stores have seen their combined sales decline for more than six years.

Facing blistering competition from supermarkets, specialty shops and mass discounters, department store operators are finally looking for alternatives to the traditional business model.

Option one: Swallow their pride and move to the suburbs.

Hankyu Department Stores Inc. is looking for salvation at large-scale shopping malls. In October, the company rubbed shoulders with other ribbon cutters at a shopping center that opened in Sakai, a bedroom town south of Osaka.

Along with a Jusco supermarket, its Sakai Kita-Hanada outlet is a major tenant in the 160-shop Diamond City Prou complex, one of the largest in the Kansai area.

Suburban shopping malls are growing fast, attracting customers with their wide product ranges and large parking spaces. It is an appealing area for Hankyu, whose traditional strategy of opening outlets in major railway terminals seems to have run out of track.

The company plans to open an additional five outlets in suburbs over the next 10 years, aiming to boost consolidated sales by 50 percent to 600 billion yen.

Option two is to convert unprofitable urban department stores into a home for specialty shops and other tenants.

Mitsukoshi Ltd., which has just marked the centennial opening of the nation's first department store, is converting its Shinjuku outlet in Tokyo into a mall of shops specializing in sundries and other goods.

While the store has been losing money in recent years due to competition, the company now expects to earn rent from tenants as a stable source of income.

The established department store operator is even considering dropping the Mitsukoshi name from the outlet.

President Taneo Nakamura says money-losing department stores should be turned into new types of profitable facilities.

The Shinjuku outlet opened its upper floors with two tenants, a Loft sundries shop and a Junkudo bookstore, in October.

Lower floors will open next spring and feature specialty shops targeting young women. The grocery section on the basement floors will be considerably downsized.

Sales at the store for the current fiscal year are expected to drop by one-third from the previous year. However, Mitsukoshi expects the renovated facility will steer back into the black next year due in part to a reduction in personnel and advertising costs.

Some department store operators believe the old model still has a future. Instead of heading to the suburbs, they are going upmarket by focusing on their most affluent customers.

Millennium Retailing has about 4,000 customers who annually spend 5 million yen or more at its Seibu and Sogo department stores.

The group sold 300 large flat-panel TVs, each priced at about 1 million yen, during the March-August period.

Millennium Retailing President Wada said the key to survival is to keep the big spenders coming back.(IHT/Asahi: December 15,2004)