Japanese Market Insights


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Insights into the market in Japan: what seperates it from other markets and how to be accepted into this lively and unique country.

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Japanese Market Insights

  1. 1. Insightsfrom Japan
  2. 2. Insightsfrom Japan
  3. 3. ©XPotential 2008 3IntroductionA market visit was made to Tokyo, Japan in June 2008 by Steve to developinsights for the Japanese market.Store Visits: Serbr-Ginza, Matsuya- Ginza, Mitsukashi, Omotesando Hills boutique/ department stores (Harajuku), Louis Vitton (Harajuku), BathingApes (Harajuku), ISETAN-Shinjuku, Marunouchi Building, AEON (Biggestchains).What follows are the series of insights from data collected from the visit.
  4. 4. ©XPotential 2008 4Japan macro economy• Japans economy is the second largest inthe world• Japans economy is currently in recession• Per capital GDP Japan is $36,544(€27,667) -- 34 in the world• Japan has one of the lowest populationgrowth rates in Asia• Japan has a rapidly ageing populations --19% over 65 years (doubling since 1985)• By 2050 42% of the population will be over60 years old• Average balance in a current accountwould be about €70 – 80 K ($92 – 106 K)• Grocery sales per capita are growing$5,925 (€4,486)As one of the most developed economies in the world, Japan is sufferingfrom many of the same symptoms of developed Western markets; aprosperous but increasingly aged population and recession or very sloweconomic growth.
  5. 5. ©XPotential 2008 5The Retail Environment Hypermarkets/ (superstores) spreadacross 4-5 stores e.g. Meguno• C-stores (convenience) in hugeincrease (almost every street corner)• Convenience stores are developingadditional services e.g. bill payingATMs, pick up for home delivery etc• Department stores under pressurefrom super and hypermarkets• Since 2007 new city planningrestrictions mean large storeopenings in suburban areas will fall87%• Restrictions on the opening of largesized stores (greater than 10,000m²)Until recently, high land prices and regulations against large stores havealso stifled expansion of the major chains and encouraged the growth ofconvenience stores (especially 7-Eleven). However, consolidation is nowgathering pace and the top players, aided by their expansion plans, areundoubtedly gaining market share. 7-Eleven Japan is the largestconvenience store operator• Sales up• New products• Refine product mix• Lawson convenience stores• Closed unprofitable stores• New formats for women andelderly• NANRAL/ LAWSON• Family Mart• Closed unprofitable stores• Reopen in hotels/ offices andhospitals• 6 largest convenience stores rangeresponsible for all the growth – 23,837(in 1991)  45,000 (in 2007)
  6. 6. ©XPotential 2008 6The Retail EnvironmentConsumers are very used to shopping in small convenience stores / smallcorner supermarkets rather than large malls (in the city, private cars arenot often used)• Convenience stores are developingadditional services e.g. bill payingATMs, pick up for home delivery etc Japanese shoppers will visit localstores 3 – 4 x per week  freshestproduce• 6 largest convenience stores rangeresponsible for all the growth – 23,837(in 1991)  45,000 (in 2007)
  7. 7. ©XPotential 2008 7The Retail Environment• Retail sector highly fragmented: top5 have less than 20% ms.• Retailers with economic downtownprice of land dropped: retailersencouraged to pursue aggressivestore openings• Hypermarkets/ (superstores) spreadacross 4-5 stores e.g. Meguno• Own label  increasingly importantespecially premium• Number of supermarkets +20%,sales area +86% (bigger storeformats)• There is a concentration ofdepartment stores through mergers/acquisitions  investigate• 6 largest convenience stores rangeresponsible for all the growth –23,837 (in 1991)  45,000 (in 2007)The retail segment is experiencing pretty sluggish growth. For a marketthat is so developed Japans retail sector is highly fragmented with the topfive players holding a market share of less than 20%.• 2001 – 2006• 344 new shopping centers• 70%  10,000 m²• Built in suburban areas, whichmeans cheaper land• Department stores under pressurefrom super and hypermarkets
  8. 8. ©XPotential 2008 8Major Retail Brands• AEON (Biggest chain)• now leading retailer in Japan, vision to become one of the top 10 largest retailers in theworld• The largest supermarket player (MaxVaw chain)• AEON and Daiei merged to create the countries largest retail group• Seven & i Holdings(Biggest convenience store chain)• 7-Eleven• 1 to Yokado?• Acquired Millennium retailing group in late 2005• Wal-Mart  acquired stake in Seryo• Tesco• Tesco C2 operates as a discounter competes vs. local grocery and small regionalsupermarkets• Acquired majority stake in C2 network and fre’c discount network (2004)NB: Tesco and Wal-Mart arriving in Japan = bad news for domestic retailers (PR)
  9. 9. ©XPotential 2008 9The Environment for Pharmacies and Drugstores• Japanese prescription pharmacies are very oldfashioned and not very open to OTC / Dermo-cosmetic products• Increasing Non prescription pharmacies aredeveloping (these carry prescription and nonprescription) they are more open and comingclose to drug store formats but in smaller space• Drug stores are growing stronger than the restof the retail marketTraditional pharmacies are closed to OTC and Dermo cosmetic products.However there is a strong consumer and legislative changes that aredriving a shopper trend towards non-prescription pharmacies and drugstores which are both growing in share.• In April 2009 sales regulations for OTCwill be relaxed. This is predicted to causesome big changes in the drugstore sectorin Japan (growing faster than the sluggishretail sector)• Market for stimulants is very large. Thesewould include herbal, naturals andneepards?
  10. 10. ©XPotential 2008 10The Environment for Pharmacies and Drugstores• AEON (the largest retail group in Japan) in Feb2007 AEON Welcia has become the largestdrugstore group in Japan with 1800 stores of 9regional drugstore chains (net sales of JPY 600Billion / US$ 5.1 Billion)• AEON is expanding Welcia Store network ofallied drugstores chains across JapanThe major drugstore group is AEON Welcia with up to 2000 stores in 9regional chains (expected to grow to 2900 stores in 2015). Success in thischain is critical to the success of new products.• AEON is expanding Welcia Store networkof allied drugstores chains across Japan• 2008 AEON will expand share of CFS to33.3% from 15% at present increasing to2000 stores• AEON is expected to be in the Top 10Global drugstore and pharmacy operationwith 2900 stores US$10B
  11. 11. ©XPotential 2008 11Japanese Women• Huge popularity for exclusive merchandise with the youngerteens• Very much a group conformity within the teens• ‘Cute’ / Kawaii is embedded into culture  manifests in womene.g. pink/ fluffy/ squeaky voice• ‘Cute’ gets more attention from the boys• ‘Cute’ always floats above the fashion trendsWomen go through several very clearly defined and regulated stages in their livesfrom the younger teen, older teen, young single woman, married woman, mother, andgrandmother.In theory Consumer insights are simpler in Japan as the need to conform to theexpected behaviours of each stage over rules the deeper emotions and beliefs of eachindividual.Younger / Older Teens for them is all about being a part of the group (and their idols),sharing the latest technology or fashion with the group and being seen to be attractive and“cute” especially to the opposite sex:
  12. 12. ©XPotential 2008 12Japanese Women• Unmarried professional women have very highdisposable income and will spend it• High levels of spend on international fashion brands• High levels of spend on make up, skin care, fashion• Low levels of spend on house and home• Professional women will stay in the family home tilllate 20’s, early 30’sWomen go through several very clearly defined and regulated stages in their livesfrom the younger teen, older teen, young single woman, married woman, mother, andgrandmother.In theory Consumer insights are simpler in Japan as the need to conform to theexpected behaviours of each stage over rules the deeper emotions and beliefs of eachindividual.Single Professional Women, for them it is all about enjoying life to the full including allits luxuries
  13. 13. ©XPotential 2008 13Understanding Japanese Women• “When a woman marries, she believes that her personal lifeis over”• Older women have tremendous buying power• Apartments are small (50 – 70 m²), contain basic furniture.Mothers don’t spend money on themselves the family isfirst (children then husband)• There is a high need for order (kata) in all elements ofJapanese lifeWomen go through several very clearly defined and regulated stages in their livesfrom the younger teen, older teen, young single woman, married woman, mother, andgrandmother.In theory Consumer insights are simpler in Japan as the need to conform to theexpected behaviours of each stage over rules the deeper emotions and beliefs of eachindividual.Women married with kids. Her life is all about being a mother and wife. She comes lastin terms of priorities but is the one that maintains the ‘order’ or kata in the familyhome
  14. 14. ©XPotential 2008 14Japanese Shopper Japanese food shoppers will visit local stores 3 – 4 x per week toget the freshest produce (also important reason that the storesare local to them)• Home refrigerators/ freezers are very small in Japan• Many fashion conscious shoppers will go to the shops every weekto see what is new in the market• You never tip in Japan for service as it is an issue of pride toserve you perfectly• Japanese consumers really read/ study magazines to getinformation on their products• Product leaflets very important to educate the consumer, indetail, on how to use the product• Top Tip: Hire your brand target market to sell your brand• Retail stores staff are always interacting with customers or theproduct and never between themselves• “I love to watch the staff in the store – they are so trendy” –Japanese fashion shopper• Attention to detail in retail is immense - the store design, staff,posters, prices are all about the brandJapanese consumers are the most demanding and active shoppers in theworld. They will go to the stores every week to see what is new, getinformation, buy the freshest, most up to date product
  15. 15. ©XPotential 2008 15Fashion and Skin Care• Trends (Fashion / Skin Care) might startnational but then individual groups takeover the trend and make it “better” “perfect” Some designers will not work if there is abudget  as it may stop perfection• Shibuya style  street fashion trend setters• Concept stores will trial small collectionsfrom unknown designers• Concept stores are 2 years ahead of themain fashion trends• Concept stores are key drivers of fashiontrends• Loveless is a leading concept store forfashion with limited range and limited lifefor designers (2 years and out)• Osaka is 6 months behind Tokyo• Japanese designers don’t know they leadworld fashion• Foreign designers do not believe thatJapanese designers lead world fashion• Printemps’ buyers make an annual visit toTokyo to see the fashion trends for the next2 to 3 yearsThe high need for perfection of Japanese culture is a major driver for thedevelopment of fashion and skin care in Japan. Japanese culture is external facing. Its howyou act and look that is important not whatyou feel.• Japanese people have a major need to beperfect• Imperfection is not tolerated  Japaneseconsumers have to make it perfect• Fashion is not about just clothes but the totalpackage  hair, make-up, bag, shoes,accessories• Accessories are key to improving ‘perfecting’fashion• Very short lead time from design toproduction because of the close cooperationwith factories in China• In fashion retail, the customer service that isprovided is not forced. You are approachedlike a friend/ they are advisors, not salespeople
  16. 16. ©XPotential 2008 16Fashion and Skin Care• Cartoons/ Animé are a huge source of influence for fashion• There is a phenomenon of Cosplay amongst the youngerteens  dressing like cartoon characters• Art defines Japanese youth culture• Attention to detail in retail is immense• Don’t see too much evidence of promotions involving price• Co – Branding at retail is successful e.g. Mac and fashionbrand/ shop and magazine• In retail stores (fashion) staff are the embodiment of thebrand: hair/ dress/ make up/ style/ service• Celebrity endorsement and product placement is a driver offashion trends• Fashion magazines are key to setting trends “SWEET”• Kawaii magazines  aimed at 15 – 19 year oldsInspiration for fashion and skin care comes from Art, Youth Culture, Celebrityand Fashion Magazines. Japanese consumers are continually looking to theseicons for inspiration and direction
  17. 17. ©XPotential 2008 17Skin care in Japan• High need for instructions in skin care – magazines/ on pack/ leaflet/ POS/ staff classes/ workshops• Some cosmetic brands offer ‘schools’ for teaching how to apply cosmetics / skin care• Japanese consumers believe that skin should look naturally perfect (not made up)• High incidence of ‘packs’, multiple products together in one pack, starter pack etc• Japanese consumers believe in regime for skin care and will look for a number of products to use together• Need to improve Western products to make it perfect• Japan is a source of inspiration for make up (Beauté)• Pharmacies vs. clinics in Japan  very little opportunity for dermo cosmetics in pharmacy but high opportunityin drug stores• “doctors cosmetics” are cosmetics developed with and for use by doctors• 5 million patients will be treated with ‘cosmetic dermatology’ in Japan (2005) double that of 2001• 70% of Japanese women have expressed an interest in Cosmetic Dermatology but only 10% have gone fortreatment• The market for “doctors cosmetics” is estimated at Yen 23 billion / 180 million Euro• Japan dermatological association has 10,000 members (over 4000 qualified derms)• Eyes are super important segment in Japan• Cosmetics• Lashes• Extensions (lashes)• Fragrance is not wanted in Japan  negative associations, therefore market is very small• Very clear range segmentation/ explanations e.g. BiodermsSkin Care Consumers look for direction and instruction from the Brands andAuthorities in Skin Care. Dermatologists are an important source of referencefor “doctors cosmetics”
  18. 18. ©XPotential 2008 18New Brands to JapanNew Brands entering the market must demonstrate a clear and relevantadvantage to Japanese brands but also show that they have adapted to theJapanese consumer needs.• Foreign products must be better/ different than Japanese or else there is no reasonto be there• Need to allow for a degree of adaption of products to Japanese consumers• To be foreign is to be tolerated, not absorbed into Japanese society
  19. 19. ©XPotential 2008 19DistributionNew Brands entering the market must comply with the existing ‘rules’ of themarket working with the established distribution networks and channels• Wholesalers are traditionally the middleman of Japanese Retailing• Japan distribution systems are very complicated. Therefore wholesalers play a veryimportant role• Group alignment is much more important than individualism  do not stand out• Keeping harmony is most important in Japanese business
  20. 20. ©XPotential 2008 20Sales StaffTrained and Motivated Staff are key to delivering exemplary customerservice as well as being the human face of the brand to the consumer• Shibuya 109 is the highest turnover retail store (perft²) in the world• Retail stores staff are always interacting withcustomers or the product never between themselves• It is seen as an honor to serve the public• Sales Staff are the ‘icons’ for the fashion brands /fashion shops• “I look up to the Sales Staff – they look really great”
  21. 21. ©XPotential 2008 21Innovation• Anniversary/ New/ limited editions are important in Japan• Shops/ designers copy and improve at very fast speed• Limited editions stores are very popular and attract huge queues. Need a ticket to get in.• Promotions are very important but more so the added value promotions (gift sets, gift withpurchase, combination deals) not the price promotionsBrands must continually innovate and reinvent themselves to showexclusivity, specialisation and expertise
  22. 22. ©XPotential 2008 22Technology• Japan is leading world in M-commerce  buying over the mobile phone• Bar code readers on the phone  take picture of the code on POS/ leaflet  go straight tothe website• Japan is one of the most developed e – commerce markets in the worldTechnology is a hugely powerful motivator and channel for consumers /shoppers in the Japanese market – Brands can leverage technology have asignificant advantage
  23. 23. ©XPotential 2008 23Appendices
  24. 24. ©XPotential 2008 24Bathing Apes Case StudyA Bathing Ape (or BAPE) is a Japanese clothingcompany founded by Tomoaki "Nigo" Nagao in1993.The company specializes in street wear,operating stores in Japan, including BAPE, BAPEStore, Foot Soldier and the Bape Exclusive store(located in Aoyama, Tokyo). The company alsooperates Bape Cuts hair salon, Bape Café andgallery, Bape Sounds records. There are alsostores located in Hong Kong, London, New York,Taipei and Los Angeles. Nigo also founded thewomens clothing lines "APEE", and "BAPY", thefemale "couture" clothing line.Bathing Apes(Harajuku)The marketing of the brand is opposite to massmarketing of the big brands. The store has nosigns and is completely anonymous when youpass by it. There is no advertising, no logos onthe product. The logo (Ape Head) is built intothe design.He has tried to be incredibly selective.Producing very limited ranges of clothes andgiving half the range away to celebrities andfriends and selling half. This has created a hugevalue in each article. For example sneakers willfrequently retail for €300-400 and T-shirts for€50-60
  25. 25. ©XPotential 2008 25Bathing Apes Case StudyIn January 2005, Nigo and Pharrell launched thefirst "Bathing Ape" store in New York. The officialname, according to the salespeople at the store,is "Bathing Ape in Lukewarm Water.“ the Brandis now also launched in London, Hong Kong,Taipei and Los AngelesAlthough he has co-branded with Pepsi, he keepsrelationships with other brands at a minimum.He is aware that the fashion clothes brand will becopied and so he has stretched the Brand intomusic, events, PR.Nigo is also co-owner and head designer ofWilliams Billionaire Boys Club and Ice Cream. In2006, Nigo and N-Kei Enzaki started a recordcompany, Ape Sounds, with help from JamesLavelle, a UK DJ and owner of the Mo Wax label.He serves as a producer and director for his CDs,blending Western hip-hop with Asian sounds.
  26. 26. ©XPotential 2008 26Bathing Apes Case Study – Implications for BrandsClear Target AudienceCreate exclusivity with limitededitions and high priceAnti – establishmentRely on Word of Mouth andCelebrity EndorsementIgnore the rules of massmarketing
  27. 27. ©XPotential 2008 27XPotential is a brand focused strategy consultancy thathelps to align individuals, functions and organisationsthroughout the world to create and deliver Brand Value.We work with some of the world’s biggest brands to deliveroutstanding results. We orientate individuals and teams in theorganisations to focus their responsibilities to deliver value totheir most important asset - their brand. We are proud to haveworked with over 30 companies in over 50 countries andtouched tens of thousands of individuals, delivering some oftheir most impressive business results.We do this through working closely with the leadership oforganisations to develop Brand Centric Vision and Strategythrough a deep understand of the challenges and opportunitiesfor the Brands and the Company, the Brand Vision and the keyaudience for change.We then design and implement a programme of brand centricchange including communication, engagement, training andfollow up. We have worked both cross functionally and alsothrough specific areas including sales, supply chain,innovation, marketing, R&D, finance and HR.Our Credentials
  28. 28. ©XPotential 2008 28XPotential (UK)4/5 Market SquareMarlowBucksSL7 3HHTel: +44 1628 485847Fax: +44 1628 478065info@xpotential.co.ukhttp://www.xpotential.co.uk/XPotential (Thailand) Co.LtdQ-House LumpiniLevel 27, 1 South Sathorn RoadTungmahamekBangkok 10120Tel: +66 2610 3706Fax: +66 2610 3601info@xpotential.co.uk“We align individuals, functions and organisations, tocreate and deliver brand equity”XPotential (Brasil)Av. Divino Salvador, 716Moema –São Paulo- SPCEP – 04078-012Tel: +55 11 5051 9194Fax: +55 11 5054 0421contato@xpotential.com.br