Timothy Schepis, founder of Tokyo Fashion Daily, offers a cautionary yet not entirely pessimistic view on the belated arrival of luxury brands to Japan
Timothy Schepis, founder of Tokyo Fashion Daily, offers a cautionary yet not entirely pessimistic view on the belated arrival of luxury brands to Japan
Over the next few months several luxury brands are opening new stores in Japan with a few of them launching for the first time, and some who have been in Japan for several to many years with varying degrees of success. The question begs is now really the right time to be launching and opening new stores in Japan’s luxury-retail market.
The fashion and luxury market in Japan is still slowly recovering from a steep decline in sales from the burst of the luxury bubble at the end of 2007, with luxury sales in Japan (1) forecast to grow less than 1% in 2010 and then only begin to recover in 2012. Recovery will only then take hold and succeed with the development and implementation of new strategies and channels; i.e., ecommerce, digital and social media, specifically localized for the Japan market. Even before the luxury bubble burst in late 2007, luxury sales in Japan were driven by and with a large percentage of sales coming from accessories; handbags, small leather goods and shoes. Further sales were higher on imported items that were marked-up disproportionately high for the Japan market which translated to higher profit margins.
Besides the recession and a decrease in the discretionary spending of consumers in Japan, there are several other major obstacles which make Japan a difficult market to enter for new luxury brands and for existing brands to expand. The current landscape for luxury brands in Japan is oversaturated with retail shops still shuttering their doors and fashion brands completely closing down operations in Japan. The recent prevalence of online price comparison, exclusive shopping sites and the popularity of auction sites as well as Japanese consumers engaging in holiday shopping is making the luxury market even more competitive than ever. In addition many foreign brands are now switching their focus and capital investment away from Japan to Greater China, now the world’s second largest economy behind the US and before Japan, all of which will leaves very little room for growth and profits. The priorities of the Japanese consumer are also changing and maturing.
They are no longer so aspirational having to own every “it” bag – they are now buying mostly fast-fashion pieces and incorporating them with a high-end to luxury piece, usually an accessory; handbags, small leather goods or shoes – the same categories that were selling well before the recession. The time of the aspirational consumer and frivolous consumption in Japan is over and with current economic indicators bleak now may not be the best time to open new and additional doors but to improve the efficiencies of existing doors and maybe even contract and close doors that are non-performing – not something CEOs nor shareholders necessarily want to hear. Here are some of the current economic indicators for Japan: (2) Japan’s Q2 GDP grew by only 0.1%, far less than had been forecast, as well (3) Japan’s unemployment rate for the month of June 2010 was 5.3%, meaning 3.4million people were out of work, the second highest since November 2009.
That being said it is not all bad for the luxury market in Japan, rather there will always be a place in Japan for quality luxury brands – with people still lining up for new store openings and huge opening day-sale numbers. It is just no longer about having that hot new “it” item – it is now about quality, heritage and craftsmanship and fashion brands will now have to position themselves in that way as well as adapt new marketing strategies and adopt real localization strategies in order to effectively compete and be successful long-term. After all Japan is still the global fashion capital with every market copying and being influenced by their unique and creative style. Having a presence in Japan adds credibility and air of success – if you can make it in Japan then you can make it…well, anywhere, sadly though making it in Japan is now mostly just a springboard for launching into China.
Timothy Schepis, Founder, Tokyo Fashion Daily
1. McKinsey
2. Economist
3. TradingEconomics
