3. ŠXPotential 2008 3
Introduction
A market visit was made to Tokyo, Japan in June 2008 by Steve to develop
insights for the Japanese market.
Store Visits: Serbr-Ginza, Matsuya- Ginza, Mitsukashi, Omotesando Hills ď
boutique/ department stores (Harajuku), Louis Vitton (Harajuku), Bathing
Apes (Harajuku), ISETAN-Shinjuku, Marunouchi Building, AEON (Biggest
chains).
What follows are the series of insights from data collected from the visit.
4. ŠXPotential 2008 4
Japan macro economy
⢠Japans economy is the second largest in
the world
⢠Japans economy is currently in recession
⢠Per capital GDP Japan is $36,544
(âŹ27,667) -- 34 in the world
⢠Japan has one of the lowest population
growth rates in Asia
⢠Japan has a rapidly ageing populations --
19% over 65 years (doubling since 1985)
⢠By 2050 42% of the population will be over
60 years old
⢠Average balance in a current account
would be about âŹ70 â 80 K ($92 â 106 K)
⢠Grocery sales per capita are growing
$5,925 (âŹ4,486)
As one of the most developed economies in the world, Japan is suffering
from many of the same symptoms of developed Western markets; a
prosperous but increasingly aged population and recession or very slow
economic growth.
5. ŠXPotential 2008 5
The Retail Environment
ď§ Hypermarkets/ (superstores) spread
across 4-5 stores e.g. Meguno
⢠C-stores (convenience) in huge
increase (almost every street corner)
⢠Convenience stores are developing
additional services e.g. bill paying
ATMs, pick up for home delivery etc
⢠Department stores under pressure
from super and hypermarkets
⢠Since 2007 new city planning
restrictions mean large store
openings in suburban areas will fall
87%
⢠Restrictions on the opening of large
sized stores (greater than 10,000
m²)
Until recently, high land prices and regulations against large stores have
also stifled expansion of the major chains and encouraged the growth of
convenience stores (especially 7-Eleven). However, consolidation is now
gathering pace and the top players, aided by their expansion plans, are
undoubtedly gaining market share.
ď§ 7-Eleven Japan is the largest
convenience store operator
⢠Sales up
⢠New products
⢠Refine product mix
⢠Lawson convenience stores
⢠Closed unprofitable stores
⢠New formats for women and
elderly
⢠NANRAL/ LAWSON
⢠Family Mart
⢠Closed unprofitable stores
⢠Reopen in hotels/ offices and
hospitals
⢠6 largest convenience stores range
responsible for all the growth â 23,837
(in 1991) ď 45,000 (in 2007)
6. ŠXPotential 2008 6
The Retail Environment
Consumers are very used to shopping in small convenience stores / small
corner supermarkets rather than large malls (in the city, private cars are
not often used)
⢠Convenience stores are developing
additional services e.g. bill paying
ATMs, pick up for home delivery etc
ď§ Japanese shoppers will visit local
stores 3 â 4 x per week ď freshest
produce
⢠6 largest convenience stores range
responsible for all the growth â 23,837
(in 1991) ď 45,000 (in 2007)
7. ŠXPotential 2008 7
The Retail Environment
⢠Retail sector highly fragmented: top
5 have less than 20% ms.
⢠Retailers with economic downtown
price of land dropped: retailers
encouraged to pursue aggressive
store openings
⢠Hypermarkets/ (superstores) spread
across 4-5 stores e.g. Meguno
⢠Own label ď increasingly important
especially premium
⢠Number of supermarkets +20%,
sales area +86% (bigger store
formats)
⢠There is a concentration of
department stores through mergers/
acquisitions ď investigate
⢠6 largest convenience stores range
responsible for all the growth â
23,837 (in 1991) ď 45,000 (in 2007)
The retail segment is experiencing pretty sluggish growth. For a market
that is so developed Japan's retail sector is highly fragmented with the top
five players holding a market share of less than 20%.
⢠2001 â 2006
⢠344 new shopping centers
⢠70% ď 10,000 m²
⢠Built in suburban areas, which
means cheaper land
⢠Department stores under pressure
from super and hypermarkets
8. ŠXPotential 2008 8
Major Retail Brands
⢠AEON (Biggest chain)
⢠now leading retailer in Japan, vision to become one of the top 10 largest retailers in the
world
⢠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 ď acquired stake in Seryo
⢠Tesco
⢠Tesco C2 operates as a discounter competes vs. local grocery and small regional
supermarkets
⢠Acquired majority stake in C2 network and freâc discount network (2004)
NB: Tesco and Wal-Mart arriving in Japan = bad news for domestic retailers (PR)
9. ŠXPotential 2008 9
The Environment for Pharmacies and Drugstores
⢠Japanese prescription pharmacies are very old
fashioned and not very open to OTC / Dermo-
cosmetic products
⢠Increasing Non prescription pharmacies are
developing (these carry prescription and non
prescription) they are more open and coming
close to drug store formats but in smaller space
⢠Drug stores are growing stronger than the rest
of the retail market
Traditional pharmacies are closed to OTC and Dermo cosmetic products.
However there is a strong consumer and legislative changes that are
driving a shopper trend towards non-prescription pharmacies and drug
stores which are both growing in share.
⢠In April 2009 sales regulations for OTC
will be relaxed. This is predicted to cause
some big changes in the drugstore sector
in Japan (growing faster than the sluggish
retail sector)
⢠Market for stimulants is very large. These
would include herbal, naturals and
neepards?
10. ŠXPotential 2008 10
The Environment for Pharmacies and Drugstores
⢠AEON (the largest retail group in Japan) in Feb
2007 AEON Welcia has become the largest
drugstore group in Japan with 1800 stores of 9
regional drugstore chains (net sales of JPY 600
Billion / US$ 5.1 Billion)
⢠AEON is expanding Welcia Store network of
allied drugstores chains across Japan
The major drugstore group is AEON Welcia with up to 2000 stores in 9
regional chains (expected to grow to 2900 stores in 2015). Success in this
chain is critical to the success of new products.
⢠AEON is expanding Welcia Store network
of allied drugstores chains across Japan
⢠2008 AEON will expand share of CFS to
33.3% from 15% at present increasing to
2000 stores
⢠AEON is expected to be in the Top 10
Global drugstore and pharmacy operation
with 2900 stores US$10B
11. ŠXPotential 2008 11
Japanese Women
⢠Huge popularity for exclusive merchandise with the younger
teens
⢠Very much a group conformity within the teens
⢠âCuteâ / Kawaii is embedded into culture ď manifests in women
e.g. pink/ fluffy/ squeaky voice
⢠âCuteâ gets more attention from the boys
⢠âCuteâ always floats above the fashion trends
Women go through several very clearly defined and regulated stages in their lives
from the younger teen, older teen, young single woman, married woman, mother, and
grandmother.
In theory Consumer insights are simpler in Japan as the need to conform to the
expected behaviours of each stage over rules the deeper emotions and beliefs of each
individual.
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
âcuteâ especially to the opposite sex:
12. ŠXPotential 2008 12
Japanese Women
⢠Unmarried professional women have very high
disposable 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 till
late 20âs, early 30âs
Women go through several very clearly defined and regulated stages in their lives
from the younger teen, older teen, young single woman, married woman, mother, and
grandmother.
In theory Consumer insights are simpler in Japan as the need to conform to the
expected behaviours of each stage over rules the deeper emotions and beliefs of each
individual.
Single Professional Women, for them it is all about enjoying life to the full including all
its luxuries
13. ŠXPotential 2008 13
Understanding Japanese Women
⢠âWhen a woman marries, she believes that her personal life
is overâ
⢠Older women have tremendous buying power
⢠Apartments are small (50 â 70 m²), contain basic furniture.
Mothers donât spend money on themselves the family is
first (children then husband)
⢠There is a high need for order (kata) in all elements of
Japanese life
Women go through several very clearly defined and regulated stages in their lives
from the younger teen, older teen, young single woman, married woman, mother, and
grandmother.
In theory Consumer insights are simpler in Japan as the need to conform to the
expected behaviours of each stage over rules the deeper emotions and beliefs of each
individual.
Women married with kids. Her life is all about being a mother and wife. She comes last
in terms of priorities but is the one that maintains the âorderâ or kata in the family
home
14. ŠXPotential 2008 14
Japanese Shopper
ď§ Japanese food shoppers will visit local stores 3 â 4 x per week to
get the freshest produce (also important reason that the stores
are local to them)
⢠Home refrigerators/ freezers are very small in Japan
⢠Many fashion conscious shoppers will go to the shops every week
to see what is new in the market
⢠You never tip in Japan for service as it is an issue of pride to
serve you perfectly
⢠Japanese consumers really read/ study magazines to get
information on their products
⢠Product leaflets very important to educate the consumer, in
detail, on how to use the product
⢠Top Tip: Hire your brand target market to sell your brand
⢠Retail storesď staff are always interacting with customers or the
product and never between themselves
⢠âI love to watch the staff in the store â they are so trendyâ â
Japanese fashion shopper
⢠Attention to detail in retail is immense - the store design, staff,
posters, prices are all about the brand
Japanese consumers are the most demanding and active shoppers in the
world. They will go to the stores every week to see what is new, get
information, buy the freshest, most up to date product
15. ŠXPotential 2008 15
Fashion and Skin Care
⢠Trends (Fashion / Skin Care) might start
national but then individual groups take
over the trend and make it âbetterâ âperfectâ
ď§ Some designers will not work if there is a
budget ď as it may stop perfection
⢠Shibuya style ď street fashion trend setters
⢠Concept stores will trial small collections
from unknown designers
⢠Concept stores are 2 years ahead of the
main fashion trends
⢠Concept stores are key drivers of fashion
trends
⢠Loveless is a leading concept store for
fashion with limited range and limited life
for designers (2 years and out)
⢠Osaka is 6 months behind Tokyo
⢠Japanese designers donât know they lead
world fashion
⢠Foreign designers do not believe that
Japanese designers lead world fashion
⢠Printempsâ buyers make an annual visit to
Tokyo to see the fashion trends for the next
2 to 3 years
The high need for perfection of Japanese culture is a major driver for the
development of fashion and skin care in Japan.
ď§ Japanese culture is external facing. Its how
you act and look that is important not what
you feel.
⢠Japanese people have a major need to be
perfect
⢠Imperfection is not tolerated ď Japanese
consumers have to make it perfect
⢠Fashion is not about just clothes but the total
package ď hair, make-up, bag, shoes,
accessories
⢠Accessories are key to improving âperfectingâ
fashion
⢠Very short lead time from design to
production because of the close cooperation
with factories in China
⢠In fashion retail, the customer service that is
provided is not forced. You are approached
like a friend/ they are advisors, not sales
people
16. ŠXPotential 2008 16
Fashion and Skin Care
⢠Cartoons/ AnimÊ are a huge source of influence for fashion
⢠There is a phenomenon of Cosplay amongst the younger
teens ď dressing like cartoon characters
⢠Art defines Japanese youth culture
⢠Attention to detail in retail is immense
⢠Donât see too much evidence of promotions involving price
⢠Co â Branding at retail is successful e.g. Mac and fashion
brand/ shop and magazine
⢠In retail stores (fashion) staff are the embodiment of the
brand: hair/ dress/ make up/ style/ service
⢠Celebrity endorsement and product placement is a driver of
fashion trends
⢠Fashion magazines are key to setting trends âSWEETâ
⢠Kawaii magazines ď aimed at 15 â 19 year olds
Inspiration for fashion and skin care comes from Art, Youth Culture, Celebrity
and Fashion Magazines. Japanese consumers are continually looking to these
icons for inspiration and direction
17. ŠXPotential 2008 17
Skin care in Japan
⢠High need for instructions in skin care â magazines/ on pack/ leaflet/ POS/ staff classes/ workshops
⢠Some cosmetic brands offer âschoolsâ for teaching how to apply cosmetics / skin care
⢠Japanese consumers believe that skin should look naturally perfect (not made up)
⢠High incidence of âpacksâ, 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 (BeautÊ)
⢠Pharmacies vs. clinics in Japan ď very little opportunity for dermo cosmetics in pharmacy but high opportunity
in drug stores
⢠âdoctors cosmeticsâ are cosmetics developed with and for use by doctors
⢠5 million patients will be treated with âcosmetic dermatologyâ in Japan (2005) double that of 2001
⢠70% of Japanese women have expressed an interest in Cosmetic Dermatology but only 10% have gone for
treatment
⢠The market for âdoctors cosmeticsâ 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 ď negative associations, therefore market is very small
⢠Very clear range segmentation/ explanations e.g. Bioderms
Skin Care Consumers look for direction and instruction from the Brands and
Authorities in Skin Care. Dermatologists are an important source of reference
for âdoctors cosmeticsâ
18. ŠXPotential 2008 18
New Brands to Japan
New Brands entering the market must demonstrate a clear and relevant
advantage to Japanese brands but also show that they have adapted to the
Japanese consumer needs.
⢠Foreign products must be better/ different than Japanese or else there is no reason
to 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. ŠXPotential 2008 19
Distribution
New Brands entering the market must comply with the existing ârulesâ of the
market 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 very
important role
⢠Group alignment is much more important than individualism ď do not stand out
⢠Keeping harmony is most important in Japanese business
20. ŠXPotential 2008 20
Sales Staff
Trained and Motivated Staff are key to delivering exemplary customer
service as well as being the human face of the brand to the consumer
⢠Shibuya 109 is the highest turnover retail store (per
ft²) in the world
⢠Retail storesď staff are always interacting with
customers or the product never between themselves
⢠It is seen as an honor to serve the public
⢠Sales Staff are the âiconsâ for the fashion brands /
fashion shops
⢠âI look up to the Sales Staff â they look really greatâ
21. ŠXPotential 2008 21
Innovation
⢠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 with
purchase, combination deals) not the price promotions
Brands must continually innovate and reinvent themselves to show
exclusivity, specialisation and expertise
22. ŠXPotential 2008 22
Technology
⢠Japan is leading world in M-commerce ď buying over the mobile phone
⢠Bar code readers on the phone ď take picture of the code on POS/ leaflet ď go straight to
the website
⢠Japan is one of the most developed e â commerce markets in the world
Technology is a hugely powerful motivator and channel for consumers /
shoppers in the Japanese market â Brands can leverage technology have a
significant advantage
24. ŠXPotential 2008 24
Bathing Apes Case Study
A Bathing Ape (or BAPE) is a Japanese clothing
company founded by Tomoaki "Nigo" Nagao in
1993.The company specializes in street wear,
operating stores in Japan, including BAPE, BAPE
Store, Foot Soldier and the Bape Exclusive store
(located in Aoyama, Tokyo). The company also
operates Bape Cuts hair salon, Bape CafĂŠ and
gallery, Bape Sounds records. There are also
stores located in Hong Kong, London, New York,
Taipei and Los Angeles. Nigo also founded the
women's clothing lines "APEE", and "BAPY", the
female "couture" clothing line.Bathing Apes
(Harajuku)
The marketing of the brand is opposite to mass
marketing of the big brands. The store has no
signs and is completely anonymous when you
pass by it. There is no advertising, no logos on
the product. The logo (Ape Head) is built into
the design.
He has tried to be incredibly selective.
Producing very limited ranges of clothes and
giving half the range away to celebrities and
friends and selling half. This has created a huge
value in each article. For example sneakers will
frequently retail for âŹ300-400 and T-shirts for
âŹ50-60
25. ŠXPotential 2008 25
Bathing Apes Case Study
In January 2005, Nigo and Pharrell launched the
first "Bathing Ape" store in New York. The official
name, according to the salespeople at the store,
is "Bathing Ape in Lukewarm Water.â the Brand
is now also launched in London, Hong Kong,
Taipei and Los Angeles
Although he has co-branded with Pepsi, he keeps
relationships with other brands at a minimum.
He is aware that the fashion clothes brand will be
copied and so he has stretched the Brand into
music, events, PR.
Nigo is also co-owner and head designer of
Williams' Billionaire Boys Club and Ice Cream. In
2006, Nigo and N-Kei Enzaki started a record
company, Ape Sounds, with help from James
Lavelle, 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. ŠXPotential 2008 26
Bathing Apes Case Study â Implications for Brands
Clear Target Audience
Create exclusivity with limited
editions and high price
Anti â establishment
Rely on Word of Mouth and
Celebrity Endorsement
Ignore the rules of mass
marketing
27. ŠXPotential 2008 27
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