As the world’s fourth largest economy emerges from depression, global retailers are again taking Japan seriously.
Over almost the last decade, Japan has been overlooked as a first priority market for the expansion of fashion brands. But now it is back with a vengeance and retailers are flooding to the market to boost their presence there.
Until last year the world’s second biggest luxury market, Japan has suffered in recent years from a stagnant economy, highly valued currency and one of the worst natural disasters to have struck the country in its history. This has led retailers to put their expansion or entry into the market on hold.
Greater China was also on its meteoric rise and the attention and managerial resources of many of the brands has been on conquering there at the expense of Japan.
A recent Cushman & Wakefield poll of 90 international retailers in Asia across a number of sectors revealed that in the last 12 months 65 per cent of retailers had changed their stance on Japan and were now looking at the market again and 45 per cent have taken positive action by either acquiring new stores or buying back existing franchise businesses.
This huge turnaround in just the last year has been due to a number of factors which are boding well for the future of the retail industry there.
Much has been talked in the press recently about the impact that the Chinese tourist has on global fashion and luxury sales. The 100 million+ international trips taken last year were predominantly in Asia with the likes of Hong Kong, Macau and Taiwan swallowing up more than 60 per cent of offshore-bound travellers. Destinations such as Korea have been rapidly increasing especially with various visa waiver programs but Japan has had a stellar performance at attracting Chinese tourists and has seen a 113 per cent year on year increase since 2014.
The generally affluent and high spending Koreans, Hongkongers and Singaporeans are also rapidly increasing with a 57 per cent, 58 per cent and 32 per cent year on year increase respectively. This rapid increase in tourism has been due to a number of factors such and at the expense of the Thailand with its political instability and safety concerns in Singapore and Malaysia after the Malaysian Airlines and Asia Air crashes.
Another huge factor to consider with the increase in tourism is that Japan was once viewed as a
highly expensive holiday destination due to the strength of the Yen. However this has depreciated significantly in value and in the last 12 months has become 20 to 30 per cent cheaper for foreign visitors.
Asia is still a huge engine of growth for the luxury brands and sales in the APAC region including
Japan accounts for 50 per cent of Richemont’s global sales and 36 per cent of LVMH’s; the same for Kering. A huge portion of this growth has come from the seemingly insatiable growth of domestic Chinese shoppers but as the clampdown on corruption and gift giving has hit hard in Greater China, individuals from the mainland are now seeking more secluded destinations to spend their money and Japan is a location that has seen great benefits from this. The Takashimaya Department Store in Japan’s second city Osaka is reported to have seen duty free sales 3.5 times greater than 12 months ago. Brands such as Burberry who have seen their direct sales up by more 30 per cent just opened a new store in Osaka as well Hublot, Kiehl’s, Guess, Saturday’s Surf NYC and Rimowa.
China is seeing the majority of luxury brands consolidating or reducing their store counts across China. Brand owners and investors are still demanding growth in such an important region and Japan offers great opportunities with a very well established market with professional landlords looking to improve and refresh their malls which new to market brands.
Luxury brands such as Zegna, Miu Miu, Stella McCartney, Moncler, Sonia Rykiel, Michael Kors are all opening new stores and Barney’s New York has just agreed to open a brand new 1900 sqm store in Roppongi.
Outside of the luxury field we are also seeing new Tokyo stores for Jack Wolfskin, Old Navy, Calzedonia, Reebok, a dedicated H&M Men’s store, an Adidas Original flagship in Omotesando to name but a few. The increase hasn’t been limited to retailers and new F&B operators such as Taco Bell, Guzman y Gomez and Carl’s Junior are also entering the market.
The Japanese consumer is a mature, fashionable and wealthy individual with a high propensity to try new brands and with such great momentum in the market and slowing sales in other parts of the region, it offers a great opportunity for retailers.
James Assersohn is Director, Cross Border Retail Asia, with Cushman Wakefield, Japan.