Standing Tall: Japan’s Resilient Luxury Market Essay Example

generates sales between $10-20 billion annually (depending on how the market is defined). This figure is unlikely to experience significant growth.

Due to Japan's declining population, sluggish economic growth, and cost-conscious consumer attitudes, the luxury market in Japan will continue to decline in significance for many luxury brands, according to the president of Japan.

The luxury ticker maker company saw a decline in global revenue, which fell to 8% by 2011. Despite this, there was an improvement compared to the previous year. Conversely, sales in other parts of Asia during this time rose from 17% to 27%.

Japan, the third largest luxury market globally, predominantly offers high-end brands rather than affordable ones. However, in terms of luxury sales, Japan ranks below both the US and China.

Despite not spending as much on luxury items compared to other age groups, a greater percentage of this specific group actively engages in the luxury market (5% versus 2.3% for individuals aged 50 and above). Furthermore, they are more prone to paying the full price and considering ownership of luxury goods as something unique. This inclination is particularly evident among men.

Despite being a small percentage of luxury shoppers in Japan, young men have shown greater brand loyalty. The male population in Japan under the age of 34 is approximately 3 million. Based on government data, this group experienced a 7% increase in average income (Exhibit 3) in 2011 and their spending also grew by 13%.

In comparison to individual adult females, the increase in their expenditure was less than 2 percent, while the average Japanese consumer saw a decrease in expenditure.

It seems that the March 11 disaster was seen as a chance for five

young men to thrive, ultimately benefiting Japan's luxury goods market. Additionally, when analyzing income inequality,

According to McKinsey's 2012 Luxury Consumer Survey, affluent individuals in Japan who spend more than a million hankering (approximately $12,000) annually on luxury goods are more likely to switch from low-end brands to high-end ones compared to those who spend less than half that amount. The survey also emphasizes that Japan's luxury market comprises different niches and segments, with certain ones being more desirable than others.

Regarding products, such as high-end Swiss watches like Rolex, Omega, Piaget.

TAG Heuer has experienced significant growth in the past year. This is attributed to the fact that luxury consumers are looking for both emotional and functional benefits in a great watch.

Investing in certain luxury categories is a valuable and inheritable asset. There are opportunities for behavior improvement on the sales floor due to reasons such as a stronger economy and enhanced upselling abilities.

While they reduce their purchases in certain areas, particularly in apparel and other similar categories with shorter product lifecycles and more options, younger consumers and men deserve special attention. Only twentysomethings are buying luxury brands, according to the definition.

When it comes to high quality and exclusivity, providing a top-notch customer experience is key to offering something extra. According to those we interviewed, they firmly believe that this investment pays off. One executive from a luxury car manufacturer explained that closely overseeing the daily customer relationship management activities of their sales team and using that data to train staff has proven to be extremely valuable.

The significance of customer experience is apparent in consumer preferences, as they emphasize the importance of not only closing a

sale but also upselling different options and features. More than two-thirds of consumers recognize that luxury brands have faced challenges in adjusting to evolving consumer behavior, while just 15 percent view online sales as a substantial aspect of their business in Japan. Simultaneously,

According to a survey, 90% of respondents highlighted the significance of online marketing and advertising. It was also noted that luxury brands should not underestimate the importance of digital platforms, particularly given women's greater interest in luxury-branded experiences compared to men. The upcoming trend in luxury is found fascinating by many individuals. Additionally, it is essential to recognize the importance of social media. A survey conducted by Nikkei in February 2012 found that around 80% of Japanese women in their twenties and thirties who use smartphones actively participate on social media.

80% of men in their 20s and 60% of men in their 30s and 40s are active users of social media. However, all age groups and both genders still prioritize shopping in person because they value the luxury experience it offers.

Despite the sheer number of section shops in prime locations attracting a large audience of shoppers, it would be a mistake to conclude that the section shop format is thriving. However, they still remain the favorite choice in Exhibit 7.

The tired format has not found its place in today's dynamic and user-friendly retail landscape. Based on research and our experience with retail clients, we have found several important implications. These include owning the interaction between digital and in-store touchpoints and embracing social media. A few years ago, at one of McKinsey's annual luxury leader dinners in Japan.

The general agreement in the room

was that social media and Exhibit 6: luxury were inherently exclusive. Because, according to common belief, social media is all-inclusive while luxury is exclusive.

Companies like Burberry are demonstrating the obsolescence and ineffectiveness of that notion today. Burberry boasts 12 million Facebook followers, 800,000 Twitter followers, and 12 million views on 250 distinct YouTube videos.

According to Nikkei Shohi Watcher, CEO Angela Ahrendts emphasized the significance of smartphones as purchasing tools for younger consumers in a statement accompanying Burberry's results for the six-month period ending on September 30, 2011. She posed a question to the general public regarding their ownership of smartphones or tablet personal computers.The article titled "The 'Smart' Set is Chiefly Female" ( "Suma-ju" sodium hitobito shuuyaku wa josei ) from February 2012, page 22, states that the company's positive results are primarily due to their ongoing investment in advanced design.

Tiffany ; Co. has fully embraced the digital era, incorporating highly regarded e-commerce and retail strategies into their online presence.

Facebook and iPad app showcase the famous collection of engagement rings of Facebook. To achieve success in social media, it is important to consistently present the brand's story and heritage across various platforms while customizing messages for specific consumer segments on each medium. Understanding the role played by each medium in the Consumer Decision Journey is also essential. For instance, introducing cosmetic routines (such as skincare and makeup) may be easier on platforms like Facebook and an iPad app in the cosmetics industry.

When customers visit the shop, they typically buy dresses and accessories while considering the usage order. However, they also frequently search online for extra information and reviews.

Success in multichannel selling and sales relies on

the ability to stand out and effectively reach customers through various touch points. This can include attracting attention through shopfronts, word-of-mouth recommendations, or even advertisements in magazines.

According to Exhibit 8, approximately 20% of luxury consumers in Japan have participated in overseas shopping over the past two years, indicating a notable interest in travel retail opportunities. Duty-free stores play a crucial role in meeting this demand, as one-third of luxury consumers have made purchases at these stores within the last year. Female shoppers show particularly high engagement with duty-free stores, with a participation rate of 36%. This trend has been fueled by international travel and the expansion of the Internet.

Recognizing the significance of consumers' awareness of luxury goods prices in both Japan and other countries, it is crucial for luxury brands to acknowledge the strong connections consumers have with their products, transcending national borders. Therefore, maintaining a consistent brand image across different channels and locations, alongside providing exceptional after-sales service, becomes imperative. This trend has been consistently observed over time.

Our observations indicate a rise in the formation of "global tribes," which are communities of consumers that have more in common with individuals from other countries than with their fellow compatriots. This trend is expected to be amplified by the widespread use of social media platforms and the accessibility of affordable travel options. As a result,

Luxury brands must recognize and embrace the global nature of today's consumers. To achieve this, they should strive to expand their brand presence on a global scale. While it may not be possible to completely prevent parallel imports - which involve importing identical products from another country and selling them at

lower prices - they can be effectively managed. Certain brands are implementing measures such as tracking serial numbers to ascertain the source of these parallel imports.

Some retail merchants are having their borders diminished when they are caught. Other retail merchants are limiting the aftersales services available for parallel imports. Only a few companies have chosen to adopt a global, exchange-adjusted recommended retail price, which may become a more common approach. Additionally, there is a trend towards embracing customization and custom-built luxury, inspired by other consumer-goods companies.

Brands like Adidas and Nike in the athletic footwear industry, luxury car manufacturers, and luxury brands for pocketbooks and accessories are embracing customization. This trend aligns with a larger consumer preference in developed markets known as the "My" generation, where niche products are replacing mass-produced ones in many countries. Consumers have become accustomed to personalizing everything from their playlists to their iPhone covers. Exclusivity has always been synonymous with luxury.

Exclusivity is becoming increasingly common and ordinary due to the overwhelming number of shops and various new purchasing channels. In a way, there appears to be a commoditization of exclusivity.

Louis Vuitton has recently launched a customization service in Japan, allowing customers to choose their own leather and create unique designs. The president of Louis Vuitton Japan confirms the trend of customization, which represents exclusivity. Similarly, certain luxury automobile brands attribute their significant revenue growth in Japan to factors other than increased car sales.

Nevertheless, luxury manufacturers have observed that customers are incorporating different features and enhancements to personalize their vehicle and make it truly one-of-a-kind. Of course, customization incurs an extra expense.

The task of adding complexity to the supply chain and beyond

should mainly be reserved for high-end products. The number of car-sharers has increased by ten times, reaching 170,000.

According to estimates from Frost & Sullivan, revenues from the software-as-a-service (SaaS) industry could reach $550 million by 2016.