For decades Japanese consumers
have been known for their keenness to pay for quality and convenience over
price. From spending for status to buying into the most popular western trend,
premium was the norm.
Recently, however, Japanese
consumers are taking cues from western buying behaviors, becoming more open to
discount shopping, bulk purchases and online retail. Private-label food sales
have also significantly increased, and despite small living space and lack of
alternative storage, buying in bulk has become a symbol of cache – ala the
American “frugalista.” With these major changes in attitudes and behavior also
come challenges and potential opportunities for retailers and manufactures in
the world’s second-largest retail market.
What must brands now
consider when retailing in Japan? The McKinsey Quarterly report attributes
three factors: economic down turn, domestic regulatory action and a
generational gap in mindsets.
It’s no surprise that the
current economic downturn is mentioned here, and, just as it has with the rest of
the globe, encouraged thrift in the form of bulk buying in Japan. And interestingly
enough, in a country where space is at a premium, “big box” retailers have
found a way to overcome this barrier and infuse bulk in the homes of Japanese
consumers. And to further this growing behavior, the Japanese government
recently reduced the maximum freeway toll on weekends to ¥1,000
(regardless of the distance traveled)—a major price cut that encouraged trips
outside Tokyo to big-box, suburban discounters and large-format retailers such
as Ikea and Costco.
While value-seeking and bulk spending habits both
have implications for brands, I see the shift in the 20-something Japanese
shopping mindset as having the potential to change the landscape of the
country’s retail market on a much more permanent level. Considering this tidal
change, marketers will be challenged to evolve with a new set of consumer
needs, expectations and behaviors. This
younger generation has continued to rebel from the tradition of “salaryman”
corporate life and questioned the importance previous generations placed on material
possessions. Where brands once were able to rely solely on a name to drive demand
and purchase, marketers for the first time are now struggling to find news ways
to deliver relevance – to both attitudes and behaviors.
Knowing that this new
generation typically spends more money on services versus goods means they are
looking for an all around engaging experience with a brand and extending the
value of a purchase. It’s not about consuming goods as it is experience
consumption.
Entrepreneur, Hiroshi
Mikitani, recognized this early on and
has adopted this new change into an unconventional business model for his
online retail company, Rakuten Ichiba.
Rakuten doesn’t house any merchandise itself, but instead operates like
a giant virtual notice board, or Craig’s List, where — for a relatively small
flat fee — retailers may offer their products for sale. Once a shopper on
Rakuten places an order, the order is then forwarded to the individual
retailer, who is responsible to shipping the product. I think this is really
smart for a few reasons. First—unlike sites like Amazon.com, which is primarily
focused on the growth of their own business, Rakuten is a grouping of smaller,
more regional Japanese retailers, which gives shoppers a sense of localism in
their purchases. Second-- Rakuten also takes a much smaller margin from their
retail partners than companies like Amazon, only walking away with 2.6
percent. And finally-because the
format of Rakuten drives competition among the retailers, much in the same way
as the real world, retailers are working with consumers directly regarding
feedback and in turn product improvement as a direct result. An online platform
that translates the benefits of service into what feels almost instantaneously
the purchase decision is not only unique but effective. Rakuten's net sales for
the year were up 16.8 percent to ¥250 billion.
Contributed by Katiy Heath
