The Changing Japanese Consumer
By Virginia F. Bodmer-Altura
Since 2009 the behaviour of Japanese consumers has been shifting dramatically and again after the disasters in 2010. However there are not only challenges but also opportunities in the world’s third largest retail market
Available figures on the Japanese market do always lag behind and therefore we consider the McKinsey survey of 2010 as still valid to provide our readers with some information of the changes taking place, maybe the projected goal of growth in 2015 might not be reached but the tendencies are still intact.
For decades Japan’s consumers were oriented to buy quality and convenience and they were also prepared to pay the according price. But already in 2009 discount and online retailers became more common for Japanese consumers. It all commenced in the food sector and with relatively affordable private-label food stuffs and buying in bulk became fashionable and instead of eating out people started to entertain more at home. Even workers started to pack their own lunches and therefore they were nicknamed bento-danshi or box-lunch man.
Behind this change of behaviour was not the need because of the economic downturn in 2008-09 but the digital revolution and the emerging of a less materialistic generation. These changes forced retailers to rethink their relationship with customers and to become more flexible on sales channels. And another important factor has to be added, the Japanese consumer became more unpredictable.
An internet survey in September 2009 found that 37 % of the respondents had cut willingly overall spending, while 53 % dedicated themselves to spend time to save money rather than to spend money to save time. This was the impetus when Japanese clothing and high-end department stores started to lease space within their stores to value-focused competitors such as casual-clothing chains Uniqlo and Forever 21 in order to revive customer traffic. This trend seems to go on, because Uniqlo just reports an increase in sales over the fiscal half year (per February) of 15 % to JPY 525.5 billion and operating income rose by 12 % to JPY 91.75 billion and overseas sales rose by 69 % during the same period of time. In 2009 luxury-goods companies had to record 10 to 20 % lower sales.
And another new buying habit was coming to light: private labels. If taking North America and Western Europe as an example there is the rule once switching to private brands in general people do not easily change back. In 2009 the private label penetration rate was just 4 % whereas the global average was 20%.
But this was not all, because Japanese were used to spend little time at home due to the long working hours and small living quarters all at once Japanese stay more at home and this goes for all consumer categories. The sudden change has a term: sugomori (chicks in the nest). It is also interesting on how the time at home is spent: surfing the internet, watching television, reading newspaper, sitting around the house, listening to music and entertaining people at home and not eating out. Table 1 presents the new attitude of staying home in comparison to one or two years before.
|The stay at home syndrome of Japanes Consumers|
|Sample of 3003 persons surveyed|
|Anwers in %||Significantly more||Somewhat more||About the same||Less|
|Remark: Against the historical tend, 46 % of Japanese Consumers are more likely to choose activities at home as against going out and this trend has been intensifying after the desasters|
|Source: Internet survey of Japnese consumers conducted fro Mr. Kinsey Nov. 2009|
In the past Japanese used to shop around their vicinity, nowadays they are more willing to travel and they a sort of abstain more and more to visit department stores and prefer to spend more time in malls and stand-alone specialty shops. That this is true could be witnessed in the sales and profit figures of Japanese retailers in 2010 and 2011 with the exception of those quickly adapting themselves to the new behaviour of Japanese consumers.
Japan has one of the world’s highest broadband penetration rates but lacked before the willingness of its consumers to shop online because it was attributed to Japanese consumers that they love the physical shopping experience and that mobile-phone screens are too small, a fact that has nowadays changed dramatically with smart phones and tablets. It has to be added that before retail transactions by Japanese were made in cash because credit card penetration is – compared to western use – low.
A survey in 2009 stated in contrast that 50 % of Japanese consumers are buying more and more online and the market size was estimated at USD 30 billion whereas in 1999 it was only USD 1.3 billion. What is to be expected of the Japanese internet retail market up to 2015 can be had from Table 2
|The Japanese Internet Retail Market by 2015|
|Projections in USD billion||2009||2011||2013||2015||2009 – 2015 in %||Online retail share of Market in %|
|Source: McKinsey analysis|
Japan has always been perceived as one of the world’s healthiest societies – recall only the many people reaching an astronomic age well over one hundred years – thanks to a combination of lifestyle, diet and genetics and Japanese consumers spending nowadays more on health, sports and recreation as compared to virtually any other retail category.
Environmental consciousness reigned for some time and has received drastic impulses by the disastrous events in Japan. In 2009 the consultancy J. Walter Thompson found that 51 % of Japanese consumers are more focused on environment than just a year before and a survey conducted by McKinsey in November 2009 found that 84 of the respondents preferred to buy daily goods environmentally friendly and Coca-Cola’s “I Lohas” water became Japan’s top-selling brand of single-serve bottled water because its selling point focused on a reduced carbon footprint bottled in 12 grams of PET bottles (instead of the commonly used 26 grams) that can be recycled. There is one obstacle to overcome, Japanese are in general not willing to pay more for green goods and services but because of the sad events in 2011 this attitude has changed drastically.
It is noteworthy to regard the emerging of the new generation in their 20’s knowledgeable of the difficult economic climate in Japan and not experiencing a booming period and their specific lifestyle is called hod-hodo zoku meaning the so-so folks or also slackers or herbivore men. They usually shun corporate life and material possessions and are more pessimistic and more unemployed than their elders. They bring about some challenges to marketers. For instance they will not buy what professional athletes or idols wear but they tend to spend rather on services and technology and women find superior design a decisive factor for buying.
With other words, Japanese consumers are nearing the habits of their peers in Europe and America, and Japanese retailing will have to adjust to these trends. On the other hand, there is also an inroad of foreign competition with the apt offerings.