Retail & Consumer Goods Japan 2009

Retail & Consumer Goods

Market Reports Japan 2009

Partner in Japan G&S International Japan 6-4-13 Soshigaya, Tokyo

Setagaya-ku 157-0072 Japan Web www.gs-int-ltd.com

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Contents / Menu click to go to page 1) What is Japan today economically? 2) How important is Japan in the world? 3) Pro & Con Japan Retail Market 2009 4) How does the Japanese consumer look like? 5) Sophisticated consumers with high purchasing power 6) What do Japanese people love to buy? 7) What do Japanese consumers spend their money on? 8) Gifts & Presents in Japan – a sales motor! 9) Market Segmentation retail in Japan 10) Overview of Japan‟s 30 biggest retail chains 11) All retailers‟ sales down? Convenience stores up in 2009! 12) Non-Store Retail Sales in Japan 13) Examples of successful retail entries to Japan 14) Few key points in regards to Japanese customers 15) How to succeed in Japan? 16) G&S Japan services overview 17) Key Reference

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Japan is a promising market, with a market scale at the top of developed nations. It is 2nd largest retail market behind the USA with sophisticated, quality conscious consumers. GDP by country (%, US$ billion, 2007)

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Per capita GDP (2007)

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... the world's second-biggest retail market with 13.03 trillion yen = $144 billion sales p.a. (Source: Jetro, 2008)

Source: IMF, 2007

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CON Japan 2009 • global economic down-turn, private consumption fell by 0.4 percent amid • Japan’s GDP fell 3.3 percent (quarter-on-quarter), for all for 2008, it shrank 0.7 percen, the first decline in nine years, according to the Cabinet Office (main reasons: shrinking global demand and historic strong yen let exports collapse) PRO Japan 2009 • Japan still 2nd biggest economy/retail market behind the USA • private consumption in Japan is up 30% in the past 20 years (1989 – 2009) • saving ratio is down from 14,5% to 2,6% in the same term (1989 – 2009) • high appreciation of Japanese consumer of foreign quality goods (fashionable life-style) • Japan has lowest self-sufficiency rate among G7, results in big demand for food imports • to revive the economy, Japan's parliament passed a contentious 4.8 trillion yen ($52.2 billion) stimulus plan in January 2009, including a cash payout that amounts to 12,000 yen ($133) per individual (20,000 yen for inhabitants younger than 8, or older than 65), the cash payout is believed to stimulate the Japanese retail market demand in 2009 • Japan is the country with the highest foreign currency and gold reserves (equivalent to more than one-trillion-dollar US), the Japanese government plans to put part of it into a stimulus plan for Japanese manufacturers and consumer markets • the currently strong Japanese yen (1 EUR down from 165 yen in summer 2008 to 115 yen in March 2009) makes imports to Japan about 30% cheaper than a year ago 5

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Speaking generally, following keywords apply to Japan: • • • • • • • • • •

high sense of quality high level of service expectation taste for foreign (western) products high brand awareness high-priced retail market highly competitive market aging society zero inflation solid, stable customers consumer activists

Japan’s Population 2008

Number in ,000 METI Japan, 2008

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Japanese consumers are early adopters and move fast to stay on the cutting edge of the latest technologies. Most companies in Japan listen carefully to consumer demands when developing new products, as many products in common use around the world have originated in Japan. Japan thus makes an ideal test market for new products and services.

Source: The Global Competiveness Report 2007” World Economic Forum, 2007

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Luxury Foreign high-end retailers have for years enjoyed strong sales in the Japanese market, which also serves as an unrivalled market for developing of high-end consumer products.

Total Per Capita Sales of Top 5 Retail Markets

Convenience A fast-paced lifestyle and the growth of e-commerce in Japan has created a strong market for foreign nonstore retailers who provide quick and easy access to their products. Style Foreign apparel retailers, not able to do without such a vital market for apparel, continue to expand their businesses to this fashion-forward location. Comfort Home furnishing centers report growth year after year and are broadening their offerings to helping consumers achieve comfortable living environments, rather than only selling household products. 8

Source: IGD Global, 2007

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Japan’s need for importing food opens opportunities for European food brands Some differences that Japan really set it apart from other advanced markets is consumer spending:

Japan Household Spending by Category, 2007

Japanese consumers spend almost 15-17% of their monthly budgets on food alone. This compares to just 5-7% in the US and between 10-12% in Europe, the only category that was larger was „Other‟ spending, which includes gifts and free spending pocket money. In 2007 at least, households also put a larger proportion into savings, adding 19.1% of household income per month, however savings are sharply decreasing. • Japanese spend a surprising low 8% on health  food spending is particularly high in Japan as inordinately food prices are high (self-sufficiency rate of Japan is only 40%, the lowest rate among the G7 nations, which means 60% of food in Japan is imported) (figures derived from the standard METI Household Accounts Survey on working households of 2 or more people, excluding rent expenses) 9

Source: METI, 2008

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Giving gifts is a major part of Japans’ culture In Japan, food is often the best gift. Japanese consumers are famous for their taste of expensive chocolate, wine, or even fruits. In the high-end supermarkets of downtown Tokyo, premium apples cost up to 16 EUR a piece. But not only premium and luxury is driving the Japanese gift and present market. It is more the custom to hand-over a gift at almost every occasion in life, let is be a visit to a friends‟ house or even returning to office from a short trip. Japanese want people around them let know their appreciation by giving a gift. Moreover, Japanese often return a gift in exchange, once they‟ve received one. Receive a foreign (European branded) product as a gift is seen as valuable; shows high appreciation.

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The Japanese retail market can be divided into two categories: the volume market that mainly consists of relatively low-priced daily products, and the trend-conscious market for consumers that are highly sensitive to fashion, life-style and technology trends.

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Giants in a huge market 12

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Japan convenience store sales up 7.0% in January 2009 Japan Franchise Association  convenience store sales in Japan rose 7.0% in January 2009. Here is a breakdown of the four major categories reported, with the percent of total sales represented by that category as well as it‟s change from a year before: Prepared foods  Packaged foods  Non-foods  Services 

33.2% of total 29.7% of total 32.8% of total 4.3% of total

+1.2% +2.9% +28.0% +9.6%

Japan’s January 2009 department store sales: ‘Plus’ 0.0%: The Japan Department Stores Association is reporting a ‘plus’ in nationwide department store sales +0.0% on a year earlier, at 688.6 billion yen. The nationwide survey includes 276 stores owned by 95 companies. Tokyo sales totalled 164.4 billion yen. 13

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As more shoppers look to the convenience of being able to shop from their computers and mobile phones outside of regular store hours, the non-store retail sector has been growing steadily. The top four media  catalogue, direct mail, Internet and TV–-make up 75% of sales, of which TV shopping and Internet sales have shown particularly outstanding growth. Japan is also often called the “country of the vending machines” TV shopping  During FY 2008, the 10 leading TV shopping companies sold a total of 210 billion yen worth of merchandise, a 25% increase from the previous year.  Sales for FY 2009 are forecasted to amount to more than 230 billion yen. Internet & Mobile  Member firms of the Japan Direct Marketing Association reported that their Internet sales doubled in FY 2002 to about 150 billion yen.  79.2 million Japanese had Internet via their mobile phones as of DEC 2008 (highest rate worldwide), allowing them to make payments to mobile telephonybased Internet merchants and further Internet sales. 14

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IKEA Japan, established 2002 Business: home furnishings, retail  Ikea is running 6 stores in Japan in 2009 (first two to opened in 2006) with huge success; Tommy Kullberg, President of Ikea Japan: “If Ikea can win the confidence of Japanese consumers, we can sell our products anywhere in the world.”

H&M Japan, established 2008 Business: apparel, retail  H&M released its annual report at the end of January 2009 and revealed that its Japanese subsidiary managed to rake in no less than ¥2.1 billion (16.8 million EUR) in just two months. The sales include the openings of the first two stores but only until the end of the company‟s financial year which is November 30. Since the first two stores only opened 13 September and 8 November, this means 16 million EUR in sales from two stores over 102 trading days in total. H&M said in the report that “The reception of the two new H&M stores in Tokyo was fantastic and sales surpassed the company’s high expectations.” Retail entries in recent years: Puma (2003), Marcolin (2007), Zara, Swatch, Chelsea, Coach, Crogs, L.L. Bean, Rucoline, other Jochen Zeitz, CEO and Chairman, Puma AG Rudolf Dassler Sport: "Since Japan, Tokyo in particular, is the epicentre of trends In the Asia/Pacific region, our focus is on further strengthening our position in this key market.“ 15

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Extreme focus on quality and on customer service Need to show long term committement to Japan Excellent distribution and service network a must Some adaption to the Japanese market often required Extreme need and request for technical information and documentation • Close and frequent communication to partner and customers necessary to maintain well-working long-term relations • Focus hard on hiring top people (a pool of very talented Japanese are available if you screen carefully). Use recruiting agencies and headhunters rather than printed or internet ads • OK to take a premium price still, although the market is becoming more competitive • • • • •

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1) People  People are first. As anywhere else people are key to your success. Customers are people, employees are people, your business partners, your suppliers, Government regulators, your competitors are people. You need to accept that Japanese people may think differently than you do. In business in Japan this can be crucial. 2) There is no easy, quick, cheap way to succeed in Japan  There are very few examples of companies which succeed overnight in Japan. It might be difficult to go-to-market without sufficient market research and planning. Just being convinced that your products sell themselves might be not enough in Japan.

3) Make sure you understand the market  Companies succeeding in Japan go through to understand the landscape they are about to enter. If newcomers do not know what you’ll have expect they’re likely to fail. You need to understand what Japanese consumers really like, and learn from the mistakes and successes your competitors have gained in Japan before. 4) Your products must be competitive  If you want to sell your products in Japan, they must provide a real value to satisfy real needs of Japanese customers at the right price. A range of "global products" which is a huge success around the world may not help you in Japan. You may need to adapt some of your products to Japanese market needs, still keeping your brand image up. 17

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G&S Japan are providing market entry and marketing/ sales for European companies in Japan. The firm serves companies especially in retail and consumers goods that plan to start or expand business operations in Japan.

Professional Japan Business Development:

• market research & marketing intelligence • sales partner sourcing & partner negotiation • marketing & direct sales • logistics & import services • e-commerce & web development • start-up coordination & turn-around management

Japan Marketing Solutions

• HR recruiting & interim management

• firm representation & PR management Please contact us for more details on the Japanese retail & consumer goods market!

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