Luxury retail in Japan continues downturn and features different trends during crisis

Along with Hong Kong, Japan has been a ”heaven” market for luxury brands for many years, yet, the current economic crisis has changed the habits and preferences of Japanese luxury consumers indefinitely. As CPP reported in an earlier analysis material, guilt and shame towards luxury branded goods is gradually replacing bling and show off.

Strolling through the affluent district of Ginza or any of the major luxury department stores in the capital city of Tokyo, one could notice less and less Japanese overtly displaying their branded shopping bags or branded apparel or accessories. Wealthy Japanese consumers are more and more resorting to ”mix and match”, a trend which is apparently compensating for the ”guilt” of buying a luxury branded item. Therefore, customers in top luxury department stores such as Mitsukoshi or Matsuya can often be seen assorting a Zara shopping bag with a Gucci one. Much like in other mature markets such as the U.S. and Western Europe wealthy luxury consumers are feeling the pressure of toning down on their spending on luxury branded goods, especially fashion and accessories.

The other major trend which can also be noticed in Tokyo’s department store is the mix of luxury branded goods with medium priced ones and this is especially obvious in sectors such as shoes, where Church’s shoes are less than 20 cm away from Geox or Timberland. However, the medium priced brands are the ones which are mainly known for their quality and not necessarily for the design or innovation.

The weak YEN has also been damaging indirectly luxury sales, most of European luxury labels being sold at 20 to 30% higher prices than in Europe. This keeps away not only foreign visitors in Japan but mainly Japanese consumers. In the Loewe and Bottega Venetta stores in Tokyo, we were told all customers complain about the very high prices and sales assistants already know the price of each item in both YEN and EURO and are also familiar with the pricing differences.

Versace Group ealier this year surprised the international luxury market by closing all its stores in Japan, as part of a global strategy by its new CEO to cut costs and improve profitability. Despite assurements that Versace will reopen on the Japanese market by the end of this year, Oliver Petcu of CPP believes this is highly unlikely. Moreover, other international luxury brands are likely to reduce their number of stores in Japan, ex Valentino, Gianfranco Ferre or Celine.

Continued negative results at all major luxury department stores are likely to keep away any further market entries such as Saks Fifth Avenue or Harvey Nichols. French premium department store Printemps, present through a local franchise operation is reported to have seen its sales decrease by at least 10% in the past 6 months compared to the same period last year. Such franchised department stores have been underperforming internationally, the worst such cases being Harvey Nichols in Istanbul and Saks Fifth Avenue in Dubai.

The only advantages ”in favour” of Japanese consumers when it comes to buying locally, are the better quality customer service and the proximity to home. International travel is still expensive and certain European capital cities offer very highly priced accommodation.