Don’t forget Japan!

One continent, and one alone, is like an Ali Baba’s Cave for the denizens of the luxury market. That continent – Asia and its Chinese pearl – fuel the wildest revenue dreams. Watch brands are no exception: as a growth engine for exports, for the past decade this corner of the world has been operating in overdrive. Brands seeking to expand their market share inevitably turn their sights on China when another country also warrants attention: Japan. Granted, Japan’s economy has slowed since the 1990s; the country has endured fifteen years of chronic deflation, suffered the indignity of being overtaken by China as the world’s second-largest economy, and the tragedy of Fukushima – but it seems better days have come, thanks to Prime Minister Shinzo Abe’s “Abenomics” policy of reform and monetary easing, led by the Central Bank.

Japan’s growth has been sufficiently robust for the government not to postpone a sales tax increase scheduled for October. Figures for Swiss watch exports confirm this upturn. After spending the years 2015 to 2017 in the red, losing between 2% and 3.5%, in 2018 Japan outperformed the industry in what was already a favourable year (+6.3% in value overall) by gaining 9.1%. The trend is borne out by figures for the first four months of this year. According to the Federation of the Swiss Watch Industry, between January and April shipments to Japan grew by 23% versus 2.1% for the branch as a whole. Only two other countries did better: Bahrein, which gained 26% but on very small amounts, and the United Kingdom (+39.6%), attributable to Brexit which is pushing up stocks. Japan thus consolidates its solid fourth-place ranking for Swiss watch exports. The country is also seeing a surge in leisure visitors from neighbouring China; their number quadrupled in five years to reach 7.4 million in 2017.

A personal choice

On these grounds, Japanese shoppers are set to become a subject of particular interest for the luxury industry. A recent survey by consultancy firm Agility Research & Strategy was reported on the Luxury Society website. A major takeaway from the study concerns the often radically different purchasing behaviours of Japanese consumers compared to other Asian markets, and the fact that these habits are tenacious. First of all, the Japanese still prefer in-store shopping. This prompts retail developments such as the Ginza Six complex in Tokyo, which opened in 2017 with close to 250 premium shops, restaurants, leisure and entertainment venues. Only 7% of retail sales are made online, a figure that has barely risen in the past ten years. This can be partly explained by a tradition of high-level, personal service – an “art” developed in department stores and which can go on for months prior to the purchase.

The survey reports that Japanese consumers buy luxury products first and foremost for their “higher quality” and as a “self-reward”: nothing to do with copycat buying or showing off social status. Price is important, but not sufficiently so to dissuade a customer from buying. Purchasing luxury is considered a personal experience, hence reluctance to buy a luxury product as a gift for someone else or a pre-owned item. This belief in the personal nature of luxury explains why purchases are rarely triggered by influencers or celebrity endorsement. Similarly, Japanese consumers are less caught up in the social media frenzy: only a small minority post photos of their latest acquisitions online, contrasting sharply with consumers in China and South Korea. Like Italy in Europe, Japan is a test market for Asia. As the country gears up for the Tokyo Olympics in 2020, that spotlight is likely to shine even brighter.