McKinsey research

Luxury goods in Japan: A 2013 preview

April 2013 | By Katrien Bollen and Brian Salsberg

Over the past two decades, Japan’s much-sought-after luxury shoppers have altered the way they think and the way they shop. Most of them no longer buy something simply because everyone else has it.

Younger Japanese consumers in particular are likely to shun a brand if everyone has it. Instead, they crave products that are unique and offer true value, not merely the flash of a trendy logo.

Consequently, luxury brands must work harder and smarter if they want to capture new customers and keep existing ones happy. Because Japan’s luxury market—even though shrinking due to a combination of changing demographics, a stagnant economy, increased price transparency, and more channel options like travel retail and internet shopping—still matters. The country remains the original Asian luxury mecca and is the third largest market in the world, after China and the US. Virtually all luxury brands have a formidable presence in Japan. In a country the size of Montana, Burberry has more than 190 stores, Coach has nearly 150, and Gucci and Ferragamo each have 80. Japanese consumers remain some of the most discerning, loyal and important luxury customers in the world.

Here are four trends marketers need to grasp in order to meet their changing expectations.

1. Japanese consumers have become even more discerning.

Renowned for their appreciation of craftsmanship and quality, Japanese luxury shoppers are now also looking for products that will hold their value over time and that seem to offer a value commensurate with their price. This doesn’t mean that customers are interested in buying cheaper items. Instead, they desire the best experience and best quality for the money. To some extent, the Japanese consumer is also becoming less impulsive, buying only when there is an immediate need.

2. The shopping experience is everything.

The perception a customer has while shopping or otherwise interacting with a brand is on its way toward becoming more important than the product or brand itself. The Japanese have always expected exceptional personalized service, and today that’s even more true. They want sales reps that can make them feel valued, appreciated and welcomed, as if a member of an exclusive club, not an ordinary shopper.

Yet, at the same time, achieving this level of superior service has become harder for brands, since customers are armed, both in physical stores and digital ones, with increased amounts of information, often gleaned from online sources. One luxury executive in Japan spelled out the dilemma. “We have noticed that a lot of customers are far more prepared and sales staff need a higher level of understanding of the products sold to keep up with the customers,” he said. “Facebook sometimes has more information than a basic sales training course. In addition, pricing has become very transparent, meaning that the sales rep really has to be able to add value to the sale to make the sales wear well.”

3. Experimentation with innovative retail formats is increasingly important. 

The best luxury brands build a sense of lifestyle around their products. They make the shopping experience not about products, but a sense of style, whether that style evokes elegance, fun or opulence. Some companies have done this through enhanced concept stores or other experiential emporiums. Kose’s luxury skincare brand “Cosme Decorte,” for instance, opened a stylish spa salon in October 2011 in the Tokyo district of Ginza. There customers have the opportunity to use Cosme Decorte products for free after their treatments. And auto brands like Mercedes-Benz and Cadillac, aiming to attract younger customers, have opened stylish cafes in their Japanese showrooms.

For many luxury companies, enticing customers into branded retail venues is increasingly important since department store traffic in Japanese continues to decline. Younger consumers in particular find fewer reasons to shop at department stores, and brands can’t rely on these outlets as a reliable means of attracting new customers.

4. Digital marketing and social media are a must for luxury brands.

Luxury brands can no longer sit on the digital sidelines, worrying that online sales will hurt brand equity or that social media like Twitter and Facebook don’t matter. Luxury consumers in Japan and elsewhere are living online, and they want to be able to meet their favorite brands there. And while most luxury apparel brands have an official website in Japan, some appear to lack key functions for online shopping and others don’t offer quick delivery.

To be successful in Japan, luxury brands need to give their online presence the attention it deserves. This means enabling shopping not only through official web sites, but also via smartphone apps and sites hosted by others. It also entails making a sizeable portion of total products available online, as well as offering certain merchandise and features exclusively online.

To read more, download “Luxury goods in Japan: A 2013 preview,” (PDF 12.5–MB).