Brian Salsberg, leader of McKinsey & Co’s Consumer and Shopper Insights centre in Japan, explains why Japan’s luxury market was somewhat unaffected from the Great East Japan Earthquake
In the immediate aftermath of the tsunami, earthquake and nuclear disaster that hit Japan last year, killing 19,000 people and battering the nation’s already shaky confidence, it was hardly surprising that people didn’t feel like shopping.
At the time, the conventional wisdom was that such restraint was likely to last. People would still have to shop for essentials, of course, but the market for things like high-fashion apparel and luxury handbags was surely bound to suffer long-term damage.
Such thinking made eminent sense – except it didn’t happen. Over one year later, that verdict appears to have been premature. Today’s luxury market looks a lot like the luxury market that existed the day before the Great East Japan Earthquake, much as we anticipated in last year’s report.
“ The Japanese appetite for luxury remains strong, despite about 20% of consumers stating they are buying less often ”
Conducting the report…
We conducted an online national survey of more than 1,000 consumers who had purchased a luxury good in the past 24 months. The survey exclusively covered watches and jewellery; accessories and leather goods; shoes and apparel.
This was the fourth year in a row we have conducted this survey, with the objective of monitoring changes in Japanese luxury goods attitudes and consumption behaviour.
Un-surprisingly we confirmed…
The Japanese appetite for luxury remains strong, despite about 20% of consumers stating they are buying less often. There is a continued focus on the quality and heritage of the product itself, and the buying experience/service experience, much more so than the logo.
We also saw a continued trend of travel retail being important—some 20-25% of our sample had travelled abroad to places like Hawaii and Korea to do their luxury shopping. We found no lasting negative impact related to the tragic events of March 11.
“ Big-ticket luxury buyers were more likely to be ‘trading up’ in the past year despite a weak economic context ”
Most surprisingly we found…
We saw particular strength in some sub-sectors of the market. For example, big-ticket luxury buyers were more likely to be “trading up” in the past year despite a weak economic context. Watches and jewellery enjoyed particular strength as a category in the past 12 months, something that has been attributed to a response to the events of March 11 and a focus on more durable luxury goods likely to increase in value.
We also have evidence to suggest that men as a group increased their luxury consumption somewhat more than women. With regard to channels, we were surprised by the continued strength of the department store, at least as a browsing channel, as well as the growing importance of smartphones in the buying process.
In a small but telling sample, when we asked 20 Japan-based luxury company CEOs about their sales outlook, every single one said 2012 would be better than 2011, and almost three-quarters said that the disasters of 2011 had no effect (63 percent) or, counter-intuitively, had a positive effect (10 percent) on company performance. Seventy percent of CEOs were optimistic about the near future and the prospects for Japan’s luxury market.
“ When we asked 20 Japan-based luxury company CEOs about their sales outlook, 63% said that the disasters of 2011 had no effect ”
If readers remember only one thing it should be…
Japan may be a shrinking population and economy, but it remains the benchmark for European luxury good trends and is still the world’s second- or third-largest market in terms of sales.
- Big spenders appear to be “trading up” to higher-end brands
- Luxury branded experiences are emerging as a strong trend
- Smartphones have become an important tool in the purchase process for younger consumers
- Overall, luxury shoppers show an increased appetite for travel
- Department stores continue to play a crucial role in distribution, but brand shops, outlets and duty-free are also gaining traction