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By Dominic Carter

Japan retakes the luxury centre stage from China

Some 30 years ago, Japan was the epicentre of growth in global luxury. While it has remained a significant market for international luxury brands, China has taken over Japan’s leading consumer role in Asia in recent years.

But could Japan be poised to regain its role as a global luxury trendsetter? Indeed, it would seem that recent developments in China, including President Xi’s Common Prosperity rhetoric, as well as seemingly endless travel bans, have made the middle kingdom lose some of its allure.

But rekindling the flame of romance with the Japanese consumer is not without its challenges. In many categories, innovations that work in other markets don’t necessarily work in Japan. One could be forgiven for thinking that luxury brands in Japan have let the grass grow under their feet, especially in the digital realm. Years and years of reliable waves of Chinese buyers in major city department stores and boutiques would tend to breed complacency even in the most nimble of players. But with the endless Covid travel bans of 2020 and 2021, those halcyon days seem on permanent hold.

Brands in Japan are scrambling to keep up with the new digital landscape

Luxury brands are more dependent in Japan than other markets on physical retail.  The fact that almost a quarter of all LVMH’s physical stores across the Asian region (including those in China and India) are located in the country helps to understand just how critical the physical channel of the Japanese market has remained. In 2020, when the Corona crisis hit, it was painfully apparent that brands had to scramble to get on top of digital channels. The pandemic starkly exposed the challenge around Japan’s resistance to online sales channels. It spelled trouble for international fashion brands who now find themselves unable to leverage e-commerce to the extent that they need. While fashion buildings and select stores in Japan rightly prioritise and embrace experiential shopping, it is crucial to think about the online space as part of the experiential shopping idea – not as a pure information source but a supportive channel to sell that may or may not be consummated online.

Purchase journeys are nowadays lengthy, deliberate and layered. There is hardly ever a single journey to a single purchase in a brand relationship. Brands have to share touchpoints with third-party sites, apps and communications platforms such as LINE. But they need to do so in a way that means that they do not lose ownership of their buyer. The contemporary luxury buyer might wish to buy on any legitimate purchase platform. These may include sites such as Zozotown, department stores, e.g. Isetan/Mitsukoshi, Rakuten, and the brand’s owned sites.

Digital platforms are experimenting with predictive AI algorithms to better match buyers with products and brands. Each site wants to leverage its customer understanding to enhance its brand promotion ability. LINE is an especially critical element in the interface with the consumer. It is a widely used every day platform that allows two-way communication (e.g. surveys and service associate outreach) that is detailed and allows a high degree of personalisation.

A huge learning curve is needed to adapt to the touchpoint landscape

Indeed, one to one marketing has to be the goal in luxury in 2022 – requiring brands to understand the crazy quilt touchpoint network that consumers are experiencing and co-creating constantly. To say that luxury brands need to understand and employ omnichannel strategies yesterday seems an understatement. But it’s a colossal task – an omnichannel approach requires a brand to have a point of view and plan on every touchpoint (digital and physical) (owned and third party) where the consumer might see, browse, or touch the brand.

Content needs to integrate across digital and physical touchpoints seamlessly. Compelling storytelling, telling stories that embody the values that define the brand, is essential. Luxury will always be about image, style and intangibles as much as it is about the objective quality of the product. It is necessary to create content and aspirational ideas and appeal to consumers’ desire to display their values to themselves and the world.

Collaborations increasingly add interest and layers of status

Brand collaborations for the global market such as those we have seen recently with Gucci and Microsoft, Balenciaga and Gucci, Reebok and Maison Margiela, Balenciaga and Crocs, to name a few, allow brands to mix and match their contexts and maintain cultural vitality. These collaborations cross borders and target an internationally-minded elite that may have more in common with each other than they do with some segments within their own cultures.

Focusing on Japanese buyers, projects that bring together international luxury houses and local brands such as those created by Louis Vuitton and Nigo and Christian Dior and Sacai have generated attention.

Collaborations can result in complex overlays of local and global cultural contexts, where the city itself is re-imagined as a venue. During the pandemic, installations such as the Gucci-themed Tokyo Tower hanami and pop-up Bamboo House in Kyoto, where local landmarks were redressed and reinterpreted by the luxury giant, garnered engagement online and offline. They stood out as statements of the presence and vibrancy of these brands brand in the local Japanese market.

Leading in the future means looking after customer's heart - as well as their planet

Increasingly and, possibly, more importantly, luxury brands also need to express a point of view on sustainability. While a pro-sustainability attitude is growing slowly in Japan, it is one of the critical priorities for global luxury fashion.

Beyond aspiration and personal expression, approachability, connection, and warmth are increasingly important. In this respect, the brands will always leverage advantage with their owned channels. However, it places a lot of pressure on the brands to create a superlative experience and on the staff that run their boutiques and concessions or interact online to deliver the fabled omotenashi. As the insurance industry knows well, there is no better way of managing a complicated relationship with journeys over multiple channels with a customer than assigning a single agent. Perhaps this is a model that luxury brands in the world may seek to emulate.

In the near future, the brands that cut through and engage the Japanese market will be those that reinforce their historical essence and oeuvre with a razor-sharp understanding of current trends. They will also understand that intimacy with a brand provides multiple occasions for that brand to come into our lives, but doing so without disrespect to their heritage. Successful luxury brands will prioritise their staff as ambassadors and socially skilled engagers. Taking cues from other industries such as insurance will provide some hints on how to help their buyers navigate the complication of the brand landscape and lead them to the products and experiences they want.

Luxury brands need to find new ways to stay close and new ways to ‘be’. This will involve using enticement, teasing, warmth and welcoming to make their buyers feel safe and grounded in an increasingly complex technosphere. As Disney has for generations in Japan, competent luxury brands will stimulate, soothe and reassure – making their valued customer feel ‘right’ in the world. Playfulness is a relatively unexplored emotional territory in luxury that will help engage, especially younger buyers. It may be too much to say that infantilisation is the implicit emotional territory to pursue. Still, certainly, to take a leaf out of Tiffany’s book, it will not be the Japanese consumer’s mother’s luxury brand that will own the future.

Dominic Carter Bio

Representative Director & CEO

Dominic came to Japan from Australia in the late ’90s to launch the Japan business of a global research consultancy. In 2003, he started what is now The Carter Group, a diversified organisation serving the needs of international businesses looking to realise ambitious goals in the Japanese market. Over the last 25 years he has worked with some of the top brands in the world, fuelling their journeys to success through the expert application of consumer insights across cultural contexts to drive successful marketing strategy. Dominic is a frequent lecturer, guest speaker, trainer, consultant and commentator on all matters to do with consumer insights methodology, social mega-trends and the contemporary Japanese consumer.