by Dominic Carter
Psychologists have been telling us for years now that personal investment made in experiences, rather than material goods, is the happiest cash you can spend. In 2019, people increasingly crave and cherish authentic experiences that stay with them as memories (and can be shared on Instagram) more than the increasingly socially-irrelevant joys of conspicuous consumption. Welcome to the age of the experience economy in Japan.
Sacher Torte is more than just chocolate, it’s an experience to be shared
This was driven home to me the other day as I sat in the café of the Hotel Sacher in Vienna. The establishment was full of Asian tourists, including Japanese (and including me) who had gone there to sample the famous Sacher Torte, but also share it as soon as humanly possible on their Instagram. Most of us had our faces in our smartphones and it seemed as if the cake eating experience existed in two dimensions – the real world and the social media world.
Young Japanese spend less on branded goods and more on experiences
While the Japanese baby boomers, the Dankai, and their children, the Baby Dankai, in their heyday liked to spend their hard-earned cash on branded goods like cars and designer handbags or doing a short stay in a big-name luxury hotel in Waikiki, Japanese youngsters think differently and they want to experience life. Positioned economically in an era of increasing material abundance which is driven by their scarcity value in the job market, they are well-positioned to do so.
As basic needs become easier to meet through economic growth and development, the consumer in any economy generally evolves in their aspirations over time. We have long left behind the agrarian stage that saw success as being able to buy the raw ingredients to make goods on our own. Aspirations have also evolved beyond the stage of simply being able to buy good quality ready-made goods. Japan–like most developed countries–has, for decades now, has been firmly settled into the service economy.
The future of the service economy is the experience economy
For example, back in the day, Japanese families would buy the fish, rice and vegetables to painstakingly create the traditional New Year’s meal called osechi, which required days of work and put them in the family lacquerware. As they became more prosperous, they bought some or all of the individual dishes ready-made in the supermarket and arranged them in lacquerware before the countdown. Nowadays, it is common to simply order the whole set ahead of time to be delivered to your home, pre-arranged in the provider’s set of lacquerware. The whole used set is then picked up from your home after the festivities are over.
As a marketer you will have noticed that not only the convenience to the consumer increases with each stage of evolution, but so does your margin. Japan, a country driven by a strong work ethic, long hours, and short holidays, has for a long time embraced convenience to lengthen the few hours of leisure time people have. Younger people, with more disposable income than their parents and eased policies regarding overtime work allowing them considerably more freedom, will have a more privileged existence. These people are hungry to fill their ‘extra’ leisure hours with more meaningful experiences.
Welcome to the experience economy of Generation Reiwa – the most evolved stage so far in consumer aspirations.
The experience economy is disrupting existing sectors
Let’s look at how this disrupts existing sectors. For example, in branded luxury goods while LMVH’s Louis Vuitton once had an almost religious following in Japan, it has now switched its focus to the Chinese market, which is still playing catch-up on the evolution of consumer aspiration. Or at cars. In the 80s and 90s, people in Japan ‘lived’ their cars. It was the hub of their existence and an expensive car directly corresponded to their image and self-worth. But nowadays, although I’m sure they exist, it’s harder to imagine the influencer persona in their 20s that buys luxury cars. People don’t live in their cars, but on their phones. Their self-image is enshrined in a digital device that functions as a catalogue of everything they have seen and done.
The luxury market in Japan is not dead, but changing
Rather than hard goods, the future of luxury (and the future of Japanese consumerism in general) will hinge on experience. This means that dining from high end to low end, entertainment, travel and leisure are all key industries of the future in Japan.
Our research has shown that Japanese teens focus primarily on experience and spend accordingly. They want to blow off steam from the significant pressures of study and fitting into the uniform Japanese society. A profoundly digitalized group, their emblematic out of home activities include karaoke, movies, theme parks and game centers. Those in their 20s are also highly digitalised and as they consolidate their identities they spend their money on theme parks, karaoke, game centers, nightlife, and watching sports games in stadiums.
The travel industry as the poster child of the experience economy
The travel industry is an obvious player that comes to mind when we think of experiences. And while Gen Reiwa’s parents and grandparents liked to vacay at Prince Hotel properties across Japan or the Sheraton Waikiki, youngsters nowadays don’t travel to impress their co-workers with place or hotel chain names, but for their personalized experience. The outbound travel industry has evolved beyond the package deals sold by domestic travel industries. With LCCs (low-cost carriers) and OTAs (online travel agencies) at their fingertips, Japanese people in their 20s tailor their trips to their own liking. A journey that starts on their phones, end in memories that stay on their phones.
No longer buying paper travel guides to popular destinations in the bookstore, they trawl influencer accounts online for what looks like the most fun experience and the most insuta-bae (insta-worthy) moment. Instagram also being the place where they will immortalize the time they spent bungee-jumping in New Zealand or surfing in South Africa. While we notice a distinct gap, with Japanese female travelers by far taking the lead over their male cohorts, travel in the 18-29 age group is on an uptrend and offers a huge opportunity if you can reach the Japanese through the channels they engage with.
At-home entertainment as everyday experience consumption
Not only outside or in far-flung places, the experience economy can also play out inside your home or on your smartphone. At-home entertainment, including streaming services for movies, sports and documentaries, as well as the video-gaming industry benefit from people’s wish to immerse themselves into digital experiences. Both are growing markets in Japan.
Taking pictures of your food, first became popular in Asia and then revolutionized the way we eat around the world. Eatertainment is the future of the food and restaurant industry. If you sell not only a food product, but a whole experience to go with it, you will win the hearts of the Japanese.
Themed dining and “eatertainment” at the heart of the Japanese experience economy
Themed dining has long been a thing in Japan: Across Tokyo, take your pick of Alice in Wonderland, vampire or robot-themed restaurants. Everyone who has been to one of these can attest that the food quality sometimes borders on shoddy, yet you can expect long queues and mandatory reservations on weekends. No one comes for the food to a maid café (or butler cafè), but for the moe experience when being called ‘master’ or ‘princess’. Our 2017 data, polling 1000 Japanese across the nation shows that younger folks in their teens and 20s show much higher momentum on eating out than do the older generations in their 40s and 50s. This trend is reflective of entertainment spending in general.
Integrated resorts and casinos are only the next step for Japan
In the late 2020s, Japan will take a giant stride toward the experience economy: its first integrated resorts will open in cities across the country. More than just casinos, these resorts will be full-fledged entertainment complexes that house resorts, shopping malls, restaurants and conference facilities. While opposition against the legalization of gambling remains strong – despite or because of the fact that pachinko has been around here forever – the experience economy factor of IRs is likely what will eventually lead society embracing them.
What experience will mean in the late 2020s is anticipated by TeamLABs’ immersive digital worlds that have taken Japan (and the world) by storm, turning art into an experience. We expect that the fully immersive digital experience as the model of leisure and entertainment is only getting started. Japan is showing that it can lead the way in new modes of engagement.
Japan is a world leader when it comes to selling experiences
Critical to the future of the economy, enhanced leisure experiences will not only be for Japanese. My team and I had the pleasure recently of taking a business group from Australia not only around the classic tourist and educational spots in Tokyo but to TeamLAB. Japan will do very well from being the innovator in experience and will gain economic benefits not just from the ordinary tourist but from the higher-value business traveler like our client who is seeking to provide learning and experiences to their valued team members.
Japan as your market research lab for crafting new experiences
Being successful in the experience sector in Japan is going to require being very up to date with what the consumer here considers to be a worthwhile and aspirational use of their time. While the broad trends I have outlined are firmly in place it is also very key to keep an eye and ear close to the ground as the market is very fickle and microtrends can turn on a dime. It is also equally true that the key formats and entertainment experiences may not have even been thought of. If you have an innovation in experience that you feel potentially fits this market I would strongly encourage you to use Japan as your lab.
Image by tosh chiang via Flickr.