Luxury brands continue to prosper, despite bleak post-311 outlook
By: Debbie Howard
Luxury brands are one of the most interesting of all consumer products here, since the Japanese have long prized them, and indeed, still hold the title as “biggest spenders luxury brands in the world.” Although China is catching up fast and is expected to surpass Japan by 2015 or so, right now Japanese consumers represent one-quarter of the world’s expenditure on luxury brands. That compares with 22 percent in Europe, 20 percent in North America, 19 percent in China and 15 percent in other markets, according to a 2010 study by Deutsche Bank.
The year of 2011 was touted by many to be a year in which luxury brand sales were slated to do relatively well globally and in Japan, following a dismal year in 2009 and some uplift in 2010. However, the 311 disaster changed all that, and the forecasts of doom and gloom were upon us.
Looking at the situation now, though, it looks like luxury brands may not fare as disastrously as expected. Forecasts have been adjusted, and expectations are for worldwide growth in luxury sales to average anywhere from 2% to 8%, depending on the source.
In Japan, specifically, it is still “touch and go,” but department stores over the summer reported good sales of luxury wristwatches, designer goods and higher-priced jewelry, and imported car sales are up as well. This all indicates that the initial mood of austerity that prevailed after 311 may at least be beginning to lighten up.
Since long before Lehman Shokku and 311, luxury brands have had to work harder to attract and maintain Japanese consumers’ attention, as attitudes towards value for money have changed. For many of today’s more confident consumers, “brands” have become less aspirational, making “brandname/reputation” less of a consideration in deference to such factors as “quality,” which many now feel they can judge for themselves regardless of brandname.
In JMRN’s updated survey among 777 Japanese luxury consumers in September 2011, it is clear that such macro trends affecting luxury brands over the long-term are even more entrenched in the wake of Lehman Shokku and 311. For example, “quality” still trumps as the most important consideration (mentioned by 87% of all survey participants) compared to both “price” (68%) and “brandname/reputation” (55%). None of these measurements have changed demonstrably since the previous survey taken 4 years ago in August 2007, indicating that the situation among luxury consumers in Japan is relatively stable.
That is not to say that other second-tier brands and “fast fashion” — such as Forever 21 and H&M — are not making inroads, since there is also greater acceptance of these newer, non-luxury-brand items over time. And it is not to say that luxury marketers do not have to fight back, which they are, with rapid expansions into China and other fast growth markets, as well as by moving aggressively into digital and online platforms in keeping with these newer channels’ rapid growth and acceptance.
On the other hand, no matter what happens with luxury brand sales in Japan in this particular year of 2011, Japanese consumers will remain a global consumption powerhouse of luxury brands for some time to come.
Debbie Howard is Chairman of CarterJMRN and President Emeritus of the American Chamber of Commerce in Japan.
Originally Published in Nikkei Weekly, 19th October 2011
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