Last September I posted a couple of notes: “Luxury: Japan is not what it once was”. A new McKinsey study, “The New Japanese Consumer, has largely validated my analysis and identifies some recent developments that confirm that the behavior of Japanese consumers now largely resembles their counterparts in Europe and America. Here are some features to remember:

•    A return to the home seen as a “nest”.

•    An increase in sales through the Internet – demonstrating the desire to shop “at my own pace”.

•    Higher expectations in matters of “health” and “environment”: “Consider, for example, Coca-Cola’s I LOHAS (Lifestyles of Health and Sustainability) Water, whose selling points include a reduced carbon footprint: bottles are Made from 12 grams of recycled PET plastic (rather than the standard 26 grams) that can be twisted and compressed when recycled. I LOHAS is also bottled locally, reducing transportation costs. Less than 12 months after its launch, It has become Japan’s top-selling brand of single-serve bottled water”.

•    A quest for the most competitive prices (“Return to value”) – we see that sales of private labels are finally developing in Japan.
Luxury brands are directly affected by this reversal, as the recent changes in the Ginza landscape show – until quite recently one of the areas that luxury brands invested heavily in:

1.    A Gucci store has been replaced by a American mall brand, Forever 21.

2.    In December 2008 Vuitton announced they were dropping the project to open a new store (there are already two!): Gap will be opening there instead.

3.    Uniqlo has expanded its flagship sales point by taking over the two floors left vacant by Brooks Brothers.

4.    H & M and Zara set up shop there in 2008.

5.    Tony Burch, the mid-range American brand, has recently opened – with intensive advertising in the metro.

Thus “fast fashion” is investing the Ginza area – instead of luxury brands. The boom is over and they will have to rethink their business models (see my posts of September where I outlined various approaches).

Michel Gutsatz – BrandWatch