Reforming Japan's Luxury Market: E commerce Lags Despite Strong Consumer Demand and Digital Trends

The Japanese luxury market, a behemoth in size and value, is the third largest in global luxury goods markets following the United States and China. The market boasts an impressive $295 billion in annual sping by consumers on designer brands ranging from high- fashion to fine jewelry and prestige cosmetics. Despite having experienced some turbulence post the 2011 Tohoku earthquake and more recently due to the pandemic, the industry has mntned steady growth over the past decade.

However, the landscape is shifting with the rise of ecommerce, a phenomenon that parallels but also diverges from the broader trs in Japan's consumer market. While digital channels like websites and social media have become an essential part of doing business everywhere, the luxury sector in Japan has lagged behind its peers. Currently, the penetration rate for online commerce stands at 8.7, well below many other countries.

A significant reason for this is attributed to the strong emphasis Japanese consumers place on the traditional retl experience and customer service provided by brick-and-mortar stores. A McKinsey report from 2017 highlights that sales excellence at points of sale remns crucial, encompassing both information gathering and purchasing experiences. Shoppers in Japan expect personalized assistance, knowledge of products, and ease of interaction with sales personnel.

Moreover, Japan's rapidly aging population has influenced the sluggish growth of ecommerce, especially mobile commerce. A Morgan Stanley report from 2019 reveals that mobile commerce constitutes only about a quarter of all online sping here. The older generation is less inclined to transact on smartphones compared to younger demographics.

In addition, major online marketplaces such as Rakuten and Amazon have been slow in incorporating luxury items into their platforms. Some niche players like Moda Operandi exist but lack awareness among Japanese consumers. In contrast, China's Alibaba-owned Tmall platform has managed to onboard high- brands like Chanel and Bottega Veneta.

The impact of COVID-19 on Japan's luxury market was profound; it forced many retlers to either shorten opening hours or temporarily shut down stores altogether. According to Euromonitor, there was limited movement towards e-commerce for luxury goods in the country during this time period. Despite these challenges, industry leaders remn optimistic about a robust recovery post-pandemic.

A notable shift is that while Japanese consumers value quality and are highly loyal to their favorite brands, ecommerce adoption within the luxury sector has been slow yet accelerated due to digitalization trs elsewhere in Japan. For instance, Shopify's sales from its 2020 Black Friday-Cyber Monday event saw a record growth of 350 for the Japanese market.

Facing this new reality, leveraging the right strategies is crucial. Bilingual account managers at DMFA can support you with your online marketing needs. We are pleased to announce a strategic partnership with PayPay Mall, one of Japan's leading ecommerce platforms. As an exclusive overseas partner, we offer fulfillment, logistics management and customer service solutions through our three-way agreement with Japanese e-commerce agencies.

This enables you to gn access to the market by handling everything from inventory to delivery and support for your customers. Contact us to learn more about this opportunity.

Sources:

1. Statista 2023. Leading Personal Luxury Goods Markets By Country.

2. Business of Fashion 2020. Luxury Brands Never Embraced E-commerce in Japan, Now They're Regretting It.

3. Bn Company 2020. Spring Luxury Report.

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