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A Tale of Two Consumers in Japan

TOKYO — You don’t have to look too hard — or wait very long — to discover this country’s legendary fixation on fashion and luxury brands.<br><br>Arriving at the Narita airport here recently, one woman from a Korean flight...

TOKYO — You don’t have to look too hard — or wait very long — to discover this country’s legendary fixation on fashion and luxury brands.

Arriving at the Narita airport here recently, one woman from a Korean flight passed the time waiting at passport control by conducting a loving and thorough inspection of her Louis Vuitton handbag.

Yet the decade-long slump in the Japanese economy — and a slowdown at retail recently — is putting such attachments to the test. European fashion executives and analysts acknowledge that market conditions here are becoming ever more challenging, with no immediate relief in sight.

“If you compare to a year ago, the market is much more quiet,” said Ralph Toledano, president of Chloé. “The economy keeps getting worse. I was [in Tokyo] in July and you can see the situation has deteriorated. [The Japanese] are much more pessimistic.”

“In general, it’s a difficult time in Japan,” agreed Paris-based designer Andrew Gn, who distributes his signature collection here with distribution partner Sans Frères. “Even established labels are having difficulties in selling this season.”

Gn said Japanese buyers were cautious in placing orders for spring, honoring commitments to seasonal increases in distribution contracts, but only just. He said the strength of the market seems to center on special, high-quality pieces or, at the other end of the spectrum, “cheap and cheerful” fashions and local brands.

“There is a big polarization of consumption, between the very high end and the very low end,” agreed Antoine Colonna, luxury analyst at Merrill Lynch in Paris. “That’s consistent with the increased gap between the top and bottom earners.”

A midweek spot check of key shopping districts amplified such observations. The spectacular Hermès tower in Ginza, opened in June 2001, remains a magnet, welcoming some 5,000 shoppers a day. Meanwhile, a 100-yen (about 80 cents) store in Harajuku, a sprawling Japanese version of a dollar store selling everything from wallets and tote bags to eye makeup, was as packed as a Tokyo subway platform.

But those accustomed to beehive images of this metropolis of 26 million would be surprised to find many downtown shopping areas as subdued as residential suburbs these days.

Even the airport at this Asian hub is eerily void of hubbub. Late last month, there was not one person waiting for a taxi. (Or could it be the staggering $220 it costs to get to downtown Tokyo?)

Although there were crowds of shoppers at the stunning new Louis Vuitton flagship in Omotesando, there was no queue, as was the case when it first opened in September. During one week in mid-November, most designer temples and specialty boutiques nearby sat nearly empty — or with a sprinkling of customers, at best.

Colonna said the recent successes of major brands like Vuitton, Gucci and Chanel in Japan have created a skewed image of the market, fostering an impression that all fashion brands are booming.

Far from it. He cited one study that concluded the market for luxury apparel and accessories has actually contracted 35 percent since 1996. That suggests brands with a lower profile are struggling and losing market share. “I see this big polarization favoring a handful of brands at the expense of the majority of them,” he said. Colonna added that he expects market conditions to remain “difficult” in 2003.

If what’s being worn on the street is any indication, subdued times are expressing themselves in relatively discreet fashions. Obvious designer labels and accessories seem to have vanished from the street scene — as have the crazy hair colors and platform shoes that recently garnered headlines in the West.

In the trendiest districts — the Jin-nan area of Shibuya and Harajuku — casual sportswear with a rustic or retro edge was predominant. Young men and women were practically drowning in their layers, topping off their ensembles with chunky knitted toques and extralong Brady Bunch-esque scarves, the most sought-after accessory duo of the season. Every teenage girl was wearing too much mascara and every teenage boy was carrying a tote bag — as if everyone got the same fashion memo. But zany getups were few and far between.

“Because of the economic situation, people are avoiding wearing too expensive or too showy garments,” Toledano said. “Some people are talking about what they’re calling designer basics as the next trend.”

Designer Lucien Pellat-Finet, just back from a week’s stay in Tokyo, drew a similar conclusion from the streetscape.

“There are no more logo bags any more on the street,” he said. “It’s very strange for me. I was there in April for the opening of my new shop and six months later, they’ve disappeared. You don’t know what they’re wearing as a bag this year. Before it was very logo, logo, logo.”

Pellat-Finet suggested that a move away from logos and obvious designer clothes perhaps suggests a growing “maturity” on the part of Japanese consumers.

To be sure, many European luxury firms have had a bonanza in Japan, especially during the Nineties luxury boom. Sales of Louis Vuitton, for example, have increased tenfold in Japan over the past 15 years. At a minimum, Japanese consumers account for 30 percent of the global $98 billion luxury market, according to a recent study by Morgan Stanley.

But the investment bank has doubts that Japanese demand will remain as robust in the long-term. Negative factors include aging population, the decline of corporate gift-giving and the specter that “parasite” singles — affluent, live-at-home youth who spend as much as 10 percent of their income on fashion — may shift spending priorities if the government moves ahead with a program of incentives to marry, have children and buy homes.

Anticipating a slowdown in growth rates in Japan for luxury companies over the long-term, Morgan Stanley is advising companies to study their success in Japan and apply their findings to emerging markets such as China, Eastern Europe and Latin America.

The firm also warns that some luxury brands may reach maturity in Japan in three to four years.

Adrian Joffe, the Paris-based managing director of Comme des Garçons, travels to Tokyo eight or nine times a year and is well aware of the impact the decade-long recession has had on the business and consumer psyche. Based on his most recent visit, he detects “a little bit of optimism.” For Comme des Garçons, sales are up 13 percent in Japan versus last year. “Our clientele is extremely faithful,” Joffe said.

But “it’s not fantastic for everybody at the moment,” he acknowledged. “I think it’s the middle market that’s really suffering, not the top.”

Japan’s department stores have been hard hit, with sales declining the last six months running. In October alone, sales at Isetan slipped 4 percent, while Hankyu saw a 6.7 percent drop.

According to Morgan Stanley, Japanese department stores currently depend heavily on seven “super brands,” which account for up to 6 percent of their sales. These are Vuitton, Gucci, Prada, Hermès, Chanel, Fendi and Ferragamo.

But Toledano said he has the impression there seem to be fewer luxury brands that are sizzling. “If you ask people if there is any hot brand, they will give you maybe one or two names,” he said.

Joffe noted that young men seem to be the most enthusiastic fashion consumers at the moment. He described a “cult” following for such brands as Junya Watanabe Man, Raf Simons and Dior Homme by Hedi Slimane. These young men are known to line up in front of stores when they know new shipments are expected.

Tough times or not, you cannot accuse the Japanese of becoming blasé about fashion.

Last month, Marc Jacobs was in town to promote his collaboration with Japanese artist Takashi Murakami on Vuitton accessories next spring. In between news conferences and interviews, he made an unannounced visit to his new signature flagship in trendy Minami-Aoyama. Spying him pushing on the door, several of the young sales girls jumped up and down with glee, holding their hands over their mouths like beauty contestant winners stifling emotion. Three male fashion design students who happened upon the store could not believe their good luck in discovering Jacobs in his own shop. “Cool,” they exclaimed, over and over, applauding and waving when the fashion star took his leave in a sedan.

Meanwhile, observers held out hope that the torrent of bad economic news — rising bankruptcies, widening unemployment and falling stock prices — might finally stir business to change and adapt to modern times.

“Department stores have not really changed for 10 to 15 years, but now they’re open to new brands,” Toledano said, noting that Chloé will open eight new in-store shops in department stores next spring. “They realize they have to make changes.”

Pellat-Finet agreed the persistence of the economic woes is finally convincing companies to rethink the way they do business.

“The Japanese have been reticent to make changes and now they have to open up,” he said. “I mean, only 1.6 percent of the population are foreigners. It’s a patriarchal situation and it doesn’t work any more. They have to face the modernity of the business.”

The decline of logo bags suggests that the brand might be losing its primal importance in purchasing decisions.

In the past, designer licensing in Japan was rampant, “but now it doesn’t work so well,” Pellat-Finet said. “Now [Japanese] care more about quality and not just the brand. They need a real product. That’s why Hermès is doing very well with its bags. It’s a real product. It’s why we do well, because we never cheat on quality.”

Sidney Toledano, president of Christian Dior, acknowledged that not all brands are prospering in Japan, and that competition for luxury dollars is intensifying. Yet, that doesn’t dampen his long-term confidence in the Japanese market. As reported, Dior plans to build a major flagship on Ometesando, slated to open next November.

“I feel very positive about Japan in spite of the financial situation and the recession,” Toledano said. “It really is a country for luxury goods. This is a country where we see high potential for growth. It’s the same feeling I have for Asia, Korea, China and Taipei. The market is responding when you have the right product and the right positioning. When people are confident in the brand, they’re buying.”