TOKYO — As Japanese retailers gear up for a busy year-end and New Year’s sales season, they are also having to contend with some less-than-ideal economic factors that may negatively influence consumer spending. Because of this, many stores are pulling out all the stops and planning elaborate promotions for one of the year’s busiest shopping periods.
Japan’s consumption tax was raised from 5 to 8 percent in April, and while most retailers agree that sales have now returned to more or less normal levels, they are now faced with other problems. Rising commodities costs have put a strain on personal finances, and wages and incomes have not increased to combat this and the tax increase, which cut into disposable incomes. Also, Japan’s third-quarter real GDP contracted an unexpected 1.9 percent on an annualized basis, putting the country into recession mode. This and a weak yen could have a negative impact on consumer mindset at a time when spending is usually high. Although New Year’s in Japan is not a gift-orientated holiday, the end of the year is a time when many workers receive bonuses and consumers spend on food and the winter sales season.
“It’s very likely that consumers will continue their cautious consumption behavior for a while,” said Eiji Kaneda, operating officer, corporate planning at Beams. “The positive and negative impacts on the Japanese economy are mixed, such as the cheap yen and low crude oil prices. Looking at the situation being reported in the media, such as the year-end general election, consumers have no choice but to be cautious.”
But being cautious doesn’t necessarily mean not consuming at all. On the contrary, it seems as though Japanese consumers, already among the most discerning in the world, are simply becoming even more careful about how they spend their hard-earned cash.
“We believe the difficult situation in the Japanese economy at the moment doesn’t have so much to do with a reaction to the consumption tax increase as it does with things such as rising costs of energy and [things needed] for daily life, and the fact that incomes have not increased to catch up with these rising costs,” said a spokesman for Isetan Mitsukoshi Holdings. “However, if you look at the trends of customers in our stores, the average purchase price per item has been rising starting from April and until recently, so we feel that more than price consciousness, customers want things with value.”
This sentiment is echoed by other retailers, such as Sogo & Seibu Co., Ltd. A spokesman for that department store operator said, “It seems like customers have a tendency to want things that they haven’t seen before; things that they can actually feel have a newness, fine quality, or a sense of fun.”
Some product categories that are showing strength lately include specialty and designer clothing and accessories and big-ticket items like jewelry and watches. However, in the case of the latter products, some of the sales are attributed to rush-buying before another planned tax increase, and large winter bonus payments. It remains to be seen whether or not these categories will continue to perform well in the long term.
In order to respond to the increasingly stringent standards of Japanese consumers, retailers are stepping up their product offerings and rolling out elaborate seasonal promotions.
Isetan Mitsukoshi Holdings announced Monday that its three main stores in Tokyo—Isetan Shinjuku and the Mitsukoshi stores in Nihonbashi and Ginza—would be holding a series of events over five days from Friday, Jan. 2. The theme of the festival is “New Year for Enjoying the Future,” and it includes promotions such as lucky-grab bags, live music and other performances, and limited-edition products such as a collection of diamond jewelery designed by Nicola Formichetti and a gold sake cup in the shape of Mt. Fuji. Other retailers are expected to hold similar events.
One thing that may help boost sales of some stores over the holiday period in Japan is a rise in the number of tourists from abroad. On December 17 the Japan National Tourism Organization reported that preliminary figures show the number of overseas visitors to Japan having increased by 39 percent year-on-year in November. And with a recent change in Japan’s duty-free system for visitors, popular department store products such as cosmetics can now easily be purchased tax-free by non-residents.
“According to the different department stores, sales of big-ticket items are increasing with winter bonuses, and cosmetics are seeing the same trend,” said Kose Corp.’s president and chief executive officer Kazutoshi Kobayashi, who also serves as president of the Japan Cosmetics Industry Association. “I don’t think it’s wrong [to say] that this is also greatly influenced by the consumption of inbound [tourists], but the places that benefit from that are only some department stores and drugstores in urban areas. Regarding regional stores, their future business conditions are uncertain, and for some there is even the possibility that consumer spending will never fully recover.”
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Retailers are equally cautious about the long-term outlook in Japan, but they’re still doing what they can to get the most out of a historically busy season.
“It’s difficult to predict what our sales will be for the year-end and New Year’s period, but we are of course making efforts to increase them over last year,” said a spokesman for Takashimaya. “However, I think it will be difficult to achieve a drastic increase over last year.”