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Market Trends

Market Trends

1. E-commerce’s Moment

For years, Japan’s low rate of e-commerce purchasing – especially compared to neighbors like China and South Korea – was not a huge concern for retailers and brands, because in-store sales remained robust. Indeed, in some categories, like luxury fashion, Japanese consumers remained some of the most avid in-store shoppers in the world! So why, brands asked, should they invest in e-commerce when consumers were not demanding it? And how could they even begin to translate Japan’s unique service culture to the online shopping arena? The COVID-19 pandemic, however, exposed the limitations of this “physical-first” approach – namely, that it left retailers and brands exposed to steep falls in retail-district foot traffic, and without the infrastructure built out to support a shift to online shopping. Going forward, expect brands and retailers of all stripes to become more proactive in developing and stoking demand for their e-commerce offerings. Because a more diversified digital-physical mix offers greater economic resilience.

2. Digital Productivity

Increasing Japanese businesses’ productivity through digitalization was a crucial part of the “third arrow” of Abenomics. And while the pandemic, in theory, offered an opportunity to move more work online, the reality is that Japanese laws have kept businesses reliant on paper, fax machines, and in-person meetings – even during the height of the coronavirus outbreak. Government officials have promised to take a new look at updating these laws in 2021. If they do, then the move towards digitalization on the part of businesses, banks, and brands can truly begin – and digital convenience and productivity will become dominant themes in Japanese society.

3. Electronic Money

The notion that coronavirus would cause Japan to completely reverse its preference for cash over digital payments was always farfetched. But it is true that in the early months of the pandemic, some major metropolitan ATM locations saw traffic drop by more than half. And it’s also true that the pandemic spurred convenience stores like 7-11 to roll out contactless card payment technologies. Demand for new cards was so high, in fact, that by mid-2020 credit card issuers were running out of new 16-digit card numbers! So, while cash isn’t going away, it’s becoming easier than ever in Japan to pay by card or phone – and consumers are increasingly appreciative of flexible payment options. In 2018, the latest year for which official government statistics are available, the proportion of households using electronic money had increased to more than 50 percent – a figure that should only grow in the years to come.

4. Advertising Recovery

2020 was a difficult year for the advertising industry in Japan, as it was in much of the world. GroupM’s “This Year, Next Year” update from June 2020 suggests that the Japanese advertising economy will decline by 2020. The upside, however, is that the Japanese advertising industry will reemerge as a more agile concern than ever in 2021 – with a newfound ability to pivot and respond to changing realities on the ground. Careful planning will still have its place, but so too will a new spirit of experimentation, innovation, and rapid rollout. In 2021, GroupM predicts the Japanese advertising economy will grow by some 15 percent.

5. Flattening M-shaped curve

For years, the employment trends for Japanese women was characterized by a steep M-shaped curve – with the sharp drop in the middle representing women exiting the labor force for about 20 years after having kids, before picking up more part-time work later in life. Rightly, there has been a lot of discussion about how to retain some of these “dropouts” – but in the meantime, the M-shape curve has actually been flattening on its own: a higher proportion of 30- and 40-year-old women are currently working than ever before. According to statisticians, that’s due to in part to people having later marriages and fewer children. But the curve is also flattening because more women have already returned to work. As Japanese society works to convince more women to reenter the workforce, then, businesses should also remember to support the many women who have already returned – by providing them with more convenience solutions, childcare resources, and emotional support.

6. Flying Cars

After seeing foreign companies like Tesla make gains in the electric car market, Japanese car brands are even more determined to gain first-mover status in the next great arena for automotive competition: the quest to build and market flying cars. Once a science fiction vision, the prospect of flying cars took one step closer to reality in September 2020 when Japanese company SkyDrive completed a test run of its flying car prototype. The startup is backed by Toyota, which has funded a number of different research avenues aimed at ensuring that Japan will have a key role to play in making humanity’s futuristic dreams come true.

7.  Kindness Revolution

Recent, tragic cases of cyberbullying have led many in Japan to reassess the way social media has made it easier to overlook people’s humanity. While the government is mulling new legislation to combat anonymous speech, the entertainment industry is looking to devise new approaches to its popular “reality-style” programming. As consumers’ lives move even further onto digital platforms after the pandemic, people have been reminded that kindness matters just as much online as off. There is a need to create and embed new norms of digital civility – and everyone, from brands to government to ordinary people, have a role to play.

8. Tourists Welcome

The number of foreign visitors to Japan has climbed to all-time highs in recent years - thanks to relaxed visa requirements, as well as a concerted push to attract new tourists in the runup to the Tokyo Olympics. In the coming decade, this influx of tourists has the potential to revolutionize Japan’s retail, hospital, and service industries – in ways both big and small. Tourists have different language requirements, payment preferences, and consumer tastes. The challenge for businesses in high-traffic areas will be to develop a flexible infrastructure that works for locals and tourists alike.  

9. Workplace Reputation

Japan largely avoided the kind of mass layoffs seen in other developed nations in 2020. This is a result that Japanese citizens can be proud of, and that some see as a vindication of Japan’s unique labor laws. Now more than ever, brand image in Japan is shaped by the way a company treats its own employees. (This is not the case in many other major markets – there, reputation is largely shaped by how a company treats its customers, and labor issues are less important). In these precarious times, Japanese consumers have proven to be especially sympathetic to worker complaints; employee relations have become more important than ever to a brand’s reputation. Consider, for example, the severe backlash that some companies faced in 2020 after rescinding promised job offers to recent graduates, or after refusing to working hours at certain convenience store locations.

10. Careful Discounting

In response to the pandemic, retailers in many countries have turned to aggressive discounts geared at getting consumers back in stores. Japanese businesses have had to be more cautious, however, given the differences in consumer psyche that have arisen after years of extremely low inflation. The fear is that once prices go down, the Japanese consumer will neither expect nor allow for those prices to go back up again to “normal levels.” As a result, expect 2021 to be a year in which Japanese businesses get creative in coming up with new, enticing pricing strategies that stop short of deep discounts. This could include new, exciting product bundles; complimentary extended service or repair contracts; and experimentation with smaller or bigger “value sized” product formats.

11. Unruly Women

From Murakami to Mishima, modern Japan’s most acclaimed literature was largely written by men. Recently, however, it’s Japan’s women authors – names like Yoko Tawada, Yoko Ogawa, Sakaya Murata, and Mieko Kawakami - who have gained worldwide acclaim for their vivid and unsettling tales. Why this matters outside the book world is because much of this work depicts women acting out in startling, bold, and honest ways. In a country like Japan, where women say they’re forced into occupying narrow social roles, there is an increased cultural desire to imagine women enacting the full range of human experience, for good and for bad - rather than existing solely as mothers, wives or entertainers.  

12. Advanced Hygiene

Japan’s longtime embrace of masks as a public health measure gave the country an early edge in the fight against COVID-19, and its ongoing mask compliance served as a positive example for the world in the ways that a country could come together to promote good hygiene. Going forward, the country is well-positioned to become a global leader in hygiene innovation. Such innovation might include new chemical engineering breakthroughs in the liquid sanitizer market – but it might also include finding ways to combine sanitation solutions with beauty products. Or it might mean finding new ways to combine mask fashions with a voice assistant or cooling technologies, as some Japanese businesses are already investigating.

13. Lifelong Learning

The COVID-19 pandemic has brought education out of the schoolhouse in many new ways. Going forward, one of the populations that stands most to benefit from new advances in e-learning and flexible classrooms is Japan’s senior citizens. Children and young adults aren’t the only students in Japan these days: as Japan approaches the new normal of a “100-year life,” the concept of a “Lifelong Learning Society” has gained traction. The goal here for retirees isn’t necessarily to gain degrees and certifications, but rather to embrace new experiences and passions at all stages of life. Education is becoming a constant life goal – and a key to vibrant aging - rather than youthful rite of passage.

14. Next-level Safety

The government statistics are clear: in many respects, Japan is safer than it’s ever been in the modern era. The national crime rate is less than half of what it was in 1980. Traffic accident fatalities are the lowest since statistical tracking began in 1948. Because of this progress on immediate safety threats, Japan has a unique opportunity to address some of the more advanced safety threats that exist in modern society. One type of “next-level safety” campaign might be around reducing cybercrimes and online fraud, which reached a record high in 2019. Brands have a strong role to play in increasing online security and data hygiene – just as surely as they’re one of the first entities to be blamed when there is a significant data breach.

15. Resilient Design

Thanks to its location in the “Ring of Fire,” Japan has long been at the forefront of using architecture and design to minimize the impact of environmental threats like earthquakes. Now, as the effects of global climate change begin to accelerate worldwide, the country has an opportunity to adapt that design expertise to help the world confront a new wave of climatic damage. The resilient home design of the future will need to guard against not just tremors and tsunamis, but also high heat, sea-level rise, water insecurity and unpredictable storms. Japanese designers can also propose new, flexible solutions to the modern challenge of “sheltering in place” for long periods of time – for instance, by applying Japanese ingenuity to the challenges of adapting domestic spaces into temporary home offices and schools.