The Japan market still has plenty of business opportunities to offer – a story of business in Japan in charts: market entry analysis Japan 2023/2024
Often touted as an economy in stagnation, Japan has a lot of opportunities for business, from a penchant for premium consumerism to an insatiable hunger for new products. Whilst some headline numbers may appear stagnant, and Japan indeed won’t lead the OECD anytime soon in terms of GDP growth, thinking of Japan’s economy as a stagnant one obscures more than it explains by hiding the extent of shifts happening underneath that seemingly still surface. Plenty of change－and growth－ can be found there.
Considering Market Entry to Japan: Is Japan Worth Investing in 2023/2024?
While Japan’s population will invariably shrink and grow older, equating this with a story of Japan’s decline seem exaggerated for anyone who has experienced its impeccable services, transport, or top-notch and ever-sprawling urban redevelopments.
Yet even those changes often described as economic risk will come with their own opportunities: FMCG makers certainly learned that much since higher markups on adult diapers more than make up for lost baby napkin revenue; and a growing group of wealthy retirees with a lifetime of amassed earnings (this is a nation of savers) and time to spend is certainly an attractive opportunity in its own right. Not even to speak of that fact that an ageing population in no way means a non-consuming society, and much has been written elsewhere about the bounties to be had in this ‘silver market’ in which Japan will invariably lead the world.
Looking beyond its shores, say at U.S. turmoil, or the upheaval in China and its policy-making that can make an about-face at the whim of one man, Japan’s sometimes slow-moving but reliable processes seem assuring if one is interested in building a dependable business for the long run－especially considering that Japan’s consumers are among the world’s most loyal once you converted them.
Beneath a Still Surface, Growth and Rapid Change: Japan Market Entry Analysis in Retail
Take retail, for example. Albeit at low pace, this massive catch-all category has been on a slow but steady growth trajectory for years. And in absolute terms, Japan will remain one of the world’s top markets for all things retail for the foreseeable future. Looking a level deeper, it becomes apparent how beneath this seemingly slowly growing category, there are many pockets of rapid and fundamental changes; let’s take a deep-dive into the personal care and beauty market:
How is Japan’s beauty market changing? Japan market entry analysis for skincare and beauty:
Japan is the second largest cosmetics and skincare market in the world after the U.S. and is still bigger than China’s. Far from stagnant, this category is growing at a much faster pace than overall retail trade and forecasted to see continuous growth for years to come. Underneath these headline figures even more fundamental changes have been taking place, often with particularly good news for new prospective entrants:
Korea has recently replaced France as the number one source of beauty care imports, driven by savvy marketing by Gen Z and millennial-focused K-beauty brands, particularly in skincare and colour cosmetics; U.S. brands take third place, then Chinese brands, which are a recent addition to this competitive category; Thai brands have equally started to grab market share, with Laforet in Harajuku recently dedicating a separate space to T-beauty brands; on the other hand, German brands, for example, though there are some strong examples, such as Nivea or Kneipp, are generally underperforming; despite an expanding subcategory of organic and bio-beauty where German brands have traditionally been strong. Clearly, foreign entrants can make it big in Japan, and the category is wide open for new players to put innovation and new offerings on the shelves, but only if they get their marketing right; French brands have learned as much at the expense of the K-wave.
But Japan is more than just a consumer market. It is also at the forefront of production and new trends; a look at its sophisticated skincare device market championed by brands such as Ya-man, or at its advanced microbiome care trend in haircare and skincare, is enough to recognise Japan’s unrelenting prowess in innovating this category. This penchant for rapid innovation, albeit that many are very incremental in nature and leave the door open for more unique propositions by the right foreign players, is not at all unique to the beauty category. Many categories in Japan, take for example food & beverage, function similarly: Suntory, for example, launches hundreds of SKUs every year to retain consumer interest in its shelf space. Naturally, competing in these spaces is tough, but also will help you bring you to the top of your game – and be all the more rewarding if you are able to cut through the noise with the right product in a sea of often newness that is often mediocre and incremental.
Clearly, retail, and beauty in particular, is a wide-open playing field, with ample opportunity to grow if one gets the mix right of bringing something new to the table without feeling too alien.
Japan luxury market 2023 – steady on:
In the same vein, Japan has remained one of the Top 3 countries for all things luxury, after the U.S. and China, and will continue to remain one of the world’s biggest markets for the foreseeable future. Many of these luxury goods are coming from outside Japan, as domestic champions often excel at premium but lack a knack for homegrown true luxury, leaving a wide open playing field for foreign entrants to the category.
For those who get it right and hit the right notes of luxuriousness that make sense to Japanese (and, soon again, Chinese tourists) consumers, the rewards can be rich, as shown by a slew of earnings data, such as Richmond Japan’s record 43% profit surge in 2022, far outperforming Europe or other APAC markets.
What Future for the Retail Market in Japan?
In a short story of just a few selected graphs it becomes clear how some of the oft-quoted stagnant headline economic figures obscure more about Japan’s economy than they clarify.
Many of the biggest categories are undergoing constant change and offer ample opportunity for business growth and rich earnings for those who find their place in Japan’s consumer culture.
