ON LUXURY BRANDS IN JAPAN

GILDED CANARIES

Japan may be in the midst of a secular change in it's consumption of Global luxury brands.  The Atlantic provides the context:

"Japanese shoppers, at home and abroad, account for about half of the global luxury-goods market. But according to a study released last fall by Bain & Company, the luxury market here was expected to shrink by 7 percent in 2008, after falling by 2 percent the previous year."

It's not just the global recession, which is obviously having an effect, as it is worldwide.  The Atlantic piece goes on to explain:

"...observers believe Japanese people have changed their attitude toward luxury consumption. In the bubble years of the 1980s and early 1990s, many Japanese aspired to own the same Western brands—not to stand out, but rather to fit in. Some 40 percent of Japanese consumers reportedly own a product from Louis Vuitton, whose parent company derives almost 10 percent of its revenue from Japan.

The collapse of the bubble economy in Japan and the “lost decade” of decline that followed left everyone a little wiser..."

What sells today is value. When the Swedish discount fashion retailer H&M opened its first Japanese outlet in September, more than 5,000 people waited on line."

The Economist a few months ago highlighted some of the longer-term trends here:

"There is also a longer-term trend at work. Japan overflows with “parasite singles”—adults living with their parents—who are flush with money that would otherwise go on rent. As fewer women marry and have children, they have more cash to spend.

All of this fuelled Japan’s strong demand for luxury goods. But as the population ages, there are fewer young, wealthy and fashion-mad customers.

Buyers’ tastes have also become more sophisticated. The days of simply slapping on a logo and charging a ridiculous price are gone, says Fiona Wilson, the Asia editor of Monocle, a style magazine."

It goes on to add the global significance:

"The big question is whether Japan is an isolated example, or signals a broader shift in demand. Perhaps it is a bit of both. If customers in other developed countries are no longer so dazzled by labels, the big brands will come to rely even more on fast-growing emerging economies, where the new rich go gaga over glam at any price."

If so, this may be more than a cyclical thing worldwide.  Remains to be seen.