What are the distinctive characteristics of Japan's luxury goods industry and Japanese consumer behavior in the luxury goods segment?
Japan is the capital of luxury and a mass market paradise for luxury brands. In February 2009, it was the final destination of 45 per cent of luxury goods sold worldwide. Indeed, for luxury brands Japan represented between 12 and 40 per cent of worldwide sales. The rate would vary according to the definition of the market. Quality has always been a key factor for successful brands in the Japanese market, especially for smaller brands or niche brands that did not enjoy the same success as larger brands, such as Louis Vuitton. Today, affordability is a new concept that is radically changing the mind set of Japanese customers, who were always eager to resemble top fashion models from famous catwalk shows.
Japan has a group-oriented culture in which there was a real pressure to possess luxury status-driven brands, and its pattern of consumption is different from that of the West. Young women are more beauty-conscious, and the proportion of the urban population in Japan that possesses a famous, expensive luxury brand item is immense, reflecting a tendency not as deeply ingrained in other developed cities such as New York, Sydney or even Paris. The cultural and social homogeneity among Japanese society helped explain its attachment to luxury items, while the existence of a large middle class and a high population density affected Japanese habits. Japanese society could be described as "impersonal" where appearance is very important, and people are supposed to dress in a way that corresponds to their social position.
Consumers today are becoming less inclined to tolerate high prices that had formerly created desirability. Although young Japanese women are still eager to save money for the "it" brands, they have become more aware of the value of money. Lower-priced accessories and small leather items, such as wallets, travellers or clutches, have reported a huge increase in sales in the recent past. Since 2000, luxury goods have had held a different position in the consumer mindset. As the market had evolved towards more sophistication, luxury brands were no longer purchased as badges of membership in the new urban class. The norms of mature brand behavior and consumer habits seen in the Western world were about to be reflected in the Japanese luxury market. As a consequence, in the luxury market, the ready- to- wear segment had most incontestably been affected by the new trends in Japanese women's choices.
2. Explain why Louis Vuitton has been successful in Japan.
In the mid-1970s, Louis Vuitton had become the world's biggest luxury brand in terms of market share, and by 1977, the company owned two stores in Japan with annual profits of U.S. $10 million. In the 1980s, with the economic boom in Japan, there was "Vuittonmania" in Japan. Around 20 million Japanese women out of a population of 127 million owned a bag of the brand and each year, Louis Vuitton sold more than five million units of "Keepal" and " Speedy the, classic leather monogram bags. Louis Vuitton was the first multinational luxury house to open its own shops Japan without the help of a Japanese distributor. When Louis Vuitton decided to opt for a controversial strategy and to establish its own subsidiary, the company turned out to be a pioneer. The French headquarters relied on the Japanese business savoir-faire, believing Japanese managers to be more likely to make efficient market-driven decisions as they understood the local people. Louis Vuitton entered into the Japanese market at first through department stores with a single brand of its portfolio and by 2007, controlled 54 stores through a directly owned shop network in Japan. Louis Vuitton took advantage of the Japanese demand for high fashion.
Louis Vuitton has always been a trend- setting brand strategist in Japan, a country that revolved around tradition and culture. Since 1995, the worldwide luxury market has been growing by 10 per cent each year. In 2002, the global economy faced a slowdown due to the recession caused by the September 11, 2001 terrorist attacks in the United States. The direct consequence was a decrease in sales, such as luxury shopping in duty free zones in international airports and prestigious luxury destinations like Tokyo's Ginza Namiki Dori. Louis Vuitton in Japan had to…