Furniture & Interior in Japan 2009

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The Europe Japan Business Center Powered by: G&S INT LTD 6-4-13 Soshigaya, Amenity Building Tokyo Setagaya-ku 157-0072 Japan www.ej-bc.com Contact: Mr. Gasch

Table of Content

Furniture & Interior in Japan

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Japan’s Retail Market Housing Starts Furniture Market Trends in Furniture Imports Furniture Imports by Year and Country Furniture Distribution Retail Localisation Furniture Consumer Price Index Furniture Key Customer Groups Furniture Branding and Brand-Awareness Important points prior entering Japan Major furniture retail players Successful Foreign Market Entries A few key points in regards to Japan Overview EJBC & GS INT LTD References/ Testimonials

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Furniture & Interior Market Japan 2009

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Japan’s Retail Market

Furniture & Interior in Japan

Japan Valued at over 108 trillion yen in 2003, Japan's retail market is the 2nd largest in the world with sales second only to those of the United States when compared to the world’s five largest retail markets. Japanese consumers are know to be most quality & service demanding around the globe.

Total & per Capita Sales of Top 5 Retail Markets

Breakdown of Retailers by Business Classification

Source: JETRO and METI, 2007

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Source: IGO Global Retailing, 2007

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Housings Starts

Furniture & Interior in Japan

Housing starts Due to the introduction of new tougher regulations for new houses in June 2007, the new housing starts plummeted dramatically in 2007. Lowest level in 30 years. Since the purchase of furniture is tightly connected to building new houses or moving to a new house it have and will continue to affect us. ”There is more than 1 million new houses built every year in Japan!” Apartment sales Apartment prices increased 10% in the Tokyo area in 2007. Sales of apartments dropped 30% in the Tokyo city center and 4.3% in Osaka. New Housing Starts 1994-2007

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Source: JETRO, 2008

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Furniture Market

Furniture & Interior in Japan

Japanese Market Tendencies • • • • • Simple, sophisticate and modern designs are widely popular among Japanese consumers Sofas, beds, dining sets, and cupboards are main items in imported furniture market Regulations of chemicals and strength are relatively severer than in other countries “Made in ~” is one of the important factors to the image of each product background Correspondence to custom-made order is one of the terms of an attractive trade Total Furniture Market Japan (in billion yen)

Japan is the 2nd biggest furniture market worldwide behind the US

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Source: JETRO, 2007

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Trends in Furniture Imports

Furniture & Interior in Japan

Total Furniture Imports Japan (CIF)

Drastic changes in general consumer’s furniture purchasing patterns  1. mind-set focused on restraining purchases 2. Purchasing tendencies of consumers: careful considered balance of price, quality, and taste 3. Diverse purchasing trends due to the diversification and individualization of lifestyles

 Notable changes of Japanese
consumer purchase patterns
Source: METI (Ministry of Economy, Trade and Industry) 2006

Trends in Wooden Furniture Shipments by Item

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Source: METI (Ministry of Economy, Trade and Industry), 2006

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Furniture Imports by Year and Country

Furniture & Interior in Japan

Total Population: 127.74 million Size of Land: 377.907 km²

”Low-end products come from China, high-end and design from Europe ”

Although being a uniquely homogenous society (Japan has only 1% foreigners, 2007) Japan’s market place today and its customers stand for great ...  Variety of Preferences  Variety of Lifestyles  Variety of Market Types

 Variety of Business Possibilities
Total Furniture Imports by Year and Country

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Source: METI (Ministry of Economy, Trade and Industry), 2006

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Furniture Distribution

Furniture & Interior in Japan

Most foreign companies use, if not setting up an own sales offices, case 1 or case 3. As Japan’s distribution system is rapidly changing, most manufacturers, foreign as national, increasingly prefer case 1, as this system ensures completive pricing, and quality sales and after-sales services to end-users (also in large scale distribution). General trading companies are continuously loosing influence in Japan.
Major Import Routes Japan – Furniture & Interior

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Source: G&S, 2006

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Retail Localisation Furniture

Furniture & Interior in Japan

In Japan, generally most retail turn-over is achieved in the areas of Kanto (Tokyo) and Kansai (Osaka). These areas have the biggest share (combined upto 2/3) of the buying power of Japanese consumers. • population: 127 million (2008) • Japan is the 2nd biggest retail market globally (Jetro and United Nations statistics, 2007)

35% of Japan: TMA , KANTO (Tokyo Metropolitan Area)  35 million consumers

25% of Japan: KANSAI Osaka, Kobe, Nagoya  24 million consumers
40% other Japan areas
Conclusion  Furniture & Interior Japan sales partners should be chosen in consideration of their main customers areas in Japan.
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Consumer Price Index Furniture

Furniture & Interior in Japan

Since the burst of the “Bubble Economy” around 1991 Japan has experienced general deflation or a very low inflation. In 2007 especially food and energy costs rose, but the picture of furniture and house-hold goods looks different. The expectation of FY 2008 is an increase of 0.5%. “Japan was, and still is, a high-priced retail market” From 2000 to 2007 furniture prices fell more than ten percent, but before 1995, Japan’s furniture prices were up to double of those in Western markets, such as the US, UK, and Germany (and other EU). In 2007, the furniture prices fell 1%, which looking from a positive angle was the lowest drop in the past 7 years. Today, furniture & interior in Japan is still costlier in retail than in the EU or US. Consumer Price Index Development 1992-2007

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Source: METI (Ministry of Economy, Trade and Industry), 2006

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Key Customer Groups Furniture

Furniture & Interior in Japan

KEY Generations of Furniture Market: the two baby-boom generations and young families. These two generations are the groups spending most on house building, furniture and interior. Population by Age (5 year groups)

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Source: Ministry of Internal Affairs and Communications, Statistics Bureau, 2006

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Branding and Brand-Awareness

Furniture & Interior in Japan
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How to become attractive to Japanese consumers • Provide appropriate products to Japanese customers through detailed market research and customers analysis  some customisation might be needed • Care for the balance of “size, price and quality” • Care for the image of your products and company • Build-up a reliable and certain export system

 Keep the contract (specification, delivery term,
etc.), try to shorten the delivery term

Outline on how to build up your “Brand” • List-up the strong and good points of the national character, industry, and products • Collaborate with national designers to show that you can offer original design • Publicise the features and backgrounds of your product materials and functions • Increase the exposure of your brand in Japanese market

 Building up the “Brand” means building up
“Image”(= good and right image)

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Important points prior entering Japan

Furniture & Interior in Japan

Important points of consideration when marketing to Japan     Understand the target market (characteristics of your customers in Japan) Send information about company and products frequently to Japan Train your Japanese employees /sales partners to understand your brand/ products well Find answers to “what can you do to actually improve live of your customers in Japan?”

How To Find the Japanese Distributors: Stage 1     Decide the type of distribution channels Decide the target retailers/consumers Decide the starting range of export products Selection of right partner for each type of furniture

How To Find the Japanese Distributors: Stage 2     Frequently visit your customers/ partners in Japan Be patient in steadily building your market share Some product adaptations is often required Pay attentions to the details & after-sales in Japan

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 G&S is providing professional sales partner search negotiations in Japan, contact us for details

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Major furniture retail players

Furniture & Interior in Japan
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The list below reflects only fraction of the most important retail stores chains in Japan, is not complete and only overviews the Japanese market.
“There are more than 8500 POS for furniture & interior in the Japanese market place” (JETRO, 2008)

Source: IDAFIJ, 2007

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Successful Foreign Market Entries

Furniture & Interior in Japan
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IKEA first came to Japan in the mid 1970s as part of an early wave of expansion in Asia. Following a long struggle, IKEA pulled out in 1986. IKEA returned in 2006, now operating 6 stores in Japan successfully.

Lars Petersson, CEO of IKEA’s Japan, believes IKEA’s success in return is because of the special care they’ve taken to get to know the Japanese customers.” Petersson places little credence in the idea that Japan is more difficult for foreign companies than other markets. He feels that past failures have been exaggerated and may have deterred some global brands from entering Japan. “Yes, there are difficulties in Japan but there are difficulties in Russia, there are difficulties in Poland...” Some advice to international companies looking to avoid our fate in the 70s, he says: “If planning to come to Japan (or Poland) thinking you are in just another country is the start of the failure because there are a lot of local things you need to understand in Japan, then you can achieve your targets in this giant market.”
Poggenpohl, German high-end kitchen maker with 110 years tradition, is exporting to Japan for 25 years with a Japanese retail partner. The manufacturer with 75% export ratio decided in 2008 to open its first own operated Asia showroom in Tokyo, the store will open in 2009 in prestigious Tokyo Aoyama. Poggenpohl aims to increase the number of own stores globally from 35 in 2009 to 90 by 2013. “Japan is a key market for our brand in Asia and very potential in terms of sales volumes”, Martin Gill, Head of Global Retail, Poggenpohl Group.

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A few key points in regards to Japan

Furniture & Interior in Japan
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To succeed in Japan in a long-term view …

• Manufacturers need to show long-term commitment to Japan and customers • Excellent distribution and service network is a must • Some adaption to the Japanese market often required • Extreme focus on quality and on customer service

• Need and request for detailed technical information and documentation
• Focus hard on hiring top people or professional partners (a pool of very talented people/ companies is available if you screen carefully) • Watch your brand image and install a well-working delivery/ after-sales-service • OK to take a premium price, although the market is becoming more competitive

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„Do you target to increase sales in Japan?

We are the place to start!“

The EJBC and G&S INT LTD provide Japan Business Development:  See and understand your market potentials in Japan  Start and manage sales in Japan, restructure existing channels  Increase market share in the 2nd biggest market worldwide - Japan With external support the following can be realised:  Fast project implementation through professional partner in Japan  Offloading your export team via outsourcing projects  Low project cost, efficient and effective use of export budgets  Risk reduction by using reliable partner and market information G&S International Japan offers: 1. Identify market potentials for your products in Japan 2. Seach & Negotiate with suitable importers/distributors/buyers
o o sales representaion, showrrom & office set-up & HR recruiting PR & advertisement, legal, purchasing & technolgy transfer

What our customers say ...
Below a couple of references/ testimonials of G&S in Japan, please contact us for details (phone +8180-5519-1260)  Company Project global high-end kitchen brand, headquarters in Germany Market Investigation, Management Set-up retail operation, HR recruiting, other

From 2007-2009 we’ve worked for a well-known German kitchen manufacturer on market analysis and management of retail organisation set-up in Japan. Export Director “I have very seldom experienced such a high degree of professionalism, accuracy and efficiency. You did an outstanding job for us in Japan!” Company Project global design lighting manufacturer, headquarters in Austria Market Investigation, Management Set-up sales office, HR recruiting, other

From 2006 – 2007 we’ve worked for a design lighting manufacturer on market investigation and set-up of its Japan subsidiary. Director International Sales: “The project with G&S in Japan was done in a professional way, straight, clear and quick; beside, it was also a very amicable cooperation, always in a cooperative, friendly atmosphere. We reached our targets on time, which of course is the most important point in business. We recommend to use G&S as costefficient solution in Japan.”

Thank you for your interest in this report!