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Japanese Customer - The year in review - 2009
By Peter Hanami, CEO,
As the end of the year draws near, a quick review of the year from the Japanese customers
perspective is timely in seeing the major events that occurred, how they impacted consumer
buying behaviour and what these changes may mean for 2010.
To put it mildly 2009 was a traumatic year for Japanese consumers. The start of the year saw
the unwinding of an economic model and the reality that the world had changed. It was quick
and unforgiving. No one in Japan could have foreseen such scenarios and a new term was
quickly coined, "Lehman shock". A label that summed up for Japanese consumers, what
happened and why.
To put the impact of "Lehman shock into perspective", let's take a quick look at some events
that occurred afterwards. Firstly, the export model froze and then contracted. According to
Martin Fackler of International Herald Tribune. Japan's economy shrank by an annualized
11.7 percent in the first quarter. Secondly, the Japanese yen strengthened in value against
the US dollar, falling below 90 for the first time since 1995, thirdly, Japanese customers
fearing the worse tightened their belts in a sudden reaction which hit luxury goods makers
hard, fourthly, pack sizes for regular items changed noticeably in 2009. For example, a bag
of marshmallows from a convenience store suddenly went from a 160 gram bag, made in the
Philippines to an 85 gram bag, made in Japan that continued to sell for the same price of 105
yen at the cash register. Fifthly, Japanese consumers appetite for risk decreased and saw
the growth in forex trading which was seen as a way to gain some sort of financial advantage
with few other investment alternatives. Sixthly, the Nikkei 225 stock index fell and wiped out
not only gains for householders but also huge amounts for those Japanese companies that
held shares in other Japanese firms.
Foreign investors also reduced their holdings in Japanese stocks and became net sellers as
the index dropped to record lows in March. Finally, consumer prices in Japan have begun to
decrease ever so slowly but probably not faster enough for consumers who have also seen
their wages drop and bonuses drop in both summer and winter.
The number of Japanese millionaires stood at 1.36 million last year, and saw a decrease of
150,000 from the number in the previous year, according to a Merrill Lynch annual report.
Japanese customers continued to retire in 2009 and according to a HSBC survey, July 2009 ,
"97% felt unprepared for retirement" (1000 survey respondents). Japanese retirees
continue to relocate to other countries including the Philippines which is reported to have a
large number of Japanese retirees and growing. Other countries are looking at further
promoting themselves to this large and lucrative market, for example, Hawaii who would love
to have more Japanese retire there.
So what did Japanese customers do to cheer themselves up in 2009 amongst all the doom
and gloom? IKEA stores in Japan have cut prices on a range of items. According to Japan
Consuming, Ikea became the number three furniture seller in Japan in 2009.
Japanese customers travelled to Korea and other Asian nations taking advantage of the
stronger yen, they flocked on tours and shopped. They shopped at Fast Retailing stores and

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snapped up over 1 million pairs of low priced 990 yen pairs of jeans according to the
Japanese Customers flocked to the cinema, first half of 2009, box office figures show a
17.6% increase on last year. We felt that this year there has been a big boost in attendance
in Japanese movies and the number of foreign movies available decreased, (personal
opinion only). Beer shipments continued to decrease and are predicted to finish the year at
their lowest level since 1992. "Japans mature beer market is valued at about $42.5 billion,
but its size has been steadily declining from about $51 billion in 2004." In 2009 it was harder
to find hot dog and hamburger buns at the supermarket, in fact we gave up looking for them.
Food shortages existed particularly for a range of tinned foods and a range of other products
that suddenly disappeared of shelves.
On the housing front, the number of houses stood at 57.59 million units, an increase of 3.7
million. The number of vacant houses hit an all time high in October 2008 and the number of
households increased to 49.99 million and the number of solitary households of people over
65 years of age increased and created a new record at 4.14 million according to Ministry of
Internal Affairs and Communications in a report released in July, 2009.
Consumer products
Apple's mind share & sales in Japan continued to grow in 2009. The brand has certainly
made great inroads into Japan's mobile phone market by promoting simplicity. In 2005 when
iPod Shuffle's were released it was very hard to find one in Tokyo, all that has now changed.
It's personal computers also have a loyal following which is set to continue and improve in
2010. Softbank unveiled its 2009 - 2010 phone range (video below) and the Sharp941SH
among its star products with an 8 megapixel in built camera.
Rice consumption was down 3 percent on the year before, the agriculture ministry says 8.23
million tons of rice was consumed nationwide from July 2008 to June 2009.
As a gauge, every time I visit my local supermarket I take a look at the store layout, check all
the aisles, the damaged goods bin, the frozen food displays and look for categories that have
expanded and contracted. Here is an overview of what happened in my local supermarket in
2009. Customers enjoyed more meat products, including sausages and for the first time,
fresh whole chickens for Xmas were on display at 1200 yen, a wider range of cheese (even if
it was cheddar in 20 different forms), an expansion in breakfast cereals and the biggest
change in 2009 was the introduction and expansion of home baking products. Particularly the
use of pancake mix to cook bread at home in a toaster oven or rice cooker. A number of
television shows highlighted this new trend. My local supermarket got rid of their in store
bakery and used the floor space to expand the home bake products that included pancake
mix, cake ingredients and pre- made cake mix.
Home cooking expanded in 2009 as a way to save money and manage the household
budget. This was first noticed when "Cooking with Dog" started their English videos
explaining how to cook a range of traditional Japanese foods on You Tube and the number
of views they received skyrocketed.
By the end of 2009 they had moved to high definition format and had over 44,000

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Interest in Japanese food outside of Japan we predict will continue to grow in 2010 and
provide a range of new opportunities for Japanese food manufacturers to further export.
The alcohol section of my supermarket expanded to become the largest section. Generic
branded products extended their reach further and deeper into more aisles this year and my
prediction for 2010 is that they will continue to grow. Frozen foods also continued to grow
particularly ready made meals. The number of milk products expanded and the choice for a
one litre pack are now over 15. New Zealand ice cream disappeared from my local store's
freezer and was replaced with a local brand alternative.
Seiyu (Walmart) have continued to expand their footprint in Japan in 2009. For example,
Saltine crackers have recently halved in price due to the stronger yen. Seiyu's inroads into
the lives of Japanese customers will continue in 2010, stores have wider aisles than
Japanese supermarkets an no clutter, sell reusable eco friendly carry bags and mix their
product range of Japanese brands with western brands. We predict they will continue to
excel in 2010.
Continuing on supermarkets the Yomiuri Shimbun reported on September 23rd that
Maruetsu a supermarket with 245 stores have introduced a new shopping cart that is 40%
lighter than normal.
Consumer worries about food labeling continued as more firms where found mislabeling
products, hiding the country of origin and a range of other practices. A new Consumer
agency opened on September 1st and a quick overview can be found here in English
Convenience store operator Lawson launched electric vehicle chargers at seven stores in
the Tokyo and Osaka areas.Initially the chargers are free but will move to a user pay model
in the future according to the Mainichi Shinbun (August 5th).
Child care services in Japan continue to expand as parents struggle to find a place to look
after their children as more families search for work opportunities. According to an editorial in
the Asahi Shimbun July 30 "spending on measures for children, such as child-support
allowances and subsidies for day nursery services, constitutes a puny 3 percent of the social
security budget".
SMBC bank started a forex mail service this year. Travellers who had excess currency (32
currencies and six brands of travellers cheque accepted) when they returned home from a
trip can send by registered mail.The proceeds attract the same rate as the banks standard
forex and can be sent to accounts other than those held at the bank. Asahi Shibun, August

An interesting statistic caught my eye this year and really stood out more than any other. It

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referred to the longevity of Japanese companies. According to according to data collected by
Tokyo Shoko Research Ltd, Japan has 21,066 companies that have been in business for at
least 100 years", the oldest was was founded in 578.I couldn't help but wonder that customer
service and the length of operation of a firm had some very important link.
Massage services (non sexual) have popped up in many new places in 2009. Japanese
customers tend to suffer from very stiff muscles in their shoulder and neck, known as
"katakuri". Customers wear their clothes and a towel is placed over the area to be
massaged no skin to skin contact. A condition that is relaxed with massage. Two stores have
opened locally and both are well visited.
Some bright sparks for share investors in all the gloom was the spectacular rise of a small
Kansai based food company Osho, that benefited enormously from the changed economic
conditions and saw it's share price climb from a low of 1400 yen per share to a high of 2800
yen per share. Another example that Japanese customers wanted value for money and
looked for outlets that provided it. Osho serves Chinese cuisine and allows customers to sit
on a stool at the counter or take a seat at tables. All cooking is open and customers can see
into the kitchen as food is prepared. The menu has a wide range of foods including meal sets
that include beer. Probably, their most famous meal item is their in house made dumpling
known as "gyoza". What makes Osho different is that it is casual. Customers are met at the
door and walked to their seat, service is fast and meals are served piping hot and offer great
value for money. Each store has its own unique character and customers can openly watch
their meals being prepared.
On the other hand public pension programs losses nearly doubled to 10.1795 trillion yen in
fiscal 2008 from the previous fiscal year according to the welfare ministry primarily, as a
result of decreased stock prices (August 5th) Asahi Shimbun.
A survey conducted by The Japan Institute of Life Insurance based on 4054 respondents
found that "an average household pays 455,000 yen or about 5,100 dollars per year for life
insurance policies including mortality and annuity insurance" as reported by NHK October
12th 2009.
Prices are dropping and a home builder started selling homes online and offering baby
boomers a one-story house priced at 8.88 million yen for 59 sq. meters according to the The
Nikkei October 15. Land extra.
Japanese tourist numbers declined to a number of past favourite destinations including Italy
and Australia. An unfortunate incident in Italy hit the newspapers in Japan about poor service
and overcharging. Japanese customers turned to a number of reassuring old favourites as
the economy declined in 2009.
My local "Takoyaki", Gindaco store did a very brisk trade this year (Takoyaki is an octpous
and vegetable ball fried in a thin batter and served with a tangy sauce, shaved fish flakes and

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sprinkled with finely cut seaweed). A new "Taiyaki" stall appeared at my local train station
around June and started business from inside a converted van, it also attracted many new
customers. Taiyaki is a red bean paste desert in the shape of a bream fish. It sells for around
100 yen per cake.
Comic performances known as "owarai" saw a resurgence on television but also as training
tools by large companies. Sales of traditional comic storytelling "Rakugo", CD's and DVD's
were also popular according to Nikkei, Weekly Aug. 3 issue.
An interesting survey by the Kanto bureau of East Nippon Expressway Company about
Japanese customers level of patience found the following. The average amount of time
people in their 20s are willing to spend waiting in line to buy something is 69 minutes
compared to people in their 50s who are only willing to wait an average of 29 minutes as
reported in Nikkei Weekly, September 14th. These are important statistics for the people who
still manually take the money on Japan's extensive collection of toll roads
Twitter launched a Japanese language mobile based platform in Japan on October 15th.
Read here to learn more about the new service for Japanese customers
Hiroto was the most popular baby name for boys in 2009, while the most popular girls' baby
name was Rin, according to a survey by Benesse Corp as reported in the Mainichi Shinbun
December 8, 2009. .
A record-high 21,603 Japanese celebrated their 100th birthdays during the fiscal year begun
in April according to the Ministry of Health, Labor and Welfare as reported in the Nikkei
Shinbun, September 11, 2009. The total number of people over 100 years of age is expected
to break the 40,000 mark for the first time this year.
According to Health, Labor and Welfare Ministry, Japanese workers take only 48 percent of
their annual leave entitlements. If they took off all their entitlements it has been predicted that
the snowball effect could create 1.5 million jobs and create 11.8 trillion a year of new
spending. Bloomberg, September 12.
Japan signed a free trade agreement (FTA) with Switzerland in 2009 which started on
September 1st. The new deal it is hoped will lead to a stronger flow of Japanese visiting
Switzerland and that Japanese customers will soon be enjoying more Swiss made food
products including possibly chocolates, meat and cheeses.

The Yomiuri Shimbun reported Dec. 31, 2009 that the closing price of the 225-issue Nikkei
Stock Average--10,546.44--was a whopping 73 percent lower than the record high of
38,915.87 marked exactly 20 years ago during the bubble economy period.

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Even though 2009 has been a tough year for Japanese customers. The outlook for 2010
shows some real promise of good times ahead. High speed rail networks are getting a lot of
press and Japanese manufacturers are out courting a range of countries including the
United States and Brazil. Britain took delivery of new Hitachi trains in 2009 and have
already gained good feedback from users. The possibility of selling the total package could
be very lucrative.
As Tyler Brule commented in 2009,"taking Japanese service concepts global would most
likely involve taking legions of Japanese staff global as well" as reported in the Nikkei,
September 21st. Riding domestic trains is becoming more comfortable with further bans on
smoking and increased use of technology, for example: the number of establishments that
accept pre-paid Suica cards is increasing. Suica can be used with vending machines and as
a prepaid card at many convenience stores. Added to this the enormous push underway at
the moment for "eco and green" products in Japan from car manufacturers to appliance
makers could lead to many new opportunities.
Domestic tourism took a big step in 2009 when Chinese tourists were allowed for the first
time to travel freely in Japan. Those applying had to meet an income requirement but from all
accounts it was a success and is hoped to be further expanded. We believe we will continue
to see a number of new companies enter the market in 2009 and focus on the "value for
money segment" that has been so missing but that has shown amazing results including QQ
stores that sold regular supermarket products for 99 yen and Uniqlo that continues to break
new ground in good quality garments for value for money prices. The haircutting franchise
QB House that introduced a ten minute haircut for 1000 yen will continue to do well.
The word for 2010 will be "value for money" and Japanese customers will continue to look
for it across all sectors and markets.
Copyright Peter Hanami, 2009. All Rights Reserved