RAPAPORT... On November 8, Giorgio Armani, a luxury apparel marketer, opened its 12-stories-aboveground and 2-stories-underground Ginza Tower in the most fashionable shopping quarters of Ginza, and in December, Bulgari, another luxury marketer, is scheduled to open an 11-story Bulgari Ginza Tower. The two are the latest of the world luxury brands to open flagship stores in Tokyo.
Other world luxury brands — including Hermes, Chanel, Gucci and Dior — acquired real estate in Tokyo years ago and their stores have been operational for some time. According to Teikoku Databank, the aggregate sales of 45 foreign brands that have registered their branches as Japanese corporations had surpassed $1 billion by the end of 2005.
Perceptions
“These international brand houses see Tokyo as a more important strategic commercial spot than we Japanese do,” said Yutaka Fukasawa of Japan Precious, a subsidiary of Yano Research Institute. “Perhaps they are testing Asian waters in Tokyo first, and when they see the results, they will set out to other locations in the region.”
The past decade, during which world luxury brand houses have made their moves into Tokyo, have been very challenging years for their Japanese counterparts. In the middle of their own national recession, Japanese companies have found it difficult to compete with world brands that have more vision and greater financial reserves. “Ask any big Japanese jewelry manufacturers — they are having a hard time selling their products, let alone seeing which direction the market is going,” said Michio Iwasaki, president of Iwaden Sangyo Co., Ltd. and also the director in charge of public relations at Japan Jewelry Association (JJA). “It is most likely their Christmas sales will be down this year. Some of the dealers already have stopped dealing with loose diamonds,” said Iwasaki.
“The stones are moving so slowly that it’s hard to tell what’s moving and what’s not,” said Masahiko Akaike of Orient 4Cs. “Sky-rocketing platinum and gold prices have shackled manufacturers. They expect Christmas sales to be modest at best, so they are reluctant to manufacture and stock. And since manufacturers are not manufacturing, melees are not moving. And big stones have become too expensive.”
Then what merit do the foreigners see in having Asian flagship stores in Tokyo at this time? “To Europeans, with the stronger euro, Japanese real estate may appear attractive,” said Akaike. “Europeans have a different point of view,” said Iwasaki. Iwasaki retold an anecdote he heard from a European marketer: “The European went to Big Camera — one of the large-scale electronics gadget and appliance outlets in downtown Tokyo — where he saw five Rolexes being sold in a matter of minutes. Three of them were bought by Asians, who were not Japanese but most likely from neighboring countries, and two by Caucasians. He thought that if Rolexes were selling like hot potatoes, jewelry should sell just as well.”
“For many Asian neighbors, Japan today is a cool place to visit,” Iwasaki theorized. “Old-timers look at this country with admiration and nostalgia but younger generations were kept from visiting for financial [they could not afford it] and political reasons [visas were not easy to get].” Today, travel agencies are promoting “Holiday in Japan” in Asia with a catchy phrase “Cool Japan.” For Australians, Japan provides better ski resorts than are available back home. For Russians, Japan offers plenty of used cars that are still in good running condition. In fact, Russians’ practice of buying and shipping used cars out of the country has become so rampant that the Japanese government has restricted these sales. In other words, Japan has become a shoppers’ paradise for people of Pacific Rim countries in terms of number of products, quality of products, volume, safety and reliability.
Iwasaki continued: “There are no shopping cities in the world like Tokyo. In Europe, stores are closed on Sundays, whereas Sundays and Saturdays are the main shopping days in Japan. Nowhere in the world do you see so many people shopping as in Tokyo.” That’s a good enough reason in itself for world marketers to have flagship stores in the city.
Trade Gloomy
In the meantime, the Japanese trade outlook continues to be gloomy. Exhibition sale shows, or trunk shows, that attract consumers at this time of year have lost their luster since the government issued warnings to credit companies not to extend credit too easily to consumers. The government’s reasoning was that easy credit has pushed consumers into buying excessively and has caused debt and other financial problems for them in recent years.
In the wholesale markets, Indians are buying diamonds aggressively, said Akaike. By the end of January, when the International Jewellery Show is held in Tokyo, he expects a large number of buyers from around the world to be buying diamonds in Tokyo.
The Marketplace• Larger 10-carat stones are extremely strong.
• 3 to 5 carats are drying up in the market.
• 4/4 grainers are becoming stronger.
• The trade finds fancy shapes and cape colors favorable, as round stones have gone up in price.
• Smaller-than-carat pointers are stable.
• Melees and smalls are weak as manufacturers are refraining from manufacturing.
Article from the Rapaport Magazine - December 2007. To subscribe click here.