Ginza—Ground Zero for Luxury Brands
Story by Tom Boatman
Published in Japan Marketing Data ‘08,’09 (2009)
Ginza Brand Central for Luxury
Quick, name the world’s top luxury brands.Armani, Bulgari, Chanel, Cartier, Gucci, Louis Vuitton and Ginza. Ginza? Yes. It may be a neighborhood, but Ginza has become a brand in its own right. Indeed, it’s a luxury brand befitting the world’s most prestigious luxury brands.
Today, thanks to Japanese consumers’ unquenchable thirst for luxury goods and undying love of global brands, Ginza has become the Mecca for marketing luxury. And Japan’s position in Asia, makes Ginza a top destination for hordes of Asian tourists, especially from China.
Accounting for a staggering 40% of worldwide revenue, Japan is the most concentrated source of sales for luxury brands, according to research by the Japan External Trade Organization.
In November of 2007, the Italian jeweler Bulgari opened its largest outlet in the world in Ginza, a 10-story tower featuring 10,000 square feet of retail space, a bridal salon, VIP rooms and corporate offices.
Earlier in the same month, another Italian fashion icon, Giorgio Armani opened a 12-story mega-boutique featuring a spa, a restaurant and a VIP bar. And similarly elaborate shrines to Chanel and Louis Vuitton are literally right around the corner.
Overall, Japan is home to some 34 Bulgari stores, 37 Chanel stores, 115 Coach, 49 Gucci, 64 Salvatore Ferragamo boutiques, 50 Tiffany boutiques and 252 stores of the luxury products group LVMH (Moët Hennessy-Louis Vuitton).
But why Ginza and why Japan? Why do Japanese consumers love European luxury brands more than any other consumers on the planet?
What is a luxury brand?
Perhaps it’s best to start with a definition of “luxury brand.”
Burton Blume is the executive strategy director, Asia-Pacific at the Tokyo office of Interbrand, the global brand management consultancy. He has lived in Japan for nearly 30 years and claims to be a keen observer of Japanese consumers.
Blume says that a luxury brand typically comes from a long-established house, most frequently of European origin. It should offer personal luxury through items of superlative quality and should be a recognizable symbol of taste and style.
“People use luxury brands to brand themselves. The brand often becomes their personal icon,” says Blume.
Blume contends that Japanese are generally status conscious and want other people to know that they’ve made it. And nothing says that better than a European luxury brand.
Katsuto Tai, agrees. Editor in chief of Yomiuri Style Magazine and chairman of the Fashion Editor’s Club of Japan, Tai has also served as chief editor of glamour magazines Elle Japon and Marie Clair and, no doubt, has been closely following Japan’s fashion industry for more than 20 years.
“In the west, when people want to symbolize that they have made it, they buy some real estate or a big house. That’s not possible in Tokyo,” says Tai.
He says that because space in the metropolis is at a premium even the finest luxury accommodations are less than impressive, and anyway, Japanese do not entertain in the home as much as Westerners.
“So wearing a Rolex watch, drinking Dom Perrignon, carrying a Luis Vuitton bag or driving a BWM declares that you’ve made it,” he says.
According to Tai, Japan’s love affair with luxury started after WWII and was spearheaded by a growing middle class. Obtaining luxury brand products was a way to demonstrate their raising status.
“Japan has always looked outside for ideas on fashion and design, and at first, during the Meiji era, they looked to Europe,” says Blume.
Indeed, Tai concurs that for Japanese consumers European equals luxury. And he includes “history” in the definition of a luxury brand.
“A luxury brand must have a history and some kind of interesting story associated with the brand,” says Tai. “Like the connection between Audrey Hepburn and Ferragamo.”
Tai contends that Japan’s famous “parasite singles,” young working women who live at home and have ample disposal income, account for a large share of luxury brand sales.
Feeding the parasites
“Japanese women are choosing to marry later in life and there are a large number of young working women living with their parents. With lots of disposable income, they express their personality in luxury brands,” he says.
In fact, he claims that 70% of the products sold in Japan are purchased by 10% of the population, primarily unmarried women living with their parents.
What’s the most popular luxury brand among Japanese women? It’s clearly Louis Vuitton, according to research by Japan Market Resource Network (JMRN) a Tokyo market research agency that published a study in October 2007 on the “Drivers of Change for Luxury Brands.” The report revealed some startling facts and surprising consumer trends.
For example, about 44% of Japanese women own a Louis Vuitton bag, according to the CEO of Louis Vuitton Japan, as cited in the report.
And according to Tai, Louis Vuitton’s Japan sales, at ¥150 billion, are tops in the world. Why? He says it was the first luxury brand to consider Japan an important market in the beginning of the 1980s. Since then most of the luxury brands have imitated the Louis Vuitton model in Japan. And for those keeping track, Louis Vuitton has two shops in Ginza and is building another— its largest flagship store in Asia, set to open in 2010.
“Louis Vuitton has really done it right in this market,” says Debbie Howard, president and founder of JMRN, who has lived in Japan for more than 23 years and is president emeritus of the American Chamber of Commerce in Japan (ACCJ).
Howard says that when LVHM started managing its brands as businesses the whole game of marketing luxury brand goods worldwide changed. However, JMRN’s report warns that Louis Vuitton’s level of penetration can be a liability in Japan’s luxury brand market.
“Today the brands are no longer fashion houses, as they originally were, they are run by hard-core business people,” says Howard. But will that business focus hurt the brand image?
Women of all ages are worried that a luxury brand’s high penetration and visibility decreases its aspirational value, according the JMRN report. Further detracting from a brand’s value, says the report, is the fact that many younger women, including high school students, can now afford to purchase luxury goods.
Expanding the brand base
“Nowadays, luxury brands are not just for wealthy people, they must sell to ordinary people because the businesses have grown so big,” says Tai. “So, thanks to robust growth, luxury brands have a big problem maintaining their luxury status.”
Kristina Dryza, a freelance strategist for the Tokyo office of CIA/The Brand Architect Group and a consumer trends expert for media agencies and innovation bureaus in London, New York and Tokyo, has closely followed luxury brand devotion in Japan for the past year.
“In the past, a luxury brand had to have superior quality - it denoted an excellence of 'know how' - but today, quality is no longer the key driver of many luxury brands” she says. “The traditions, the stories, the service, the detailed craftsmanship, some of the traditional bedrocks of luxury, have been lost. People now buy luxury brands irrespective of an individual item’s merit.”
However, while the reasons they choose luxury brands may be changing, Japanese consumers still demand quality, and that makes Japan an ideal market for testing a brand’s mettle.
“Japanese consumers are extremely quality conscious and they will not accept even slightly flawed or damaged goods,” says Tai.
He believes that’s one reason luxury brands devote so much attention to Japan. If they can be successful in Japan they can be successful anywhere in the world. That also makes Japan an ideal test market for new ideas.
“Japan has become a proving ground for new marketing ideas in luxury fashion,” says Nicole Fall, president and owner of Five by Fifty, a Tokyo trend analysis and market research agency. She writes a column on business trends for the ACCJ Journal and has been keeping a close eye on the Japan’s luxury fashion market for 10 years. She also manages her own luxury brand in Japan, Bespoke Tokyo, an upscale concierge tour service for travelers who don’t mind spending a little extra.
“For example, the Ginza Coach store is the only one in the world that offers unique products available only in Japan” she says. “Japanese consumers love limited edition products,” she says. “These items become “must-haves” and luxury brands take advantage of the demand.”
Yet, what luxury brands are doing in Japan goes beyond product marketing. Is it possible for luxury brands to become more than aspirational products to people? Dryza says the definition of luxury is changing.
Turning luxury into a sensory experience
“Luxury is being redefined as experiences that deepen one’s understanding and appreciation of life. Events, people, places, services, and moments - anything that helps unlock the cultural, natural and traditional richness of the world - this is what new luxury is about,” she says. A stroll through Ginza will tell you that the big brands concur.
For example, Chanel's 10-floor boutique, opened in 2004, includes a concert hall and Beige, a restaurant created by the celebrated French chef Alain Ducasse. The chairs in the restaurant feature Chanel fabric patterns and the chocolates are wrapped in foil bearing the Chanel logo.
The 9th and 10th floors of the Bulgari Ginza Tower are home to “Il Ristorante,” an Italian-inspired restaurant-bar operated by Bulgari and designed by the architectural firm Antonio Citterio & Partners. Accessible through a separate entrance and dedicated elevators, it is crowned by a rooftop terrace with a hanging garden and lounge area.
“The new luxury outlets are not just temples to the brands, they are an extension of the brand offering consumers a unique experience,” says Fall.
According to Howard, though, brand extension is a risky proposition best approached with caution, especially when brands venture out of their core areas to say, the food service business. One fallen soufflé can damage a reputation that has been nurtured for decades.
“How easy is it to mess up a restaurant?” says Howard. “If luxury brands venture out of their core areas they need to make sure that they get it right.”
Perhaps that’s why the elevators to Bulgari’s Il Ristorante allow people to by-pass the retail space on their way to dinner. No need to ruin your appetite by looking at the prices of rings.
“However, if someone’s having a good time in your restaurant you stand a better chance of getting them to buy your products,” says Fall.
According to Dryza, Japan’s new luxury experiences and products will be those that help Japanese consumers know themselves better, and help them more genuinely express themselves.
“Pure luxury isn't meant to appeal to the masses. It’s about individuality to the point of obscurity. It’s a private thing. It is ‘your’ emotional connect and reward from the product, or experience, that allows it to appear as a luxury; and it’s all a matter of where your own definition of pleasure comes from,” says Dryza.
What does the future hold for luxury?
JMRN’s “Drivers of Change” report suggests that five key trends are affecting the playing field for all brands in Japan and will largely shape future trends.
1. From “Me Too” to “Me First”. Consumers will be seeking out unique products regardless of price. 2. Mind, Body & Soul. Consumers are looking for enriched brand experiences. 3. Diversity in Brand Lifestyle. Consumers easily believe that less expensive brands can deliver value in terms of quality and functionality. 4. What’s in a label? In an era of low-cost manufacturing, authenticity still reigns. 5. The Emerald Effect. Consumers are looking toward “green” luxury.
“Fifteen years of economic doldrums has really done a number on people,” says Howard, speaking of Japan’s stagnant economy throughout most of the 1990s.
“Luxury brands are still aspirational but consumers have more confidence to mix it up,” she says.
That’s why today it’s not unusual to spot a well-dressed Tokyo woman sporting a Chanel bag, wearing Gucci shades, but dressed in a simple polo shirt and jeans from Uniqlo, Japan’s leading discount clothing store.
In fact, just down the street from the hallowed halls of Chanel and Gucci in Ginza you will find the Uniqlo flagship store. And not far from Tiffany you’ll find Zara, the affordable fashion retailer from Spain and H&M, the Swedish version of Zara.
When, H&M opened its 1000-square-meter flagship store in Ginza in September of 2008, more than 5,000 people lined up to get in. And while Uniqlo, Zara and H&M are a far cry from luxury, they obviously feel they belong in Ginza, and apparently so do Japanese consumers.
“When consumers have more confidence, they can judge quality on their own; they don’t need a luxury label to tell them,” says Howard.
On the other hand, the JMRN report says that the “luxury loyalists” have become even more discerning and will demand more from their brand experiences and in return for their patronage.
How will luxury brands meet the challenge? Best to keep your eyes on Ginza.
