Rahul Sachitanand
Feb 11, 2020

Despite virus woes, Japanese brands face globalisation imperative

Slowing sales at home and increasingly unfavourable economic growth and demographics lead companies' overseas push.

Uniqlo expects the revenue of its Southeast Asian operations to double, led by its expansion in India
Uniqlo expects the revenue of its Southeast Asian operations to double, led by its expansion in India

In the first few days that Japanese retailer Uniqlo (owned by $21.2 billion Fast Retailing) opened its first store in India in October, some 40,000 people are estimated to have poured through its doors in a posh mall in New Delhi. Since then, the fast-fashion brand, which gets nearly a third of its business from outside its home country, has expanded its footprint to three stores in India—and plans several more—as it seeks to recast itself as a truly global retail name.

All told, Uniqlo expects its 'Southeast Asia' market (which includes India) to double in revenue to 300 billion yen (US$2.3 billion) in the next two years. In 2019, international revenues crossed 1 trillion yen for the first time.

Led by bold overseas expansion by the likes of Uniqlo, a range of Japanese retailers from Muji to Rakuten to Don Quixote (Don Don Donki) are leaning on global expansion plans, alongside a range of growing fashion labels such as Nepenthes, 45R, and Snow Peak. In hospitality, Japanese names like APA and Hoshino are among those with overseas accommodation ambitions. Then there are the Japanese FMCG companies like Kao and Lion stepping up their global game. They're supported by the likes of personal care brand Kosé which earns nearly a third of its business from overseas markets, with that figure forecast to rise.

Brand Japan's evolution 

Over the past half century, several waves have defined the export of brands from Japan. If the strengths of Brand Japan previously (high tech manufacturing and top quality) saw automobile companies such as Toyota emerge from the cocoon of its home market, the next round saw electronics firms such as Hitachi and Panasonic lead the charge.

Long-used to catering to a fertile domestic market (127 million with a $5 trillion GDP in 2019), these firms are now casting their fortunes overseas, as these metrics fade. From a position of strength, Japanese brands and their marketers are having to reposition themselves to cater to different—and more heterogenous—audiences for their products.

While Japanese brands face growing competition from rivals in Korea and China, some observers like advertising industry veteran David Mayo, contend that companies can yet leverage the strengths of Brand Japan. The legacy of high-quality products in industries including automobiles and electronics still confers an advantage, he says. 

“For the past 40 years, Japanese companies achieved global leadership by dominating their home market, but this is no longer a winning game plan,” says Anindya Ghose, a professor of marketing at NYU in New York and close watcher of the evolution of Asian markets and brands. “To become truly global will require Japanese executives to get out of their comfort zone and think drastically differently about organization, marketing, and strategy.”

These changes could come in all shapes and sizes. Rakuten, the technology and media company, made an early switch, a decade ago, when it switched to English as its language of communication. More recently, in March 2019, the media brand expanded its streaming video offering to take on the might of Netflix, Disney and Amazon.

Consider the case of Asahi Dry, the storied Japanese beer, which has focused its marketing efforts on ensuring its sales cross the 100 million cases benchmark. Three years ago, the brand’s sales fell below this and have been declining since.

To try to spur global sales, Asahi Dry is focusing on premium segments in countries as diverse as Indonesia, China and Korea, even as it has spent nearly $11 billion on buying beer brands in Europe. In January 2020, the firm appointed Mcgarrybowen as its first global agency, as part of this push.

Three years ago, Asahi Dry's sales in Japan fell below the 100 million benchmark

Brand experts tell Campaign that Japanese brands focusing on globalising themselves need to have distinct strategies for each market and face the daunting challenge of building this diversified marketing framework. This could involve using affiliate marketing and curation sites in China, for instance, or focusing on consumer blogs in Taiwan, while relying more heavily on search engine marketing in the US.

It might also mean doing away with the persistent practices of sending Japanese expatriates to run local businesses overseas, unless they are highly qualified and devising creatives afresh for local  markets instead of merely replicating work from Japan.

Then, for brands used to catering to the comforting monoculture of Japan, marketing plans and budgeting needs to be tweaked for a more heterogenous calendar. The US, for example, sees business spike during Easter, Halloween and Christmas; China has typically explosive sales during the Lunar New Year, while in India, the end of the calendar year sees back-to-back festivities driving sales.

“Those companies that can leverage the positive equities of brand Japan such as high quality will have a higher likelihood of success,” says Jay Milliken, senior partner and Asia regional lead with brand consultancy Prophet in Hong Kong. “Japan still retains a strong positive view for products made there, but not as high as it used to.”

Japanese companies taking this global gambit need to confront this brand duality head-on, say experts. Ray Fujii, a partner and representative director in Tokyo for boutique management consultancy LEK, contends that to be successful in markets such as US and Europe, these brands need to have a strong identity, but only focus on inherent “Japanese” qualities in sectors such as food retail, where this resonates. “On the other hand, emphasis on Japanese brand would work in Asian market where Japanese tends to be associated with positive image,” he adds.

Changing the rules 

Even as Japanese brands consider their global game plan, the emerging coronavirus epidemic that began in China (and has now spread overseas), has shaken the foundations of this strategy. Many lean heavily on Chinese manufacturing to keep pace with their ambitious plans, but a crippling shutdown of cities and factories is proving to be a severe test to globalisation strategies.

An empty shopping mall in Binjiang Dao,Tianjin

Despite this crippling blow, agency executives who work closely with Japanese brands say that they have a chance to become global heavyweights but need to shed some of their legacy thinking to make a successful transition.

“[Japanese brands need to] emphasise local context when marketing and being multinational in any aspects of [their] marketing activities,” says Masato Suematsu, chief strategy officer of ADK Holdings' Global Business Center. “From qualitative perspective(s) such as brand affinity and brand loyalty, they can potentially become influential alternatives to market leading brands.”

The Japanese cosmetics giant Shiseido is already seen as the Asian upstart that is upending the fortunes of legacy western rivals, with a presence in 120 countries.

“China, travel retail and EMEA posted strong growth, with like-for-like sales growing 21% in China, 24% in travel retail and 19% in EMEA,” Shiseido's finance chief Michael Coombs told analysts on a call after posting its most recent fourth quarter results. “This positive momentum offset the deceleration in our Japan business [but] our global brands maintained their robust momentum,” he added.

Brand Shiseido became the first JPY 200 billion brand in 2019.

Along the way, Shiseido is acquiring brands overseas and turning them into global entities too. For example, Laura Mercier, an American makeup brand the company acquired three years ago now has larger international sales than in the US.

Singer JJ Lin attends a Shiseido promotional event in Taipei, Taiwan

Uniquely Japanese products

Brands with unique products may have an advantage overseas. “The basis of its product development is to create products that are truly fundamental to day-to-day life without any unnecessary complexity,” a Muji spokesperson says, “(We) aim to deliver this idea of 'a simple, pleasant life' to customers not only in Japan, but around the world.”

Overseas business accounts for over 37% of the brand’s revenue and the company rep says they expect “further growth” from this segment thanks to its popular products like toning water, storage and stationery products which are very popular worldwide. 

In case of Kosé, its Decorté premium cosmetics brand was a hit with Chinese people and grew significantly there, with a brand spokesperson citing its ability to innovate and provide safe, high quality products.   

While Japanese brands continue to enjoy a favourable reputation worldwide, what's important is that Japanese marketers view their brands from the perspective of global consumers.

Lek consultancy's Ray Fujii contends that Japan could be seen as a "France in Asia" with its strong and unique cultural identity, long proud history, ultra sensitivity to sensory functions and exclusivity as a mono-linguistic market.  "I do not think Japanese understand their unique positioning in the global market because they have not seen themselves from outside of (their) own little island(s).”
Changing this self-perception may be one of Brand Japan's biggest challenges yet.
Campaign Asia

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