Jun 12, 2017

Japan market snapshot: Slow growth, except in ecommerce

Nielsen provides insight into Japan's economic outlook and retail backdrop.

Japan market snapshot: Slow growth, except in ecommerce

Nielsen provides insight into Japan's economic outlook and retail backdrop.

Japan represents one of the world’s biggest retail markets with approximately 126.3 million consumers who appreciate high quality and excellent service. Japan faces its challenges, as the only Asian country whose population will decline by 2025 (-3 percent) due to dwindling birth rates and an aging population.

Recently Japan’s economy grew 1 percent in Q4 2016, with sluggish private demand offset by a depreciating yen that boosted exports and business investments. Consumer confidence in 2016 has remained low since the financial crisis, but there are small signs of increasing confidence. Low wage growth is limiting recovery in domestic consumption, with only one in five consumers stating it is a good time to buy the things they want or need considering cost of living and personal finances. Prime Minister Shinzo Abe has called for companies to pay workers more to fuel consumption and an economic recovery.

FMCG market growth in Q4 2016 was up 1.6 percent on the back of volume growth. Within the general merchandise store space, a sudden rise in vegetable prices led to an increased average spend per customer in October (0.6 percent) and November (0.8 percent). However, the unusually warm winter caused clothing sales to be sluggish in December, down 2 percent from the previous year. Although customer numbers were sluggish, convenience store growth was up year-on-year for Q4 2016. This was most likely due to strong sales of conveniently packaged salad and cut vegetables following the sharp hike in vegetable prices. In December, sales of items cooked in-store and merchandise for Christmas and other year-end celebrations were particularly strong. To meet changing demographics of smaller households and needs of seniors, major convenience chains are developing small-size, low-calorie and health-conscious ready-made meals. Additionally, some convenience chains are offering free delivery services to cater to elderly consumers.

Despite the overall slow growth of the FMCG market in Japan, ecommerce continues to perform well, with double-digit growth over the past three years. This trend is expected to continue during 2017 and thus opportunities exist for companies that can leverage online channels. However, the ecommerce industry has recently met challenges, with increased shipments exceeding the delivery capacity of logistics companies. With an increase of double-income and single households away from home during the day, re-delivery is an issue that weighs heavily on logistics companies. As a countermeasure, freight prices will increase in the coming months, and re-delivery fees have been tabled which will impact ecommerce growth in the future.

Sources: All population and urbanisation figures come from United Nations Urbanisation Prospects 2015.


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