We asked four in-market experts for their take on the prospects for local versus global brands in Japan.
- John Woodward, chief strategy officer, McCann Worldgroup Japan
- Chris Iki, COO, TBWA Hakuhodo
- John Rowe, MD, Wieden & Kennedy Tokyo
- David Burger, deputy MD, Geometry Global Japan
How much growth opportunity is there still for international brands in Japan?
Woodward: There’s certainly growth opportunity for international brands in Japan, and we see many of our international clients re-investing. The first thing to remember is that there is still market growth, it’s just not evenly spread. A slow growth economy doesn’t mean that no sectors of the economy have high growth. If you look, for example, at credit cards and electronic payments, or functional foods or pharmaceuticals, or ecommerce, these are sectors where the market is growing very significantly. The second thing is that most Western companies have very small shares in Japan. So, their real opportunity is to grow market share. And the market is so huge that even growing a few share points can affect the bottom line.
Iki: The days where people draw a deliberate distinction between ‘international brands’ and ‘domestic brands’ are over, with a very few exceptions, which leaves plenty of growth opportunities for international brands in Japan. It’s not about ‘international’ versus ‘domestic’ brands. It’s about brands that offer products and services that are relevant and meaningful, but also ones that ‘connect’ with people.
With Japanese tourism booming in recent years, and as the country gears up to host the Olympic Games, Japan is hoping to attract 40 million visitors in 2020 alone—providing huge growth opportunities for international brands in Japan, beyond the Japanese consumer. The country is currently ranked the world’s #2 luxury market, with tourists accounting for about a third of top-end spending.
Rowe: The key factor is the quality of your offering; if you offer a best-in-class product, service or experience, and you market it well, you can absolutely still find growth. In the short term, I don't see this changing dramatically. In the long term, the mature brands are the ones who need a Plan B. You are already seeing staple Japanese brands struggling to find growth in Japan and looking outside. Mature international brands will be the next to feel the pain. But I think international brands looking to enter japan for the first time can still find plenty of success now, and for years to come.
Drawing on your observations from the past year, how are international brands competing with local brands and are there any key rules/best practices for those trying to do so?
Woodward: The best companies are investing in getting the basics right first. Spending money on things like real-estate, buying out JVs or putting in place IT backbone so they have a competitive offer, and a sustainable economic position. This isn’t a market where you can just swan in, try some ads and hope for a quick win. You have to be here for the long haul. Then, in terms of communication, I do see a significant advantage in many cases to locally produced copy. Japan has a highly independent culture, and is used to locally relevant references, including celebrities. Not producing local copy is very often to remain an outsider.
Iki: If you look at international brands that have successfully established themselves in Japan, it’s clear that they are all purpose-driven and have positively affected the user experience. But brands offering positive, memorable experiences that fulfill the needs of consumers do well, regardless of their origin. A brand’s vision (i.e. what the brand stands for) also comes into play. People gravitate towards brands that align with their personal values—brands they can trust.
Rowe: I try to stay away from key rules or best practices. But I can offer a few thoughts. First, I think the successful international brands are the ones who stay true to who they are. You're not from Japan, so don't try to act like you are—that's probably the quickest way to turn off Japanese consumers. You must be authentic to who you are.
Second, proceed with patience and thoughtfulness. You cannot be cavalier in Japan. Find partners you trust and take time to build the right relationships.
But importantly, you must challenge these partners. Don't accept the status quo. You're new to this market and there are likely competitors with much higher awareness that also provide a great product, service or experience. If you follow the status quo, you are dramatically limiting your potential to stand out and make an impact. Find partners who know the market but are willing to think differently.
And finally, consider the experience around your brand, not just the product or service. More and more, young Japanese consumers are seeking out experiences over things, and this is definitely carrying over into the world of consumption.
Burger: The fast moving nature of trends in Japan is critical. Being on top of consumer behavior and triggers is key to brands being relevant to consumers. In addition, understanding the complexities of doing business in the retail channels are also critical. Digital retail is on the up. Ecommerce and all elements of your brand in digital channels needs to be a priority.
Quality is another critical element to establish your brand as a leader. Japanese people value quality above all else. The Japanese market is full of fantastic product offers so whether you are a clothing retailer or a whiskey brand or electronic manufacturer your offer needs to superior within its category as minimum starting point to make significant in roads. This is not a new dynamic but foreign brands often over estimate their brand value locally and under value the challenge faced in launching or growing business in Japan. With a truly superior quality product many of the barriers are removed to achieve growth.
What can international brands learn from local brand marketing?
Woodward: Local brands tend to have very clearly defined value propositions. Japanese culture is generally less about projecting an image (in fact it is often about fitting in more than standing out), so brands can trade less on identity value. Instead, I find that successful Japanese brands tend to have quite a clear expression of what the product actually does. Japan’s the only country in the world where people read the small print on the electronics box, and actually know what it means.
Rowe: Western marketers are taught that differentiation and disruption are key. Both of those factors are also important in Japan, but you must also seek out ways to create presence and credibility. You can spend a lot of money on TV advertising to create presence, but that's not the only way to do it. You can partner with a celebrity endorser to provide credibility, but that's not the only way to do it. If you know your brand well, you must spend the time to think through the right way for your brand to deliver on all three—presence, credibility and differentiation.
Burger: Local brands keep communication simple and clear. The Japanese mindset requires clarity. This is expected in any piece of communication. Foreign brands can easily get caught in ‘well this is how it works everywhere else in the world so it will work in Japan’ mindset. That is a mistake. Learning and understanding local communication rather than immediately judging through a western lens makes all the difference.
There is also the entertainment factor. Japanese audiences are constantly bombarded with communication – even more than in the West – so make sure you are differentiated and interesting. Define what a remarkable brand experience is for a Japanese audience in your category and start from there.