Akiko Sayama re-examined her spending habits when the Tokyo staffing agency where she works cut its overtime budget. She lost around ¥1 million in annual pay, so one of the first things she did was curb her tastes for Louis Vuitton and Gucci.
“I need to cut back where I can,” said Sayama, 41, who lives in Saitama Prefecture. “It’s not like I lost my interest in luxury brands. I can’t afford them.”
Sayama is embracing a frugality that, along with a shrinking population and falling wages, is causing the economy to contract 5.7 percent this year, according to the median estimate of 17 economists. Luxury spending could fall 14 percent to ¥2.5 trillion this year from a peak of ¥3 trillion in 2005 and 2006, Boston-based consultant Bain & Co. said.
The worldwide luxury market is expected to shrink 8 percent to ¥20.5 trillion this year, including a 16 percent decline in the Americas and an 8 percent drop in Europe. Yet spending in China, the world’s most populous country, may grow 12 percent to ¥888 billion this year, compared with around ¥800 billion last year, Bain said Oct. 19.
“Given the pace of economic growth, luxury goods makers are starting to give up on Tokyo, as they shift their focus to other Asian markets like China and Singapore,” said Naoki Iizuka, a senior economist at Mizuho Securities Co.
“The situation will remain severe here because more people are losing interest in brands with the advent of cheaper, fast fashions.”
Tokyo housewife Masako Shikano, 46, said she stopped buying clothes by Michel Klein, a Paris-based designer, in favor of Uniqlo. Michel Klein offers a fake leather jacket for ¥19,950, while Uniqlo’s synthetic leather jacket sells for about ¥6,000.
“Uniqlo has a good design,” Shikano said. “It looks good on me, even though it’s cheap.”
LVMH Moet Hennessy Louis Vuitton SA, the world’s largest luxury goods maker, last year scrapped plans for a Vuitton flagship store in Ginza, one of Tokyo’s busiest shopping districts. Gap Inc., the largest U.S. clothing retailer, took over the space.
Gianni Versace SpA said in October it will withdraw from Japan and review its entire business strategy. Versace Japan had sales of ¥1.6 billion in 2008, compared with ¥4.1 billion four years ago, according to credit researcher Teikoku Data Bank Ltd.
“The Versace boutiques in Japan no longer represented the brand image and it was felt to be more advantageous for the company to close them and start with a clean slate,” Milan-based Versace said Oct. 7.
The Japanese market will stay “very tough,” Hermes International SCA Chief Executive Officer Patrick Thomas said Nov. 6. Sales elsewhere in Asia are “booming,” he said. Gucci sales in Japan dropped 20 percent in the third quarter of the year, according to Jean-Francois Palus, chief financial officer of PPR, the company that controls Gucci.
Bain estimated that 15 percent of the 300 luxury stores expected to open this year will be in mainland China, with another 25 percent opening elsewhere in Asia. Bulgari SpA Chief Executive Officer Francesco Trapani said Oct. 9 that sales at the world’s third-largest jeweler improved in the second half, particularly in China. Asia is its biggest market.
Japan has the highest proportion in the world of people over 65 and the lowest of those under 15. Wages fell for the 16th straight month in September, the government said Nov. 2.
Winter bonuses among the largest companies will fall 15.9 percent to ¥747,282 in 2009, the biggest drop since the survey began in 1959, the Japan Business Federation (Nippon Keidanren) said Oct. 29. Companies typically pay the bonus in December.
Casual-clothing chains including Uniqlo and H&M are increasing their presence. Fast Retailing Co., operator of Uniqlo, opened its biggest store in Nagoya in October. The company has about 780 domestic outlets.
Hennes & Mauritz AB, operator of H&M shops, opened three stores in September around Tokyo. Its sixth outlet opens in Tokyo this month.
Los Angeles-based Forever 21 Inc., which sells casual dresses, opened its first shop in Tokyo in April. Abercrombie & Fitch Co., the U.S. retailer specializing in clothes for teens, opens its first Asia store in Tokyo in December.
J. Front Retailing Co., Japan’s second-largest department store operator, wants to reduce reliance on luxury goods at its Daimaru and Matsuzakaya department stores after profits dropped 31 percent in the first half of this year from a year earlier. The company must expand its low- and midprice merchandise to attract younger consumers, Chief Executive Officer Tsutomu Okuda said Oct. 13.
“The number of rational and smart consumers is increasing rapidly, and they’re becoming more casual and thrifty, eager to find value for what they spend,” he said.
The Esperanza casual shoe brand is opening an outlet next month inside Daimaru’s Osaka Shinsaibashi store, selling short boots and pumps for less than ¥5,000.
Not everyone is shopping downmarket to save money. The economy is signaling a recovery, with industrial production rising for a seventh month and the jobless rate falling for a second month in September.
“I would buy Louis Vuitton if I find something I really like, and it doesn’t matter how much it costs,” said Kyoko Hoshi, 55, a housewife.