Market Analisys Report Retail Industry in Japan

MARKET ANALISYS REPORT RETAIL INDUSTRY IN JAPAN

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1. STRATEGIC IMPORTANCE OF THE MARKET

MARKET POTENTIAL[1]:

The key first step for any business is to find out whether it is worth putting the time and resources into a specific target market. In order to do that, we have to look first at the Market potential, which is the entire size of the market for a product at a specific time and it is usually measured either by sales value or sales volume.

We can’t forget that market potential is just a snapshot in time. It's a fluid number that changes with the economic environment.

To do a deeper analysis of Market Potential, at least three factors must be examined that will determine whether the market potential of the product is worth the investment.

The first one is the Potential Customer Base, where the size and demographic characteristics of the potential consumers is determined.

Japan has an actual population size of more than 120 million inhabitants ranking it in the 10th position of the most populated countries. Data show also that the median age is around 46 years and that women, normally have their first son with 30 years[2]. If we now focus on Joe Fresh’s target market and customers, which is mostly married women between 30 and 40 years old[3], we can see that Japan is potentially a really interesting market to expand because of the size and characteristics of its population.

Other data that should concern Joe Fresh in order to get a more accurate customer base are product preferences and median annual household income. Annual Household income in Japan is of USD 26,111 (higher than the OECD average) and about product preferences, we are going to see the barriers Joe Fresh may face when analyzing the cultural distance, as Japanese people trust in Japanese brands most of the times.

All these data tell us the number of potential customers and whether they can actually afford the product.

The second factor we are going to analyze, are the competitors. It is important to assess the number of your competitors, their respective share of the current market and how Joe Fresh can be differentiated from the product they are supplying. In Japan there are plenty of Japanese clothing brands that are not really known in the rest of the world, however, the style and fashion are similar to other Canadian, American, or European brands[4]. In fact, some designers are basing their style in some of Japan’s fashion characteristics.

The last fact that we should take into account when referring to Market Potential is to analyze the current environment. As said before, market potential is not a static concept. In order to do that we are going to take into account economic indicators like inflation rate and interest rate, wage growth or unemployment rate. Actually, Japan is performing in a quite regular way, with no many changes. Japan’s GDP was worth 4601.46 billion US dollars in 2014 which represents 7.42 percent of the world economy[5].

The components of potential customer base, level of competition and the current environment should not be analyzed in isolation. After collecting data regarding the relevant components, we should look at components as a whole to better discern the overall market potential Joe Fresh product. Here we can lead to the conclusion that although GDP data and its forecasted predictions may not be the optimal, the great amount of population and target customers makes the market more attractive.

LEARNING POTENTIAL:

To get an accurate learning potential analysis, two drivers must be taken into account. The first one is the presence of sophisticated and demanding customers for the particular product or service. It depends on customers that the company (Joe Fresh) will vary their standards, service quality, cost and other attributes of their product when entering the target market.

In the case of Japan, the generations are divided by the years of birth. Each generation has its own characteristic caused by the historical and the economic background. Detailed accounts of their characteristics, life styles and a description of the women in the generation are given in the appendix[6].

Regarding the appendix, we can see that potential customers will start in those whose birth year is in the 1950’s. People belonging to this group started to be known under the image “fashionable young people.” They were the pioneers in developing styles for young people, starting wearing fashionable and highly individualistic clothes of designer and character brands and enjoying themselves at many different leisure spots.

That generation is the first one we are going to look at. Since them, consumption, fashion and style kept growing until the generation known as “Banana Generation”. People of this group, who grew up in an affluent society, were not as active in consumption as their previous generation. They prefer to be moderately individualistic rather than differentiating themselves through consumption.

However later on, “Second baby boomers” and “Pocket Beeper Generation” show again a great interest in consumption and fashion.

If we now move on to the next appendix, we can see charts that relate income and consumption and expenses in clothing for the generations explained. We see that the customers with higher incomes and therefore the higher consumption rates are between the ages of 30 and 60.

Consumption and Income are positive related which basically means that the higher the income the higher the consumption.

Looking into the charts we see that in Japan clothing expenditure is higher than medical or even education expenditures, giving clothing the 5.1% of total consumption. This is similar to the consumption we can find in the U.S or some European countries[7].

For Joe Fresh all these are good news. We explained during the market potential analysis that the great population gives a great amount of target customers, and now, during the learning potential analysis we see that these target customers are willing and will spend on clothing, and furthermore, they will mostly spend in casual and street wears[8], which are Joe Fresh’s main products[9].

The other