Japan has the lowest levels of inbound tourism among advanced economies, but this is about to change thanks to lavish marketing, the growing affluence of neighbouring populations, Japan’s increasing soft power, and the Olympics in 2020. The benefits to retailers and brands will be immense.
At a Japan Shopping Centre conference in Yokohama recently, there was a mix of apprehension and optimism; apprehension at the potential impact on consumer confidence from a higher cost of living and lower real incomes, and optimism due to the enormous potential of Japan as a tourist economy.
Both department stores and developers are waking up to the long-term gains from reconfiguring existing facilities, and developing new SCs, to meet tourist demand. In 2013, tourist numbers jumped 24% to 10.3 million, boosted by both the weaker Yen and easier visa procedures for many ASEAN countries.
Forecasts suggest total visitor numbers in Japan could reach 20 million by 2020. This is not an unrealistic expectation; France, which had the highest tourist numbers in 2012, saw 83 million visitors, followed by the US with 67 million and 57 million for China and Spain. Even with 20 million tourists, Japan would still be fifth in Asia in terms of inbound tourism behind China, Malaysia, Hong Kong, and Thailand. The World Tourism Organisation expects global tourism to expand at an annual rate of just under 4% over the decade from 2010, increasing tourist numbers from around 1 billion to 1.4 billion by 2020, with strong growth from many Asian countries that could become key markets for Japan.
Prime Minister Abe himself met with various ministries in February to break through long-standing impediments to tourism, not least airport bottle necks and transport to and from them, with prioritised plans for high speed trains to Narita and Haneda by the 2020 Olympics. Given the ongoing heavy investment in tourism promotion, and the expected huge boost from the Olympics in tourist numbers, budgeting for increased tourist sales for almost all Japan-based brands and retailers looks like a pretty safe bet.
Retailers and developers are clear about the potential, and expecting far higher growth than tourist numbers as a whole would suggest. At the Yokohama conference, Isetan-Mitsukoshi president Kunio Ishizuka said that while tourism increased 24% in 2013, tourist numbers at its three key stores (Shinjuku, Ginza and Nihonbashi) were up 179%, and sales jumped a huge 205%. Tourist sales at Isetan Shinjuku hit ¥7.2 billion, up 191% but this is still just 3% of store turnover; given that tourist share at Galeries Lafayette in Paris is 30% and 15% at Harrods in London, it is clear just how great the benefits could be.
Mitsubishi-Simon, owner of 60% of Premium Outlets, is equally optimistic. Tourist footfall at all its malls rose 159% to 360,000 in 2013. Unlike department stores, it found the biggest footfall in fact came from Thais, accounting for 25% of the total, and up 173% on 2012. Second were Chinese at 20% of footfall, and Taiwanese and Hong Kongers in third and fourth with around 15% each. Tourists now account for 10% of sales. Mitsubishi-Simon expects much greater traffic from individual travellers and is working closely with hotels to encourage trade.
Overall, retailers and developers suggested potential growth in tourist sales of as much as six times by 2020 through better marketing, merchandising and engagement.
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