The coronavirus will result in a number of changes in Japanese consumer behavior for the foreseeable future, which may have significant impact on your business’ strategy in Japan.
Table of Contents
- How the Coronavirus Will Impact Japanese Consumer Behavior
- Short-term Changes to Japanese Consumer Behavior
- More Lasting Changes to Japanese Consumer Behavior
- Hygiene Practices Will Be Scrutinized
- Cashless Gets a Boost
- Ecommerce Accelerates
- Japanese Consumers Watching Their Spending
- Greater Focus on Country of Origin
- Bottom Line: Changes in Japanese Consumer Behavior After Coronavirus
The coronavirus pandemic has caused tremendous disruption around the globe and is expected to have lasting implications for nearly every industry.
With regard to Japan, many businesses, both domestic and foreign-owned, will face increasing challenges—including changes in consumer expectations and preferences—as we move towards a post-coronavirus future.
At the same time though, it’s important to note two things: (1) some changes we are currently seeing in Japanese consumer behavior are likely to be short-lived and (2) Japanese consumers are not simply one, all-encompassing group of people.
The latter of these two points is of particular consequence for marketers in Japan as not every single one of the observed changes we outline in this article may be applicable to all consumers in equal strength. However, for a large percentage of the Japanese population the mid-term changes in consumer behavior we have identified are going to be pertinent, especially when it comes to planning strategy for Japan moving forward post-Coronavirus.
Short-term Changes to Japanese Consumer Behavior
It’s important to distinguish between what are likely only short-term changes brought about by social distancing and people staying indoors with those changes in Japanese consumer behavior caused by the economic and psychological impact of the coronavirus, which will be with us for a while.
In particular, we are advising clients to be careful about reading too deeply into some of the surface-level changes in Japanese consumer behavior due to the coronavirus.
We see this to ring especially true for what we are calling “substitutions.” That is to say, with limited options and restraints on available choices, substitutions are those alternatives Japanese consumers are choosing in light of the current situation.
Delivery Service Boom
Japanese people in major cities like Tokyo may be using delivery services more often, but rather than marking a shift in Japanese consumers’ dining habits, we see delivery as being a temporary substitution for eating out at restaurants.
We do not see this as a long-term, behavioral change given the major role restaurants—especially izakaya (Japanese pubs)—play in socialization and business culture in Japan.
Of course, the streaming video market in Japan is having a moment, as it is elsewhere in the world, and practically everyone wants a Nintendo Switch it seems, but are more people going to become hardcore gamers or turn into indoor-types as a result of the coronavirus?
Casual gaming is already quite common in Japan as it is and people won’t be stuck at home forever.
Cooking at Home
Japanese are buying kitchen gadgets, and we’re facing shortages of flour and butter, but will we see a cooking-at-home renaissance? In the context of Japan, probably not nearly to the extent you might expect based off what’s happening in countries such as the United States.
The fact of the matter is, Japan has a unique set of circumstances that will lead to different outcomes despite facing the same challenges presented by the coronavirus as the rest of the world.
To illustrate this, we would point to the role convenience stores play in everyday life in Japan. We’d also mention how pivotal ekibiru (train station stores) or depachika (department store basement floors dedicated to prepared food items and groceries) are to the Japanese lifestyle.
Institutions such as these have been made to seamlessly fit in with Japanese peoples’ day to day movements and normal routines. Although many ekibiru and depachika closed to help prevent the spread of the virus, those that have opened in recent days—with new precautions in place—are seeing customers steadily returning.
For certain changes in Japanese consumer behavior, like those listed above, we fully expect people to fall back into familiar patterns and pick up old habits.
However, based on early indications and an understanding of what’s happening here in the market there are a number of changes to Japanese consumer behavior that will stay long after the specter of the coronavirus has passed.
More Lasting Changes to Japanese Consumer Behavior
A number of changes to Japanese consumer behavior brought about by the coronavirus will be much longer-lasting than those we just went over.
Some industries are facing near existential-crisis levels of uncertainty as things currently stand, while nearly all the rest are bracing for a new reality that will drastically change things for years to come.
Hygiene Practices Will Be Scrutinized
As concerns regarding the transmission of the coronavirus grew, Japanese consumers rushed to purchase hand sanitizer, alcohol sprays, and disinfectant wipes. Demand for these items, along with PPE products like masks, is expected to remain elevated for some time.
However, what will be longer-lasting than the demand for these products themselves are the expectations that Japanese consumers will have regarding hygiene after their experience of living with the coronavirus pandemic. In fact, it’s almost guaranteed that hygiene practices will be placed under a microscope by a growing number of Japanese consumers.
As a result of the coronavirus, changes to hygiene protocols for businesses—including restaurants, hotels, and airlines—will undoubtedly be implemented, which will drastically change how some operate in the mid-term.
Currently, nearly all brick and mortar businesses in Japan have placed alcohol spray or hand sanitizer for customers to use before and after entering the store. In larger office buildings and department stores, cleaning staff wipe down handrails and doors with increased frequency, while servers at restaurants and store clerks at grocery stores or convenience stores wear disposable gloves while working.
Not only are Japanese themselves more concerned about their own personal hygiene than ever before, but they are expecting businesses to be more proactive about hygiene as well.
Businesses that want to win Japanese consumers’ trust will need to actively reassure customers that they are prioritizing health and hygiene by laying out the specific steps they are taking to protect them.
As an extension of this heightened focus on hygiene, even the act of using cash (i.e. paper bills and coins) is being re-evaluated among Japanese consumers.
Cashless Gets a Boost
Another change to Japanese consumer behavior we are witnessing lately has to do with cashless payments.
A growing number of Japanese are eschewing cash in favor of cashless options. This shift may prove long-lasting and might even help move Japan towards the kind of cashless society the government has been advocating for some time.
While the number of cashless payment options in Japan have grown exponentially in recent years, Japanese consumers, especially older Japanese, were still showing a strong preference for using cash prior to the coronavirus outbreak. Even with a multitude of cash back promotions and incentives for using the various new types of payment options in Japan, like mobile wallets and QR code apps, it seemed many Japanese were reluctant to give up on physical currency.
On the other side of the equation, businesses, especially smaller, mom-and-pop establishments, have also been a major factor in the low cashless adoption rates in Japan. Without the support of more merchants in Japan, some of whom are reluctant to pay a percent of every transaction in fees to payment processors, cashless payment options still face substantial obstacles.
With the outbreak of the coronavirus, however, more Japanese have been quick to pick up on just how often paper bills and coins change hands as well as the heightened potential for spreading germs from using cash. In fact, according to one survey, 58% of respondents were concerned about hygiene when handling coins, compared to just 18% when using credit cards and 34% when using a smartphone.
As a result, one of the outcomes of the coronavirus pandemic in Japan has been a notable increase in the number of Japanese actively choosing to use cashless options, including credit cards, transit IC cards (emoney), QR code apps and other contactless payment methods.
Greater adoption of cashless payments is also paving the way for a greater number of Japanese consumers to begin shopping online.
While purely brick and mortar operations have been absolutely pummeled due to the coronavirus, businesses engaging in ecommerce have not only been able to continue operating throughout this crisis, but in some cases have seen sales increase over 200% as more Japanese stay indoors and opt to shop online instead.
Although the surge in online shopping during the coronavirus pandemic is not likely to be maintained at the current, elevated levels for all types of purchases, such as groceries, it will likely impact Japanese consumer behavior to lean even more towards ecommerce for non-essentials.
For foreign brands without a physical presence in Japan selling through an online store, it’s easy to misinterpret this as a lucky break. But in fact, for many brands, this is an important time to reassess the current state of your ecommerce store or website for the Japanese market.
In the coming quarters, you can be certain that more Japanese companies will be reevaluating their ecommerce strategies, with many looking to beef up their ecommerce activities as soon as possible, in response to the growing number of Japanese consumers that are shopping online during the crisis.
Although the need for greater implementation of ecommerce was a long time coming, the coronavirus has moved the priority level up in the eyes of Japanese businesses who had been dragging their feet.
It’s been well-publicized by the media in Japan that organizations that incorporated ecommerce as a larger part of their business have not had nearly the same difficulties which predominantly brick and mortar operations have had as a result of all the extended closures or reduced hours during the pandemic.
One of Japan’s major department stores, Isetan Mitsukoshi, even shut down their entire online operation, in addition to their physical stores, when the state of emergency was initially declared. Although online operations resumed one month later, their stores remain closed as of May 2020. This is surely to be a hard-learned lesson for the company, who has yet to successfully integrate ecommerce into their business model.
The case of Isetan Mitsukoshi is just one example though; countless other Japanese businesses that grappled with the same problem, are coming to the realization that they can’t sleep on ecommerce any longer.
With more Japanese shopping online, businesses engaging in ecommerce in Japan should expect increased competitiveness as the overall quality of ecommerce in the market is poised to greatly improve as a result of the coronavirus.
In real terms this means we’ll see more investment go into ecommerce websites and online stores—made specifically for Japanese consumers—by Japanese businesses.
Japanese Consumers Watching Their Spending
The coronavirus has had a tremendous economic impact around the world, and Japan is no exception. With the majority of Japanese businesses asked to close shop during the nationwide state of emergency announced on April 16, 2020, and many industries expecting to see a significant decrease in revenue, Japanese consumers will be tightening their belts in the mid-term due to either loss of wages during the pandemic or uncertainty about money in the future.
It’s also important to understand that Japan was actually in a unique situation prior to the coronavirus. Only a few months before the initial outbreak the Japanese government had raised the country’s nationwide consumption tax (VAT) from 8% to 10%. This tax increase had already resulted in a drop in retail sales around the country, as consumers had begun to reign in their spending, and the coronavirus situation is now poised to further this trend.
Whereas the impact of the tax increase was expected to affect consumption for a brief period after coming into effect, given the current situation and power of hindsight, it can’t be seen as anything except ill-timed. Because of these two major events affecting people’s income in such quick succession, Japanese consumers will be monitoring their spending much further into the future than anyone could have anticipated a few months ago.
Furthermore, with consumers being much more deliberate with their purchasing decisions, marketing strategies will also have to adapt accordingly. Advertisers in Japan will face the dual challenges of both a more discerning audience and a more competitive landscape as rival businesses, eager to quickly recover, compete over the “new” Japanese consumer.
While Japanese consumers will become increasingly price sensitive there will also be a shift in attitudes towards products’ country of origin, which will exert a different kind of pressure on purchasing decisions.
Greater Focus on Country of Origin
Although Japanese consumers will be monitoring their spending more carefully over the next few quarters, there is also a growing shift in perceptions with regard to various products’ country of origin. This will mark one of the biggest changes to Japanese consumer behavior in the mid-term.
There’s no two ways around it, the coronavirus pandemic has put a spotlight on manufacturing–and it’s an issue which can’t be separated from politics.
Whereas before only certain industries and products got this sort of attention the circumstances surrounding how the coronavirus spread around the globe and the resulting impact it has had on supply chains has led a growing number of Japanese consumers to consider country of origin in their purchasing decisions.
Without a doubt this will matter for items such as personal protective equipment (PPE), such as face masks, but there will be similar considerations across industries.
Food imports, long scrutinized by Japanese consumers, will see country of origin continue to play a large part in purchase decisions.
Even, to some extent, clothing and household items may see country of origin considered more closely than before.
While it’s true that where a product was made does not always equate to quality, consumer perception will often have the two closely aligned, and this is what matters in the end.
For better or worse, there will be some countries who will see their products experience increasing demand from Japanese consumers as a result of the coronavirus and those who will see a decrease in demand.
It’s worth pointing out that Japanese consumers have traditionally shown a strong willingness to buy domestically produced products (i.e. Made in Japan), despite higher costs. Up until very recently, as perceptions about quality in relation to cost started to weaken, however, low-cost options in various categories had been gaining in popularity.
The coronavirus situation has once again changed things though.
Already we are seeing a move by the Japanese government to provide subsidies worth a total of $2.2 billion USD to companies that will repatriate manufacturing to Japan from China. And this is not a purely government-conceived initiative. The general public is also supporting such moves.
Ultimately, what this particular change in Japanese consumer behavior means is that price will be weighed against country of origin in a growing number of purchasing decisions and, in some cases, brands and products that have displayed a commitment to quality may be chosen even with a higher price attached.
Japanese consumer behavior in the mid-term will see significant changes as a result of the coronavirus.
Some of these changes, like the move towards online shopping, may simply accelerate a shift that was already taking place within Japan. Others, like greater attention being placed on the country of origin for manufactured products, will mark a departure from the trajectory we once found ourselves on.
In the short-term Japanese consumers’ spending habits, like those of most peoples’ around the world, have been affected in obvious ways. However, these short-term changes and substitutions should not be confused with a change in attitudes and perceptions, which represent greater, longer-lasting shifts in Japanese consumer behavior that will result from the coronavirus pandemic.
Looking beyond the easily observable increases in demand for products such as hand soap and hand sanitizer, which are merely temporary consumption patterns, we have identified a number of changes in attitude and mindset that underline important changes in consumer behavior in Japan for the mid-term.
What does all this mean for your business in Japan though?
Japanese consumers will continue to make purchases and buy items in all product categories, but like the rest of the world, there will be an economic impact that makes our job as marketers slightly more complicated.
As purchases of non-essentials wane among Japanese consumers in the immediate aftermath of this pandemic, brands will need to approach marketing in Japan from a more strategic approach.
Marketing communication, messaging, and tone, will all be more important than ever given the delicate climate of economic recovery and continued uncertainty.
On the product side of things, you will have to commit to your product, by which we mean really investing into it for both the Japanese market and Japanese customers.
Digital advertising campaigns and your media mix for Japan should also be reviewed accordingly.
Finally, staying on top of changes in consumer behavior and preferences will be critical for foreign businesses trying to communicate with Japanese customers in the aftermath of this pandemic.
The coronavirus continues to shape Japanese consumer behavior and the calculus of doing business in Japan. While this is still a developing topic, at Plus Alpha Digital we are continuing to remain dialed into what’s happening on the ground here in Japan.
If you have questions about how Japanese consumer behavior is changing or your strategy for Japan post coronavirus contact us to see how we can help.