Branding the key to success in Japan
Japan has long been an attractive destination for New Zealand exporters as the world’s third-largest economy (measured by purchasing power parity), with 127 million consumers and where foreign companies enjoy a commercial system compatible with internationally accepted business norms. Over the last few decades commodity exporters have successfully sought out opportunities in Japan, making Japan New Zealand’s third largest export destination as a result.
But sales growth has stagnated or slowed in recent years for many of these commodity exporters. Japanese consumers’ buying power and confidence have been dented by an economy that has been sputtering between anaemic growth and short recessions since the early 1990s. Sales of traditional New Zealand agricultural exports, such as wine and beef, are challenged by price-cutting competitors in Australia and China.
New market entrants have found that products successful in New Zealand or elsewhere seem to have no traction in Japan. Some have found buyers but in order sizes that are impossibly immense to fulfil. Many have shifted their attention to more prosperous markets in Taiwan, Hong Kong, Korea, China and Singapore.
Brands on the ground
The solution taken up by a widening variety of businesses is to market branded goods rather than price-sensitive commodities. Branded exporters to Japan include agri-business combines such as ANZCO, Avanza and ZESPRI; boutique food and beverages, including 24 Below, Comvita, Cloudy Bay and Jack Links; fashion brands Cybèle and NOM*D; and sporting wear brands Canterbury and Carisbrook.
Exporters widely acknowledge that Japan is a unique market with distinct requirements for successful brand building. Extensive time and effort must be devoted to cementing relationships, often requiring hiring local Japanese staff members, and exporters emphasise that success demands a long-term commitment, typically three to five years before the business becomes profitable.
Quality standards in Japan are among the highest in the world. Consumer research to fit products to buyers is vital and sellers must aim to market directly to consumers, bypassing distributors who are often fragmented by region and rarely control large portions of the market. The extent to which exporters are succeeding with brands often reflects how directly they can build marketing channels to end-consumers and bypass Japanese wholesalers who gate-keep the retail end of the distribution chain.
Defending territory
Longstanding sheep and beef exporter to Japan, ANZCO, adopted a branded strategy to defend a new market it was creating in lamb. Sheep meat had long been synonymous in Japan with low-price mutton, so ANZCO decided to market its chilled lamb as a premium product suitable for menus of top-flight restaurants.
“We wanted to protect our investment in building a premium market for lamb,” says Makoto Kinjo, president of ANZCO Foods Japan in Tokyo. “So we marketed our lamb under an ANZCO brand that emphasises the advantages of our product. Branded products can also command a premium. If Japanese consumers understand the value and quality of a product, they are prepared to pay higher prices.”
To nurture its brand ANZCO, like other exporters, markets directly to consumers, bypassing distributors. “In Japan, distributors and importers do not have the vision or aspiration to build your brand for you, so you need to do it yourself,” says Mr Makoto. But he says the cost of advertising is prohibitive in Japan so brand builders must be innovative in finding ways to reach customers.
“We’ve got huge mileage from public relations,” says Mr Makoto. “Through an agency, we provide information to the mass media on how lamb should be eaten, how it’s cooked in other countries, its health benefits, new restaurants and so forth.” The enthusiastic media coverage of new foods reflects consumers’ intense interest in food and nutrition.
Boosting margins
Boosting margins by more than 50% was a key reason for Sports Resources to switch from exporting as an original equipment manufacturer to selling its branded range of Carisbrook sporting wear, says Geoff Bonner, the company’s Auckland-based marketing manager.
“Appointing our own manager in Japan was the key to our move into branded goods and our Japanese business went through its biggest period of export growth once we hired local staff,” says Bonner. “Our Japanese sales manager markets directly to local rugby teams and sports clubs. It takes a long time to establish sales relationships in Japan and decisions are made much more slowly than we’re used to in New Zealand.”
Manufacturers should also prepare themselves for high standards of customer service, including rigorous quality standards, the ability to fill small orders sizes and factor in higher returns of stock. “Accepting returns is a given in this market, whether it’s because a particular size isn’t selling or customers don’t like the colour,” says Bonner. “Japan is the only market where all our garments are hand-inspected and x-rayed for stray needles.”
Market research and quality
Market research to understand unique Japanese buying habits is crucial to positioning New Zealand fashion brands in Japan, says Jason Coates, Tokyo-based international marketing and sales director at H3O Fashion Bureau, which counts New Zealand fashion brands Cybèle and Nom*D among its portfolio of clients in Japan.
“It’s essential to do research on this country and its people,” says Coates. “Consumers here are eager to take up foreign products, but only if those products are presented in the right way and are of good quality.”
In fashion wear, examples of consumer preferences include colours and styles that Japanese women favour, sizing and important differences in consumer fashion tastes among regional centres such as Tokyo, Osaka and Sapporo. Practical examples include Japanese women avoiding orange because it doesn’t complement their skin tones and considering unfashionable the long gowns worn as high-end evening wear in Western markets.
“Home market standards generally don’t cut the mustard in Japan… standards are almost outrageously high,” adds Coates, who gives as an example that retailers generally route all their imports through independent quality checkers who are paid by the number of faults they find.
Brand New Zealand
Brand New Zealand is currently riding high in Japan and exporters are capitalising on the country’s clean, green and friendly image to build their own brands, particularly in food and beverage where a series of scandals has made the Japanese wary about the origin of products they buy.
“Japanese people have a very positive opinion of New Zealand as a sympathetic, clean and comfortable country, says Neil McIntyre, CEO of Auckland-based Func.Nutrition, who is developing a line of branded functional beverages for the Japanese market. “These are really attractive attributes to Japanese consumers, especially at a time of publicity about food safety issues and anxiety about the integrity of food.”
Tom Huskinson, Tokyo-based brand manager for 42Below New Zealand vodka brand cautions that while the ‘made in New Zealand’ label might help create the brand, exporters still need to be prepared to adapt their product to fit Japanese tastes if required and to educate consumers directly. In 42Below’s case, this included working with bartenders and holding Vodka ‘university’ evenings at the regular drinks functions held by Japanese companies.
“As a nation, we tend to think our products are really great and that everyone should know about them,” advises Huskinson. “While Japanese consumers may have heard of our country, New Zealand isn’t on the radar from a business perspective.”
While brand building in Japan requires a long-term investment, meeting the market’s often exacting requirements can offer the ability to access other Asian markets, such as Korea, Hong Kong and Taiwan. “One of the reasons that 42Below is here in Tokyo is that Japan is a driver for fashion and trends throughout Asia, “says Huskinson. “There are many places for a successful brand to go from here.”
by Matthew Roy
Matthew Roy lives in Japan’s Hokkaido prefecture where he works as a copywriter and marketing professional. Formerly, he worked as a financial writer in Australia and Europe.
Article uploaded February 2009.