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How to make Japan market entry a success?

How to make Japan market entry a success – for profitable and sustainable business development of a new brand

It is almost magical to see how a foreign retail brand can achieve a literally overnight success here in Japan — the first store can easily break the world sales record with off the charts customer transactions.

If that brand can expand its store network in the right way, Japan market can grow to be a star moneymaker for that brand.

To name a few of such examples:

  • McDonald’s Japan opened its 1st store in Ginza (see pictures) in 1971 that instantly became talk-of-the-country with long “Gyouretsu” (long customer line) and broadcast on all major TV stations. McDonald’s expanded its store network nationally to over 3,000 stores in 30 years to become their largest market outside of the USA.
    • You can download McDonald’s 30 years of history summary (excel file) here > McDonaldsJapan_1971-2000 (Overview of the history of McDonald’s Japan from their 1st store opening until they reached 3000 stores — their “Kousoku-Syutten” or super-fast-store-development period. Note this chart was developed from public sources, so some numbers are not available.)
  • Starbucks Coffee Japan opened its 1st store in Ginza in 1996. Starbucks CEO Mr. Howard Schultz recalls that day as follows: “We opened our first store outside of North America, in Japan, in 1996. I really thought we might fail there. On the morning of the opening, people were lined up outside. A guy had slept there overnight; he didn’t speak any English. We rushed him to the front of the line, and he said to the barista, in English, “Double tall latte.” I knew then we were going to be a huge success.” (Source: Bloomberg Businessweek) And as we all know, Starbucks really became a huge success in Japan.
  • H&M (51 stores in Japan today) opened its 1st store in Ginza in 2008 and over 5,000 people lined up. Forever 21 (17 stores in Japan today) opened its 1st store in Harajuku in 2009 and recorded over 3 million customer transactions within 6 months after the opening.

Any new brand coming from “overseas” could be awarded a special, prestigious image by Japanese consumers for its “overseas” origin itself. So, an everyday brand in your country could be alchemized into a magical brand in Japan. Golden rules of success can be drawn from this uniqueness of Japan market.

Success factor #1:  create “magic” with the 1st store

Grand_OpeningBefore entering the Japanese market, a brand should prepare a branding strategy to give itself a highly fashionable image and create its awareness with effective PR strategy so that Japanese consumers feel strong hunger for the brand and have them eagerly wait for the brand. Make sure that many cameras will wait for the moment that the brand opens its 1st store in Japan, and the photos will be disseminated across SNS. There are many local PR agencies that are competent in making it happen, if you need help.

The 1st store should be located at a center of a major city, definitely in Tokyo, at the prime real estate location such as Ginza or Shinjuku, in order for the brand to most effectively spread word-of-mouth throughout Japan.
Such a location requires high rent, so the store must obtain much higher sales compared to the stores in its mother country. Therefore, the store must attract very high customer transaction, especially if the brand sells low ticket products.
This explains why heightening newsworthiness of the brand in Japan before market entrance is vitally important.

Success Factor 2:  build bond with “developers”

AEON_MallIf a brand succeeds in creating “magic” and achieve profitability in the prime real estate location, then the brand will be awarded with opportunities to open stores in commercial facilities (e.g. shopping centers) as their tenants.
Major “developers” of such commercial facilities operate a number of popular shopping complexes and also have a number of future development / redevelopment plans.
Examples of such developers include MITSUBISHI ESTATEMITSUI FUDOSANAEON MALLToshin Development, major railway companies (e.g. JR, Tokyu, Tobu, Seibu, Keio, Odakyu, Keikyu, etc.), and so on.

In today’s Japan, most shopping complexes of almost all the cities are built around the artificial developments by these developers. Therefore, it is very important to build and maintain good relationship with them, in order for the brand to achieve successful and speedy store expansion nationwide. The other way around is also true – if the brand fails to build bond with developers, national expansion becomes, practically speaking, nearly impossible.

However, a new brand should be careful of how to expand business relationships with developers. Hierarchy does exist among them according to the company size or the power of influence. If a new brand opens stores in low-hierarchy facilities first, then the brand might experience negative reactions from those in high-hierarchy. Initially, a new brand should prioritize the business with higher hierarchy developers, and by doing so, the brand can also maintain its high brand image.

Success factor #3:  be prepared for the fast expansion

KitchenEvery successful chain retail store company experiences super-fast market expansion period at one time of its growth stage. Such “following wind” to a celebrated brand blows strongly, and it blows suddenly. When the time comes, flood of great expansion opportunities come to the brand all at once.
At that stage of the growth, securing human resources and finance become a very critical management priority.
If the brand cannot prepare such resources, it may lose precious growth opportunities.
On the other hand, it usually takes long time to build good relationship with labor market and finance market. A brand should be prepared for the fast expansion stage well before such “following wind” blows.

Success factor #4:  be prepared with new store concepts

When a brand grows and penetrates in Japan market to a certain level, new store concepts become necessary to grow the brand further, mainly for two purposes.
Firstly because, “developers” start to request to the brand a new “news” as a tenancy condition. They always want to own primeur concepts to attract media attention to their commercial facilities. When the brand itself is not new “news” any more, then the brand might be required to present an attractive new store concept in order to win the battle for good store location.
Secondly, “Small” size store become necessary over time. Here, “Small” means not only the store size, but also the sales; the “Small” store must also be profitable, so many inventions might be required in operations and logistics.
On the other hand, it usually requires long time, effort and a painful approval process to develop a new store concept. A brand should start preparing for this growth stage well before its real estate managers start shouting for new concepts, in order not to miss the precious growth opportunities.