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May 2006 – No other country in the world is as concentrated a source of revenue for so many luxury brands as Japan.  Here, a population not even half as large as that of the United States consumes an incredible 41 percent of the entire world’s luxury goods.

This appetite makes Japan the source of a striking percentage of revenues for many of the world’s luxury brands.  The following chart shows the percentage of each company’s overall revenue that is generated in Japan.

Percentage of overall revenue from Japan

Bulgari CEO Francesco Trapani points out, “Accounting for 26% of total revenues, Japan is for Bulgari the first and most important market.”  Japan is also the single largest market for Baccarat, Burberry, the Gucci Group, Louis Vuitton and Salvatore Ferragamo and is the second largest market for Coach and Tiffany & Co.

Where do they put all those stores?

An area only about the size of Montana, Japan is studded with 34 Bulgari stores, 37 Chanel stores, 115 Coach stores, 49 Gucci stores, 64 Salvatore Ferragamo boutiques, 50 Tiffany & Co. boutiques, and 252 stores of the LVMH Group, a conglomerate of many of the world’s leading brands including Louis Vuitton, Donna Karan, Marc Jacobs, Berluti, Moet & Chandon, TAG Heuer and De Beers LV, a joint venture with the world’s leading diamond group.

Click on images to enlarge

For the past two decades until 2003, Tiffany & Co. has had more boutiques in Japan than in any other country in the world.  The company will open two more boutiques in Japan this year, where consumers generate 20 percent of the company’s overall revenue.

Timeline of Tiffany & Co. Boutiques Worldwide

Click on chart to enlarge

Further reflecting the value of this market, in the past five years, several luxury brands have made Japan the home for their largest store in the world.  These include Louis Vuitton (2002), Christian Dior (2003), jeweler Van Cleef and Arpels (2005), Tod’s (2004) and soon Bulgari, who will open its 10-story flagship in December 2007. 

Deeper than sales
Some companies have a deeper interest in the Japanese market than straight revenue.  In an earlier interview with JETRO, Collasse spoke of how Chanel’s R&D activities in Japan are dedicated to refining their products to meet Japanese consumer standards.  These standards then serve as a benchmark for worldwide success of their products. 

"Looking at our efforts in innovation,” he said, “we established our own R&D unit in Japan, since this country unquestionably has the most advanced technology in cosmetics. We made this investment because we concluded that we needed to develop products for not only Japan but also the global market."

Tiffany & Co. launches some designs first in Japan, measuring market reception, and then later in other countries.  A recent example is a sterling silver Atlas numeric cube pendant that launched in the spring 2005 in Japan and then in summer 2005 in the United States and the rest of the world.

Trapani also finds greater value in the Japanese market than solely revenue.  “Japanese clientele have a peculiar attention for quality and image,” he said, “and Bulgari's constant drive for excellence perfectly fits this peculiarity. This is also one of the reasons why Japan has always been among the markets the company elected to launch new products or to test new distribution formulas, since the appreciation of the Japanese clientele is the best guarantee for worldwide success.”

One recent example of this is the perfume for women called Omnia Crystalline that Bulgari launched for the Asian market in 2004.  It became such a success that the company decided to launch it in 2005 on a worldwide basis.

A glimmering future
The world’s luxury brands do not see demand for their goods in Japan fading any time soon.  AFP quoted Collasse commenting on Chanel’s largest store in the world, a 10-story glass structure located in Tokyo’s Ginza District, saying, “We decided on absolute luxury. The future of luxury in Japan is a lot more luxury.  We’re betting on the high end, and that runs against what everyone is doing.”

Over the next three years, Coach believes it can open about 30 more successful locations throughout Japan, bringing the total number of stores to 140, including 15 flagship stores.  The company also aims to double its current sales in Japan to 80 billion yen by the end of FY2009.

“Japan is an extremely important market for Coach with the world’s highest concentration of luxury goods buyers,” said Ian Bickley, president and CEO of Coach Japan, Inc.  “We will continue to invest in our people, systems, and infrastructure in Japan.”

Betting on continuing year-on-year increases in earnings and the growth of the Japanese economy, the world’s luxury brands see a glimmering future ahead of them.