Japan: The Death Biz Isn't What It Used To Be

It's growing fast in Japan, but discount parlors are putting pressure on prices

In Japan, few rituals are as tightly scripted as the send-off for the dearly departed. The typical Buddhist-inspired funeral involves a gathering the night before the cremation, a memorial service performed by a monk, and a cremation ceremony attended by family and close friends. The cost: an average of $22,000, or nearly four times the typical bill in the U.S. Despite the price tag, most grieving families fork over the yen rather than risk the embarrassment of being seen as cheapskates.

Now, though, there's another choice. Thanks to a handful of upstart mortuaries, the $22,000 funeral may go the way of the 39,000-point Nikkei average and department stores with white-gloved greeters. These discount funeral parlors have injected some much-needed price competition into a $15 billion industry that has long engaged in an elaborate system of kickbacks in which florists, caterers, and even monks pay up to half their fees to funeral directors who steer business their way. That's changing as Japanese become less willing to spend big portions of their inheritance on a funeral. "The industry is facing radical reform," says Hajime Himonya, editor of SOGI, an industry trade magazine .

The business clearly offers growth dynamics to die for. Japan has one of the highest concentrations of elderly in the world. More than 1 million souls departed for the great beyond in 2003, and that annual tally is expected to jump nearly 50% by 2020. Tokyo hotels that have watched revenues from weddings dry up in recent years as young people wait longer to tie the knot have started marketing packages for funeral banquets. The capital's ritzy Imperial Hotel booked $4 million in funeral business last year, up 30% from 2003.

At least one entrepreneur has abandoned weddings altogether in favor of funerals. Takeyuki Nakagawa saw an opportunity in funeral packages that are flexible and reasonably priced. So three years ago he sold his interest in a wedding-reception business and used the money to start a funeral-parlor chain called Urban Funes Corp. The chain, with three outlets in Tokyo, offers a simple, customized service for friends and immediate family of the departed for $3,838. Sales in the year through September rose 50%, to $1.15 million, with about 10% of customers choosing the cheapest option. "Many people are dissatisfied with one-size-fits-all ceremonies," says Nakagawa.


Some new operators say the cost of funerals is less important than the lack of transparency in the business. John Kamm, a licensed embalmer from Colorado, launched a funeral parlor called All Nations Society in Tokyo two years ago after he sensed the opportunity the market offered. He offers a clear pricing list -- no-frills cremations, for instance, go for $2,450 -- and bans kickbacks of any kind from Japanese suppliers. (Kamm says one monk offered him an envelope stuffed with $3,358 a while back. He returned it.) So far, Kamm's clients are spending an average of $19,000, though admittedly his office is located in the upmarket Ginza neighborhood. Mourners, says Kamm, "generally don't mind paying a lot of money if they know where the money is going." Kamm won't disclose his revenues but says All Nations is profitable.

The upstarts are even starting to force changes at Japan's 45,000 old-guard funeral purveyors. The family-run outfits that have long prospered on kickbacks are fighting back with a vigorous public relations effort emphasizing their professionalism. Still, rates have dropped by half over the past decade, and "many funeral parlors have gone bankrupt from the recent price competition," says Midori Kotani, an industry analyst with Daiichi-Life Research Institute. For Japan's graying seniors -- and their families -- the trend is welcome. If any industry needs some creative destruction, it's this one.

By Hiroko Tashiro and Brian Bremner in Tokyo

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