Japanese Shoppers Loosen Up OnlineBy
Gilt Japan executives reacted to the Mar. 11 earthquake and tsunami in the same spirit of jishuku, or self-restraint, that characterized much of the country. For the week and a half following the quake, the online luxury retailer didn't send the usual 9 p.m. e-mail blasts to its 600,000-plus members promoting "flash sales." It held a fundraising sale to help with disaster relief, agreeing to match contributions.
When Gilt Japan resumed sending e-mail alerts on Mar. 22, Peter Glusker, its chief executive officer, was surprised at the response. "It was within a hair of being our best weekend ever," he says of the days that followed. While Glusker won't disclose sales figures, he says "the demand for luxury goods was incredibly strong."
Gilt's experience contrasts sharply with reports of post-quake spending abstemiousness. In the upscale Ginza shopping district, stores still struggle to woo shoppers—a challenge made tougher by reduced hours, halted escalators, and lights dimmed to conserve energy. Spring festivals have been canceled and the start of cherry blossom season has been marked by fewer raucous flower-viewing, or hanami, parties in local parks. Luxury goods purveyors from Tiffany (TIF) to LVMH Moët Hennessy Louis Vuitton have braced themselves for sluggish spending at their stores in Japan.
Although major e-tailing websites experienced sharp traffic declines in the first days after the earthquake, Japanese consumers are shopping online again. Some, like Yokohama housewife Naomi Odajima, have been conservative. She ordered bottled water from Kyushu, a southwest island believed to be free of radioactive contamination from the crippled nuclear reactor in the northeast. She didn't buy items like cosmetics or clothes, explaining, "I wondered if such orders might bother the overall transportation system." Asako Kuroki of Tokyo, though, went online earlier this month to buy a watch for her father's birthday and warm-weather clothes for herself. "It was easier and felt better than going into stores."
Online shopping is a $5.5 billion market and represents about 3 percent of Japan's domestic retail market. JPMorgan Chase (JPM) analyst Hiroshi Kamide says that, compared with department stores that have seen year-over-year sales fall by half since the earthquake, "online has gotten off quite lightly." Yushi Shiozaki, a spokesman for Rakuten, Japan's largest e-tailer, says it has largely recovered since seeing a drop in sales and traffic after the earthquake. "Sales and traffic have basically returned to the same level as before the disaster," notes Shiozaki. "We think there is no jishuku in Rakuten right now."
Rakuten has seen a surge in customers shopping for more energy-efficient appliances, water, and emergency supplies. Sales of fridge curtains that limit energy loss are triple what they were last year; cooling mattress covers have sold at 10 times the level a year ago. "The public is thinking of ways to save energy over the long term in anticipation of ongoing power supply issues," says Shiozaki.
At Gilt, Glusker has been impressed by "people's propensity to buy"—the site recently sold a 1.2 million yen, or $14,280 necklace—in these tough times, though the fact people are spending more time at home is surely a factor. (A sister site called Gilt City, which offers deals on services like spas, hasn't done as well, says Glusker.) Other upscale sites such as Glamour Sales (GLS) report similar results. "Our sales were growing before and after the earthquake," says Sabrina Watanabe, marketing director for GLS Japan. With fewer people visiting stores, Watanabe adds, suppliers now seem more inclined to offer products for sale online.
Like their bricks-and-mortar brethren, though, e-commerce players remain unsure about the long-term impact of the crisis. Misao Konishi, who heads public relations for Amazon Japan (AMZN), says trends are mixed. Sales of goods such as tents, lanterns, bikes, sneakers, and maps have increased since Mar. 11. But Konishi notes that "consumers are also becoming stricter about their spending and don't seem to want to buy unneeded goods."
Overall, consumers appear to be warming to the idea of shopping again, especially with some politicians calling on them to boost the economy. For Tokyo entrepreneur M. Audrey Sato, a veteran Gilt Japan customer, the lure of online is likely to remain strong as long as stores continue to curb their hours. "If I want to go to a department store after work, it's almost impossible," she says. And, like many consumers, Sato is drawn to the prospect of better prices and a lower-pressure environment at sites including Gilt. "I want to use this service more in the future."
The bottom line: Japanese have started spending again at online sites as retailers contend with power shortages and reduced hours.