27 Feb 2014
Tokyo Gift Show exhibitors left jittery by two years of 'Abenomics'
Japanese SMEs prove a little disenchanted with the wonders of Abenomics and the on-going uncertainties in the commercial sector as the 2014 Tokyo International Gift Show highlights another challenging year for the industry.
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Whether Prime Minister Shinzo Abe's famed "Abenomics" economic strategy ultimately succeeds or not, it seems clear that it prioritises the interests of big Japanese export firms over those of small to medium-sized companies. With many of these smaller businesses attending this year's Tokyo International Gift Show (TIGS), it was never going to be the happiest of trade gatherings.
As a consequence, despite a few good signs – such as the fourth quarterly expansion of the economy in a row – there was a sense among the TIGS exhibitors that any of the benefits of Abenomics – first introduced in December 2012 - weren't worth the disruption caused to date. With traders still reeling from the yen 20% devaluation against the dollar, apprehension was high over the looming consumption tax hike (from 5% to 8% as of April).
Despite this, there was some optimism to be found at the show. Undaunted by the questionable economic clime, a number of businesses were looking to either expand their customer base or to increase the orders from their existing clients by offering an enhanced product range.
The tendency towards marketing to an older demographic was also more pronounced at this year's event. This was particularly apparent in terms of the number of health-related items on offer.
With companies in certain sectors, notably house builders, enjoying something of a pre-tax-hike boom, many at the show believed this munificence should be extended a little further. Satsuki Konishi, the President of M. N. Japan, a health and lifestyle products distributor, emphasised the need to bring a little stability to the retail and gift sector.
Issuing a call for the government to reduce the tumult in the commercial sector, she said: "We don't want to have a pre-tax-hike rush. If we did, then what would our company do after that? People have to stay calm. Keeping things stable is best.
"For a small company, such as ourselves, even two months disruption can be a big problem. Large companies can ride these waves better. We are also in the business of importing, so the exchange rate is another problem for us."
Konishi's company specialises in the sale of aromatic soaps, bubble baths, and infused scent sticks. When it comes to trading in such low- to medium-end luxury goods, even a small price rise can have a disproportionate effect on sales, which perhaps explains Konishi's concerns.
She also takes issue with the government's current policy of devaluing the yen in order to discourage imports and stimulate domestic production. According to Konishi, the reality of it is far more complex than the Abe administration is supposing.
She says: "We have to do more domestic sourcing, that's agreed. Japanese production standards are truly excellent, but the costs are still huge, so I don't know if it's viable. There is also the question of what then happens when the yen goes back up…"
Just as Abenomics has benefitted some companies while penalising others, different consumer demographics have also had contrasting fortunes. While older people with shares are benefitting, for instance, less well-off young workers are finding things far harder.
Not surprisingly, one consequence of this has been that businesses have begun to target the older, richer demographic far more assiduously than in the past. There were clear signs of this change in priorities at this year's show, with the dedicated healthcare zone proving particularly busy. Among the most popular items on show in this section were a range of massage chairs, several health tonics and a selection of magnetic rheumatism-curing cushions.
A number of companies had chosen to taken the expertise that they had honed in other sectors and look for applications in the senior/healthcare market. Such dexterity was clearly on show from Helmet Sensui, a Japanese company that had made its name as a manufacturer of diving suits. At TIGS, it was looking at reinventing itself as a supplier of innovative hot water bottles, including boot-shaped ones that could be worn on the feet. All of its new range used techniques that the company had long-mastered while producing underwater rubber gear.
Such innovation is the mainstay of TIGS, but most companies opted for less radical departures than Helmet Sensui. For the main part, companies were either looking to sell their core products to a new customer base or to secure orders from existing clients for upgraded or accessorised versions of existing products. Of these two approaches, Disney (Japan) had clearly opted for the former.
As usual, the company was hosting an enormous pavilion as a showcase for the wide range of items produced by its 300+ licensees. These included Spiderman cookies, Sleeping Beauty cosmetics and Star Wars lunchboxes – proof, if proof were needed, that almost anything can be branded with movie or animated characters. At least, in Japan.
According to Uyo Kondo, one of the company's senior managers in Japan, the group had adopted a policy of acquiring more adult, male-friendly brands, notably Star Wars and the Marvel Comics superheroes. It was now also looking to adapt existing characters to boost their appeal to older consumers.
He said: "We are now cultivating a much older target – the adult market. There are now far more Disney products aimed at – and being accepted by – the adult market than there were three years ago."
Kondo said the group was now actively pursuing a "synergy strategy", cross-selling through its portfolio of movies, digital platforms, shops and the Tokyo Disneyland theme park, an attraction currently celebrating its 30th anniversary.
The second route to driving new business – accessories and upgrades – was most clearly apparent in the smartphone sector. Leadtop Technology Ltd, a Hong Kong-based phone accessories company, was attending TIGS to showcase its own-label smartphone cases and schedule holders, while also on the lookout for OEM business.
The rich fabric designs and the choice of warm earthy colours of the company's range showed that it had clearly worked to target the Japanese market. Explaining its thinking, Swan Li, one of Leadtop's merchandisers, said: "Our strategy is to promote the idea that you can change your smartphone covers to match your handbag or even your outfit of the day."
Another Hong Kong company, Hyone HK, a technology design business, was taking a similar – if slightly more in-depth – approach through its range of innovative smartphone-related products. According to David Lo, the company's Managing Director, it had secured patents on all of its products and was now looking to promote its own brand on the back of its unique designs.
Lo said: "To be honest the market is oversupplied, but I found there was no innovation, inspiring me to launch the business three years ago. All our products are design-led, with special features, and are all aimed at medium- to high-level consumers."
The company had already showcased its range of products at a number of international expos, but had chosen Tokyo to present three specific items – an antimicrobial and anti-electro-magnetic screen protector, a Bluetooth smart remote and a magnetic, stackable charger.
Assessing its success at this year's TIGS, Lo said: "We have had a very good response. We wanted to develop the Japanese market, so we found a partner to handle all of our business here.
"To expand your business, you need to be very active on the marketing front. So our first priority was to find the right distributor. We are now working with them and their recommended advertising, and digital strategy."
A well-thought strategy is now seen as more important than ever in a market that has continued to prove challenging for many. Overall there is a sense that even the smallest of successes requires a truly Herculean effort. In order to stay viable, many Japanese companies are continually obliged to ask more from their workers, while finding new ways to be competitive. Overall, taking the mood of buyers and exhibitors alike, a somewhat downbeat mood still characterises the country's business sector.
In light of this, it is perhaps unsurprising that those products designed specifically to comfort, soothe and mollycoddle were particularly popular this year. Among the more unusual were aromatic, non-burning candles and cushioned notebooks, allowing students or overworked desk workers to grab a quick nap between shifts or essays.
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The Tokyo International Gift Show 2014 took place from the 5th to 7th of February at the Tokyo Big Sight. The event attracted 196,378 visitors, a slight increase on last year's figure.
Marius Gombrich, Special Correspondent, Tokyo