The number of foreign visitors to Japan is expected to reach 10 million this year. And this number will likely grow further with the 2020 Olympics in Tokyo. What do businesses need to do in order to succeed in this growing market? What are the issues? We undertake a multilateral analysis.
As a nation for tourists, the government needs to develop rules
The number of inbound visitors to Japan rapidly increased during the period from January to September, and is expected to reach 10 million by the end of the year. While this trend is riding the tailwind of a weaker yen and visa deregulation, could Japan continue to increase its inbound visitors to double or triple the current number?
The Ginza store of Don Quijote (“Donki”), a discount store that is open twenty-four hours a day, is known to be teeming with tourists from Asia and other foreign countries late at night. After taking in the country during the day, visiting tourist attractions and theme parks, there was nowhere for people to safely enjoy their late-night hours. Noticing this, Donki went creative and started attracting these inbound visitors. The number of foreign tourists visiting Donki’s current network of 257 stores totals 4 million a year. This figure has grown ten-fold from the 400,000 visitors of five years ago.
Nakamura Yoshiaki, the president of Japan Inbound Solutions, which has led inbound visitor initiatives since 2008 and was spun off from Don Quijote, explains, “While some retailers tried to fill the gap in their domestic sales with sales from inbound visitors, Donki went and found the ‘blue ocean’ (a market without any competitors) of inbound visitors when its main business was on a roll.”
The key to Donki’s success in its inbound business is that it developed a system of identifying customer needs.
Although the store is largely known in Japan as a discount store that is open late into the night, Donki exhibits at tourism expositions overseas and advertises itself to local travel agencies as a tourist attraction. No other business sells such a wide variety of goods, ranging from name-brand watches to home appliances, cosmetics and snacks, and 231 of its 257 stores even sell duty-free items.
Donki also runs the Yokoso! Discount Passport system exclusively for foreign visitors, and allows customers who present the card to receive a 500-yen discount on purchases of 10,000 yen or more. As with the company’s domestic members, cardholders can buy certain home appliances at up to a 50% discount.
The company also takes advantage of the card as a tool to collect marketing information. The card is distributed to domestic and overseas travel agencies and major hotels nationwide, and a barcode on the back indicates which travel agency distributed it on what date, and which hotel gave it to which nationality of traveler. Travel agencies and hotels also earn incentives according to how much customers purchase at Donki, so they thoroughly explain Donki’s advantages to their customers. Over 400 travel agencies and hotels partner with Donki, and around 300,000 cards are distributed annually
Don Quijote (“Donki”), Osaka
The biggest seller at Donki is the matcha-flavored Kit Kat. Many tourists buy these by the box, and Bomoto Kentaro, the manager of the Ginza store, says, “We get calls checking whether we have any in stock. Our supply can’t keep up with the demand.”
The matcha-flavored Kit Kat originally started out at the Dotonbori store in Osaka, where it sold well to Chinese customers. When the store increased its display space for the product, other snacks such as Milky also began selling well, and this led Asian customers to tweet on SNS (social networking services) that “Donki has everything you need,” and “Bought it at a discount.” Other foreign customers saw these tweets and came to Donki.
In 2011, Donki opened an account with the Chinese SNS Sina Weibo and has its Chinese staff tweet daily which stores accept the Union Pay debit card and what discounts Donki is offering. Stores offer free Wi-Fi, and customers can recharge their smartphones for free. While deeply cutting costs, the company believes that its reputation as a “convenience store” will spark word of mouth on SNS and draw customers to its stores.
Its Yokoso! Map lists local department stores and restaurants. It is offered in English and Chinese or English and Korean, and the Osaka edition features a complete map created in partnership with the city tourism office.
Realizing that “Drawing foreign visitors to the local area will lead to Donki sales,” Nakamura recently began developing tourism for the San-in region. Using the Hiroshima store, which gets few Asian customers, he began promoting the local region’s resources, such as the Tottori Sand Dunes and Shimane tea. He planned to take advantage of the travel agency network that was developed with the Yokoso! Passport.
Donki is the ultimate success story of a business taking advantage of the increase in Japan’s inbound visitors to achieve its own growth, but it is not a rare case. Many companies are expanding their sales with a little creative effort by targeting foreign visitors to Japan. Market expansion enables this.
Chinese travelers are not decreasing
The number of visitors to Japan from foreign countries is growing rapidly. According to the Japan National Tourist Organization (JNTO), from January to September 2013, the cumulative total of inbound visitors from abroad was 7.731 million, a 22.4% increase year over year. This will almost definitely exceed the level prior to the Great East Japan Earthquake and surpass 10 million this year. The Koizumi administration launched a Visit Japan campaign in 2003 that aimed to increase the number of visitors to Japan to 10 million over the next ten years. This means that it met its projected goal.
The top three countries from which inbound visitors come are South Korea, Taiwan, and China, with these three nationalities comprising roughly 60% of all visitors to Japan. Due to the Senkaku Islands issue, visitors from China fell by 21% year on year in the bulletin-report figures for the January–September period of this year, yet the total number of visitors to Japan still increased by double digits due to the rapid increase in visitors from Southeast Asian nations.
The factors driving this increase include the weaker yen, the deregulation of tourist visas for ASEAN nations, and an increase in LCC (low-cost carrier) flights. As income levels have risen in ASEAN nations, barriers to visiting Japan have been lowered, and travel demand has increased among the middle class. Visitors, particularly from Thailand, for which Japan removed the need for a tourist visa in July, have rapidly increased, and total visitors for the January–September period increased by 59.1% year on year.
Although the list doesn’t include Indonesia, since that country wasn’t subject to the consumption trend survey of foreign visitors, visitors from Indonesia increased 36.9%, to 98,000, compared with the same period last year, not far behind Malaysia, in eleventh place. The rise in income and the LCC connection have brought Japan that much closer. During the Lebaran holiday (the holiday after fasting) in August, flights from Jakarta to Japan were sold out.
The number of tourists is not the only figure that is increasing; the consumption amount per tourist is also increasing.
Even with only four-fifths of Chinese visitors—who lead the world in travel spending—visiting Japan compared to the same period last year, domestic consumption by foreign visitors to Japan rose 22% from January to June.
According to the Yodobashi Camera Akiba Store, “Indeed, we no longer have Chinese groups flocking to our store, but we have had steady visits from individual Chinese customers. They buy luxury watches in bulk, and for digital cameras, they go less for the under 30,000-yen products than they do for the high-priced digital SLRs and mirrorless cameras. Cosmetics also sell well.”
About 40% of the foreign visitors to this store are Chinese, and foreign visitor sales for 2013 are expected to exceed the highest ever.
The circulation of the Union Pay card used by Chinese visitors has also broken its record for three consecutive months since last July, with a figure of 15 billion yen recorded for September. This is due to its use by individual Chinese visitors as well as its increased use by Chinese-Asians in Taiwan and Singapore.
These people use tablets and smartphones to frequently check travel information, particularly through word of mouth and SNS posts. They will also post online about meals or hotel rooms they liked.
The above figures indicate the satisfaction level of visitors to Japan. Having experienced firsthand Japanese services and hospitality as well as the pleasures of Japanese food and shopping, their satisfaction level exceeds 90%, which includes “Fairly satisfied.”
This high level of satisfaction naturally leads to repeat visits. Particularly regarding travelers from Taiwan and Hong Kong, over 80% visit for travel purposes and close to 80% come for repeat visits.
As a nation for tourists, the government needs to develop rules
The number of inbound visitors to Japan rapidly increased during the period from January to September, and is expected to reach 10 million by the end of the year. While this trend is riding the tailwind of a weaker yen and visa deregulation, could Japan continue to increase its inbound visitors to double or triple the current number?
The Ginza store of Don Quijote (“Donki”), a discount store that is open twenty-four hours a day, is known to be teeming with tourists from Asia and other foreign countries late at night. After taking in the country during the day, visiting tourist attractions and theme parks, there was nowhere for people to safely enjoy their late-night hours. Noticing this, Donki went creative and started attracting these inbound visitors. The number of foreign tourists visiting Donki’s current network of 257 stores totals 4 million a year. This figure has grown ten-fold from the 400,000 visitors of five years ago.
Nakamura Yoshiaki, the president of Japan Inbound Solutions, which has led inbound visitor initiatives since 2008 and was spun off from Don Quijote, explains, “While some retailers tried to fill the gap in their domestic sales with sales from inbound visitors, Donki went and found the ‘blue ocean’ (a market without any competitors) of inbound visitors when its main business was on a roll.”
The key to Donki’s success in its inbound business is that it developed a system of identifying customer needs.
Although the store is largely known in Japan as a discount store that is open late into the night, Donki exhibits at tourism expositions overseas and advertises itself to local travel agencies as a tourist attraction. No other business sells such a wide variety of goods, ranging from name-brand watches to home appliances, cosmetics and snacks, and 231 of its 257 stores even sell duty-free items.
Donki also runs the Yokoso! Discount Passport system exclusively for foreign visitors, and allows customers who present the card to receive a 500-yen discount on purchases of 10,000 yen or more. As with the company’s domestic members, cardholders can buy certain home appliances at up to a 50% discount.
The company also takes advantage of the card as a tool to collect marketing information. The card is distributed to domestic and overseas travel agencies and major hotels nationwide, and a barcode on the back indicates which travel agency distributed it on what date, and which hotel gave it to which nationality of traveler. Travel agencies and hotels also earn incentives according to how much customers purchase at Donki, so they thoroughly explain Donki’s advantages to their customers. Over 400 travel agencies and hotels partner with Donki, and around 300,000 cards are distributed annually
Don Quijote (“Donki”), Osaka
The biggest seller at Donki is the matcha-flavored Kit Kat. Many tourists buy these by the box, and Bomoto Kentaro, the manager of the Ginza store, says, “We get calls checking whether we have any in stock. Our supply can’t keep up with the demand.”
The matcha-flavored Kit Kat originally started out at the Dotonbori store in Osaka, where it sold well to Chinese customers. When the store increased its display space for the product, other snacks such as Milky also began selling well, and this led Asian customers to tweet on SNS (social networking services) that “Donki has everything you need,” and “Bought it at a discount.” Other foreign customers saw these tweets and came to Donki.
In 2011, Donki opened an account with the Chinese SNS Sina Weibo and has its Chinese staff tweet daily which stores accept the Union Pay debit card and what discounts Donki is offering. Stores offer free Wi-Fi, and customers can recharge their smartphones for free. While deeply cutting costs, the company believes that its reputation as a “convenience store” will spark word of mouth on SNS and draw customers to its stores.
Its Yokoso! Map lists local department stores and restaurants. It is offered in English and Chinese or English and Korean, and the Osaka edition features a complete map created in partnership with the city tourism office.
Realizing that “Drawing foreign visitors to the local area will lead to Donki sales,” Nakamura recently began developing tourism for the San-in region. Using the Hiroshima store, which gets few Asian customers, he began promoting the local region’s resources, such as the Tottori Sand Dunes and Shimane tea. He planned to take advantage of the travel agency network that was developed with the Yokoso! Passport.
Donki is the ultimate success story of a business taking advantage of the increase in Japan’s inbound visitors to achieve its own growth, but it is not a rare case. Many companies are expanding their sales with a little creative effort by targeting foreign visitors to Japan. Market expansion enables this.
Chinese travelers are not decreasing
The number of visitors to Japan from foreign countries is growing rapidly. According to the Japan National Tourist Organization (JNTO), from January to September 2013, the cumulative total of inbound visitors from abroad was 7.731 million, a 22.4% increase year over year. This will almost definitely exceed the level prior to the Great East Japan Earthquake and surpass 10 million this year. The Koizumi administration launched a Visit Japan campaign in 2003 that aimed to increase the number of visitors to Japan to 10 million over the next ten years. This means that it met its projected goal.
The top three countries from which inbound visitors come are South Korea, Taiwan, and China, with these three nationalities comprising roughly 60% of all visitors to Japan. Due to the Senkaku Islands issue, visitors from China fell by 21% year on year in the bulletin-report figures for the January–September period of this year, yet the total number of visitors to Japan still increased by double digits due to the rapid increase in visitors from Southeast Asian nations.
The factors driving this increase include the weaker yen, the deregulation of tourist visas for ASEAN nations, and an increase in LCC (low-cost carrier) flights. As income levels have risen in ASEAN nations, barriers to visiting Japan have been lowered, and travel demand has increased among the middle class. Visitors, particularly from Thailand, for which Japan removed the need for a tourist visa in July, have rapidly increased, and total visitors for the January–September period increased by 59.1% year on year.
Although the list doesn’t include Indonesia, since that country wasn’t subject to the consumption trend survey of foreign visitors, visitors from Indonesia increased 36.9%, to 98,000, compared with the same period last year, not far behind Malaysia, in eleventh place. The rise in income and the LCC connection have brought Japan that much closer. During the Lebaran holiday (the holiday after fasting) in August, flights from Jakarta to Japan were sold out.
The number of tourists is not the only figure that is increasing; the consumption amount per tourist is also increasing.
Even with only four-fifths of Chinese visitors—who lead the world in travel spending—visiting Japan compared to the same period last year, domestic consumption by foreign visitors to Japan rose 22% from January to June.
According to the Yodobashi Camera Akiba Store, “Indeed, we no longer have Chinese groups flocking to our store, but we have had steady visits from individual Chinese customers. They buy luxury watches in bulk, and for digital cameras, they go less for the under 30,000-yen products than they do for the high-priced digital SLRs and mirrorless cameras. Cosmetics also sell well.”
About 40% of the foreign visitors to this store are Chinese, and foreign visitor sales for 2013 are expected to exceed the highest ever.
The circulation of the Union Pay card used by Chinese visitors has also broken its record for three consecutive months since last July, with a figure of 15 billion yen recorded for September. This is due to its use by individual Chinese visitors as well as its increased use by Chinese-Asians in Taiwan and Singapore.
These people use tablets and smartphones to frequently check travel information, particularly through word of mouth and SNS posts. They will also post online about meals or hotel rooms they liked.
The above figures indicate the satisfaction level of visitors to Japan. Having experienced firsthand Japanese services and hospitality as well as the pleasures of Japanese food and shopping, their satisfaction level exceeds 90%, which includes “Fairly satisfied.”
This high level of satisfaction naturally leads to repeat visits. Particularly regarding travelers from Taiwan and Hong Kong, over 80% visit for travel purposes and close to 80% come for repeat visits.