In fact, the positive impact of Abenomics has already been seen in the sales of luxury goods, such as watches and jewelry, which analysts say would directly be reflected in the Nikkei index.
However, it will be quite a long time ahead when such a trend becomes clearly apparent in the overall consumer activities.
Furthermore, it is noticeable that some luxury brands of clothes and leather items—which did not reduce prices to pass on the benefits of the strong yen to their customers—are now increasing prices. For example, Louis Vuitton on Feb. 15 hiked prices by 12 percent on average.
So, how big is the retail market size for luxury goods in Japan?
It is actually difficult to grab the concrete picture of the market in this field because luxury goods companies in general do not release sales breakdown by countries or brands they own even though they are listed on the stock exchanges.
Plus, the recent currency volatility has widened price divergence in yen-, euro- and dollar-based figures. In addition to this, the definition of luxury brands remains obscure.
In the field of pret-a-porter, or ready-to-wear clothing, and fashion and leather goods, brands names, such as Louis Vuitton, Gucci, Hermes, Chanel, Prada, Miu Miu, Fendi, Salvatore Ferragamo, Dior, Bottega Veneta, Loewe, Celine, Yves Saint Laurent, Balenciaga, Chloe, Valentino, Versace, Givanchy, Jil Sander, Bally and Tod’s are understandably included in the genre. In this column, these brands are categorized as top-tier luxury brands.
However, there are some problems. For instance, supposing Burberry, Armani and Ralph Lauren are not top-tier luxury brands, what are they? (They can often be categorized as high apparel brands and designer brands.) Then what about Coach, Furla and Longchamp? Are they also included in the top-tier group? (These brands do not have a strict policy of manufacturing their items in their home countries, such as France and Italy, and are usually categorized as accessible luxury and rough luxury.)
In jewelry, the three major names—Cartier, Tiffany & Co. and Bulgari—and Grand Cinq in Paris (Van Cleef & Arpels, Boucheron, Mauboussin, Chaumet, Mellerio dits Meller), as well as Harry Winston, Graff and Gump’s, which also have a high profile like the eight brands, are definitely treated as luxury brands. They are followed by more brands, which may not claim a high profile like the names above, but offer equally high-quality goods.
In this article, all these brands are treated as luxury brands. Regarding watches, the same approach is applied.
Taking it into consideration, the size of the luxury goods market in Japan is estimated to be around 2 trillion yen in total—1 trillion yen for fashion and leather goods and 1 trillion yen for cosmetics, wine & spirits, watches and jewelry among other items.
According to the report compiled by Bain & Company, a Boson-based research and consulting firm, the size of the global luxury goods market is 19.1 million euros in 2011, or 22.92 trillion yen (1 euro = 120 yen).
Japan claims about 10 percent of the entire market, making its market size roughly about 2 trillion yen. Bain & Company’s report also reveals an interesting fact in the breakdown by nationality of the 19.1 million euro market.
Chinese consumers account for 23 percent of the market, followed by Americans at 22 percent and Japanese at 20 percent.
If you believe these figures in the report, Chinese spend most on luxury goods in the world, while Japanese spend almost equal amount on European and American luxury items at home and abroad.
Many European luxury brands did not reduce prices of their products in the Japanese market until the exchange rate became 170 yen to the euro. This probably resulted in the rapid increase in Japanese buying luxury items overseas.