How COVID-19 is Altering Consumer Behavior in Japan?
Like millions of other Tokyoites enduring month after month of “soft lockdown,” Megumi Takesawa has been stocking up on non-perishables such as canned tuna, tomatoes, and corned beef as well as boil-in-the-bag curry. She also stores a wider selection of alcohol in her pantry now, from bottles of wine and sake to cases of beer, as dining out and gathering with colleagues after work for drinks have become a rarity.
Meanwhile, the 39-year-old office worker says she’s spending less on tickets for live concerts, movies, and theater performances, and has substantially cut down on vacation expenses, as long-distance travel is frowned upon. She also tries to buy books from local bookstores so the smaller shops won’t go out of business, and, in order to stay fit while working remotely, she’s taken up jogging.
Some hygiene practices that have become commonplace over the past year to curb the risk of contagion will likely stick, Takesawa says.
“I think I’ll be carrying around disinfectant sprays and wet wipes regularly even after the pandemic,” she says.
COVID-19 is upending Japanese shopping habits like never before. Stay-at-home requests, social distancing measures, and the surge in remote work have seen consumers reprioritizing what is essential.
Healthy dietary and lifestyle choices, as well as demand for home cooking and baking, have seen products such as protein powder and flour fly off the shelves while the ubiquitous use of face masks has hammered cosmetics sales. And with physical contact being largely avoided, more people are swapping supermarkets for online shops.
For corporations buoyed or burdened by the phenomenon, the big question they are asking themselves is whether these trends are temporary or here to stay.
“I’ve never seen anything like this,” says Toshimitsu Kiji, a data analyst at market research firm Intage Inc. The company collects weekly sales data from approximately 4,000 retail outlets nationwide, including supermarkets, convenience stores, and drug stores, to assess consumer trends.
According to figures it compiled for the whole of 2020, sales of face masks, disinfectants, and thermometers jumped by 380%, 296%, and 255% year on year, respectively. While that may be unsurprising considering the ongoing pandemic, more unexpected products also made its top-30 list of highest-selling goods last year.
At the sixth place on its list is “malt beverages,” which grew by 173%. Behind the spike was a social media-backed campaign purporting the health benefits of Milo, the malt-based chocolate drink produced by Nestle. Its sudden popularity saw the powdered product disappear from supermarkets, with opportunists selling them at a premium on resale sites.
“Snacks produced by toymakers” come in at No. 7, with sales climbing 154% compared to 2019. Kiji says the phenomenon was partially the result of people flocking to snacks that come with stickers and other toys that feature characters from “Demon Slayer,” the manga and anime series that was the basis for a film released last year became the biggest-ever box-office hit in Japanese history.
Protein powder follows in eighth place with a 141% surge.
“From around June last year, young women began buying soy protein powders in order to stay in shape during the pandemic,” Kiji explains. “Maintaining a healthy lifestyle while remote working has been a big topic affecting shopping trends.
“Others on the list include non-perishables such as frozen seafood as well as whipping cream and baking mix for home cooking purposes. With people spending more time at home, we saw sales of detergent, deodorants, and dehumidifiers grow,” he says. “And with restaurants facing closures and asked to curtail business hours during a state of emergencies, alcohol sales have been robust.”
Meanwhile, cosmetics took a hit in 2020, with lipstick faring the worst with sales down by more than half at 42% compared to the previous year. Sales of face blushes, foundations and makeup bases also plunged to 63%, 68%, and 72% year on year, respectively, with fewer opportunities to go out and people encouraged to work from home. Drugs for motion sickness fell out of demand as trips became less frequent, while better hygiene over virus fears put a damper on common cold medicine.
“Sales of chewing gum and candies — things often purchased by office workers to stay alert during the day — have also fallen,” Kiji says.
So which products are going to maintain their edge when the pandemic subsides?
“It essentially comes down to goods that consumers feel are useful,” Kiji says. “For example, recent data suggests hair treatment products are gaining popularity. If people feel they can take care of their hair by themselves rather than frequently visiting beauty salons, that could become a lasting trend. The same goes for bath additives. If consumers feel they’re effective in relaxing and rejuvenating, they will continue using them even when they can freely go out without the worry of contagion.”
A report on the impact COVID-19 is having on Japanese consumer behavior compiled by Nomura Research Institute (NRI) says stockpiling of non-perishables will likely decelerate as the pandemic subsides, but home cooking will still be popular and interest in healthy eating is expected to continue growing. Sales of large television sets and other home entertainment audio-visual systems are expected to remain strong, while the outdoor activities boom may see demand for SUVs rise.
The outbreak is understandably accelerating spending on online services as well — not only shopping for daily necessities, but also for games and video-on-demand streaming and rental services.
Hiroyuki Hayashi, a consultant at NRI and an expert on consumer trends, says the ratio of those surveyed by the think tank who are subscribers to Amazon Prime, for example, jumped by 6 percentage points from 16% to 22% in the two months from March to May last year.
“Prior to that, it took two years for the ratio of subscribers to grow 3 percentage points, so this was quite a surprise,” he says. “It shows how the first state of emergency issued last April turbocharged digitalization in Japan.”
Online shopping, banking, and free video-streaming services such as YouTube have all seen strong demand, Hayashi says, although there’s a catch.
“Online shopping activity remains strong amid the pandemic, but the number of money users spends per transaction has decreased,” he says. “Whereas people used to buy in bulk when shopping online, they are now buying more frequently in smaller quantities.”
Surveys conducted by NRI in December 2018 and December 2020 showed that the number of times respondents said they shopped online annually grew from 33.8 to 37.4. In terms of the amount spent per transaction, however, the figure dropped to ¥2,136 from ¥2,484.
“When analyzing the number of transactions and payment amounts, we notice purchasing activity is most robust among youths,” Hayashi says. “Those in their teens, for example, spend roughly ¥600 on average per transaction, while those in their 20s typically spend around ¥1,000.”
China leads the pack with one of the most sophisticated digital ecosystems in the world. According to Mckinsey & Company’s China consumer report 2021, the nation has more than 850 million internet users, with mobile payment penetration triple that of the United States. It also boasts the world’s largest e-commerce market, accounting for about 45% of global retail e-commerce transaction value in 2018.
The report says around 55% of Chinese consumers are likely to continue buying more groceries online after the peak of the crisis. The consulting giant said that, according to its mobile survey, 74% of Chinese citizens increased their online grocery visit frequency during the pandemic, and 15% said they will increase visits after its peak has passed.
Japan, in the meantime, has been a slow starter when it comes to digital payments. Cash remains king, and contactless transactions including credit cards and smartphone apps account for only 20% of personal spending, according to 2016 data from the Ministry of Economy, Trade, and Industry. That’s compared to over 95% in South Korea and nearly 70% in the United Kingdom.
Hayashi of NRI says surveys show that even during the pandemic, the Japanese have been relatively hesitant compared to other developed nations in using services such as online learning, telemedicine, and smart speakers. But when users were asked whether they plan on utilizing these services after the pandemic, a large portion was optimistic.
“Digitalization will be here to stay,” he says. “Japanese tend to be reluctant to spend money on new services, but once they do and realize the benefits they can enjoy, they tend to become loyal customers.
“Internet shopping will also take a stronghold, especially when movement has been restricted for so long,” he says.
“There’s no comparable event in modern history that has impacted consumer behavior at this scale,” Hayashi adds, expressing concern that a growing digital divide and financial hardships endured by many during the crisis could exacerbate economic inequality.
“I fear the economic fallout from the pandemic will widen the wealth gap.”
The outbreak is already taking a severe toll. According to the health ministry, as of early April, more than 100,000 people have been dismissed or seen their employment contracts terminated without renewal.
Under the circumstances, job insecurity is likely to remain high especially among workers in the manufacturing, retail, and restaurant industries that have been hardest hit by the pandemic. That, in turn, is impacting consumer behavior.
In order to understand how the pandemic is changing consumer psychology, online market researcher Macromill Inc. launched its own consumer segment — the With COVID-19 Segment — in December. It features six segments based on analyzing the company’s 1.3 million consumer panel.
These include average consumers (33%) who are adapting to the new lifestyle yet feeling stressed and inconvenienced, as well as those who are “home nesting” to avoid virus risks but are struggling with their social lives (14%) and feeling financially pinched (14%). The latter two segments are mostly women in their 40s and below.
Then there are the digital natives in higher income brackets who have quickly adapted to the “new normal” (15%) and those who have taken the pandemic in stride (11%) without letting the crisis get in the way of their personal lives and hobbies. The latter segment is led by men in their 40s to 60s.
Finally, there’s the segment composed mainly of men in their 30s and younger who are feeling inconvenienced by virus-induced restrictions but nevertheless continue to go out and meet with like-minded people (13%).
Tomoyuki Shibuya, a senior consultant at Macromill, says half of the six segments representing roughly a third of all consumers surveyed are enduring a lower quality of life amid the outbreak compared to the rest that is typified by older men and high-income white-collar types.
“Those feeling financially strained are most often members of small to midsize businesses that are facing the wrath of the pandemic,” he says. “This divide will likely remain after the crisis. Japan has long been described as a middle-class society, but that may no longer be the case.”
Source: Japan Times