“What’s different this time is that consumers aren’t simply looking only for low prices, they’re being more selective and hunting for higher quality and more fashionable products,” according to economist Teruhiko Mano. And analysis of Internet search data bears this out.

A review of keywords that experienced a surge on Yahoo! Japan in May leads to several sites that allow people to save on normally high-price items. (Of course, flu fears and the usual celebrity and sports news also featured heavily.)

Searches soared for “5.5 million yen house,” a keyword used by real estate agency Aqura Home for a new service offering made-to-order houses for 5.5 million yen, around US$55,000.

In mid-May, there was a huge volume of searches for sisyokukai.jp a new service that promotes new restaurants. Users receive discounts of 50-80% for meals in exchange for providing feedback to the restaurants, who are trying to perfect their service.

This week, there has been a large number of searches for “kane no tamago service,” which introduces consumers to apprentice nail artists and hairdressers, who provide manicures and cuts for large discounts or even free.

One luxury item that did enjoy increased search interest was the Segway, as the transport device is rumored to soon become legal on the streets of Yokohama.

Time to reward yourself with that new 24-inch iMac?

Recession fatigue is starting to show in the United States, where consumers are rewarding themselves by “trading up” items that play an important role in their daily lives, according to Boston Consulting Group (reported by WWD). In fact, marketers interested in this trend need only look to Japan to see how an extended downturn can actually boost sales of high-quality daily necessities.

The top ten list of “trade-up” items for the U.S. is dominated by what most people would consider 21st Century home necessities. No. 1 is the personal computer, and household electronics like home entertainment (5), kitchen appliances (8) and washers and dryers (9) also feature. At No. 2 is fresh fruits and vegetables, reflecting wellness trends as well as the basic importance of food, with other entries being meat (4), sit-down restaurants (7) and fish and seafood (10). The other entries are bedding (3) and automobiles (6). With the exception of restaurants, the list clearly shows the items consumers will start spending on first will be things that improve their daily lives and personal space.

A prolongued period of low growth in Japan bred innovation in small-ticket items, as consumers recalibrated their spending patterns

The changes in spending by Japanese a decade ago reflected their different priorities, with more emphasis on fashion (which doesn’t make Boston’s U.S. Top 10) and personal computers (mobile phones were always more useful here). However, the shifts in demand were similarly focused on improving consumers’ daily lives and, in the process, contributed to world-leading innovation in everything from functional home electronics and B2C mobile commerce to beverage flavors and cigarette packaging.

Contact us for details of ethnographic research and innovation programs to help your business anticipate consumers’ changing priorities.

A recent campaign by Suntory matches six malt whiskies with six specially made chocolates.

“The French use the word mariage to mean pairing,” explains chef and author Clotilde Dusoulier. “It is used in the case of food and wine (mariages mets et vins), and also between two ingredients (le chocolat se marie bien avec les fruits rouges – “chocolate goes well with red berries)”. In the past two years mariage has appeared in the Japanese lexicon, refering to alcohol match with a complementary sweet, most often chocolate.

Corona beer is now comes with a gift piece of chocolate.

For its current “Malt and Chocolate” campaign, whiskey maker Suntory collaborated with famed chocolatiers in Tokyo to pair six malt whiskeys with six chocolates. Glenfiddich, which Suntory imports to Japan, has been matched with a citrus chocolate, and Suntory’s own 12-year Hakushu is paired with green tea chocolate. The chocolates are not sold with the whiskeys, and are only available at the chocolatiers that produce them, so mariage fans would have to travel to six different locations to sample the full range.

Continuing the mariage trend, Nippon Beer, which imports Corona beer to Japan, is now attaching a piece of bitter, 79% cacao chocolate to Corona bottles available at convenience stores and liquor stores.

Narita Airport is Japan's gateway to the world. Will it see more or less traffic in the months to come?

For a long time we have known that Japanese in their 20s have less interest in traveling abroad than previous generations. But now that so many other formerly rich countries are going through Japan-style economic slumps of their own, is this a pattern that we will see repeated worldwide?

Visa recently conducted a worldwide study that found that two out of three travelers were rethinking their holiday plans this year. (Some newspapers decided it was positive that one in three wasn’t rethinking, surely a sign of negative headline fatigue.) If they weren’t going to cancel their breaks entirely, they were considering holidaying closer to home.

Some airlines are responding with dramatic fuel surcharge reductions (from 14,500 yen to 2,000 yen on an ANA flight from Tokyo to Singapore) or discount campaigns (“35,000 yen return” from Tokyo to London on British Airways), but others are already cutting schedules: JAL is currently operating 33% fewer flights to Bangkok.

As the Golden Week holidays approach, there are also signs that the Japanese travel market is at a tipping point that will strongly favor the domestic industry.

It’s worth noting that flights to SE Asia mid Golden Week are still available for as low as 35,000 yen return (on United), while prices to Okinawa remain sky high. That suggests that people are making travel plans not only for economic reasons; it also “feels wrong” in these lean economic times. There is a deeper shift in consumer behavior going on toward the local, the safe and the humble.

As more demographics choose to travel locally, expect a more diverse range of leisure options to develop in Japan targeted not only at the Silver Market and families with children, but also at sophisticated and wealthy consumers who used to go overseas. They will be looking for international-standard hospitality within easy reach of Japan’s urban centers. Products and services offering understated luxury, eco-awareness, wellness and experience will prosper.

Pampers Premium Care diapers.

The birth rates has been steadily falling in Japan, and marketers are hoping that as parents have fewer children, the will spend more on each child.

P&G Japan has released Pampers Premium Care, available exclusively through Babies ‘R Us, the Japanese retailer Akachan Honpo, and mail order. The price is around 2,000 yen for a package of 60, considerably more expensive than around 1,500 yen for the same number of normal Pampers. The premium diapers are said to be better at preventing diaper rash through improved air circulation.

Learn more:
Other P&G Products
P&G Japan Official Site (Japanese)

Lotte and Suntory have collaborated to release a chocolate bar flavored with premium 12 year old single malt Suntory whiskey from Yamazaki Prefecture. In time for Valentine’s Day, a gift set including a bar of the chocolate and a miniature bottle of Yamazaki 12 Year, is being released for a limited time.

Learn more:
Other Lotte Products
Other Suntory Products
Suntory Official Site (Japanese)

Designer Norico Kamata shows off some of her designer canes.

Designer Norico Kamata was working in the fashion industry four years ago, when a sudden illness left her in the need of a cane. She found that while of functional design of canes made in Japan are excellent, it was difficult to coordinate them with fashionable apparel. She launched her original brand, Norico, to fill that need. Her canes can be accented with Swarovski crystals and crocodile skin, and cost between 56,000 yen ($560) and 120,000 yen ($1,200), and custom order models are available. The canes are available at high end department stores such as Takashimaya and Mitsukoshi.

Recently eyeglass shops and drug stores in areas with a large amount of pedestrian traffic have begun selling canes from display stands in front of the shops.

Luxury hotels such as this one in Seoul are facing tough times.

We have entered a new economic era. A period when the adage ‘more is good’ no longer resonates and in which conspicuous consumption is starting to be viewed as repulsive amid the world’s harsh new realities.

As companies scale back on international expansion plans and consumers tighten purse strings in anticipation of a grim 2009, this new era of ‘Controlled Luxury’ will see people in Asia and throughout the developed world become increasingly thoughtful when making daily consumption choices and measured with the purchase of larger ticket items.

It is a time when the logos and egos of luxury brands will start to look old-fashioned as people decide that luxury is no longer defined by the purchase of a designer product but is representative of something that is far more personal.

Luxury purveyors of goods and services that were oh so special and difficult to obtain but then became more ubiquitous than a convenience store bought snack will be hardest hit by this sea change.

This new paradigm will mean that luxury, a noun overused in today’s world, will no longer be used to sell everything from soap to socks but instead within the context of a specific environment, become an adjective for how we feel at the time of purchase or usage.

Going forward, we can safely assume Asians will pare back on services and brands that misuse the word luxury, especially at hotels that charge high room rates yet still expect us to feel a warm, fuzzy feeling about the hotel brand upon check-out, only to discover we have been charged for Internet access and breakfast, no longer extras in this day and age, but necessities.

How will our responses rate on customer service surveys at hotels that try to convince us with their brand messages they act as a home away from home then charge for extortionately priced breakfast – for I am racking my brains remembering the last time I paid $25 for a bowl of cereal in my kitchen. And as for hotels charging ridiculously high Internet access fees that do not reflect actual cost, this starts to feels more like an insult along the same lines as charging us to turn on the television or hairdryer.

Let’s not dwell on the outmoded and outrageous table charges for the privilege of sitting at a bar for a cocktail twice the market price at the city’s trendiest spots. If there is a positive to this crisis, it is the reawakening that it is no longer smart to overpay for products and services merely because they are fashionable or been labeled with the luxury tag. Instead, consumers will patronize outlets that offer value for money and also offer a memorable experience.

And to the car brands that once represented an area of individuality among personal expenditure, after all, our car choice was considered the mobile representation of our homes and generally speaking, the second largest purchase after the roof over our head. Who truly feels special driving a car that our neighbors, co-workers and friends also own.

Will we be sorry to see fewer designer handbags slung over the shoulders’ of young women who instead of saving for their future were instead building debt with credit card companies. The same designer accessories that were once crafted with care in the ateliers of Europe and held strong brand values dear to the buyer’s heart, but are now systematically churned out in Asian factories in gargantuan quantities that can be purchased from any trendy shopping thoroughfare in our city.

Yet despite all the doom and gloom, this new era of thoughtful spending brings opportunity. While people throughout the developed world have been shaken to their senses by the realization that the zeros that were being rapidly added to their property and equity portfolios, and consequently they borrowed on, were as fake as the bags found at street stalls in this city, there is still room in this ‘huddle down’ era for brands to shine.

In fact, now more than ever, it is critical to stand out from the pack. Not just as an individual searching for a job or even as a person trying to keep an existing position, but from a brand point of view too. During this current adversity retailers, manufacturers and brands that develop tactics to combat consumption fatigue have a real advantage in carving out a niche to dominate the marketplace of the future, both here and overseas.

By utilizing consumer insights, and there are many from this spending binge and its subsequent post consumerism hangover, we distill what people want from a retail and service experience. After all, we still need clothes, food and indulgences, just fewer of them.

What we may learn is there is no gratification in buying one in each color, or stocking up unnecessarily just to keep cupboards full or buying a second home you never get the chance to use. What we see is that the symptom of uncontrolled spending is guilt that later manifests itself in unhappiness because it appears the more we have the less we appreciate.

So, here’s the reality. We have all overeaten and now we are collectively purging on over consumption. As we look in our closets, we ask ourselves, will we return to the stores that we bought sweaters from that pile up unused at the back of our cupboards? More than likely not. Nor will we use the services of companies that were never that good to begin with but we continued to use out of convenience. In this ‘Controlled Luxury’ era, we will walk a mile to save on unnecessary costs.

With this re-examination of who we are and what we now stand for, luxury will remerge as a moment in time and a memory to be cherished, personal to its owner, not an overpriced item that can be bought on credit.

Just last week someone was telling me they found their personal reaction to the global crisis far more understated than they thought possible. He said, “What I find most puzzling is my lack of anger at losing so much money. I can only surmise that everyone around me is in exactly the same boat, so losing out doesn’t quite feel as bad.”

It’s exactly these powerful, collective emotions that will push forward-thinking businesses front of stage. The brands that understand the consumer desire to create a safer future (taking up a BRIC-country language course for example) will lead.

Consumer expenditure in the luxury sector will obviously still occur, but for the foreseeable future it will be carried out in a more reserved manner and only after a period of self-imposed abstinence. Bottles of champagne will be still be ordered, but instead of routinely and on cheaper brands, Asian consumers will splash out on a more expensive bottle as a behavioral reward to switching to filtered tap water, after forgoing environmentally polluting bottled varieties.

Moving online, targeted digital services will prevail. As consumers switch from hitting stores out in the streets to shopping out of their armchair’s in the home environment because the outside world is seen as increasingly threatening, the online malls that offer the social functions of social networking site’s (SNS) will increase in popularity.

Trust has weakened in the concept of globalization and people are naturally looking at home and to the immediate region for solutions. As we move away from the shaky foundations of what constituted the old model of globalization, South Korea is geographically well located to become a key player in the new era of regionalization. Local businesses that innovate fresh products and services that focus on originality and quality will become market leaders, both home and abroad.

Globally, countries wealthy enough to support substantial luxury purchasing are really suffering economically, and South Korea and Japan are no exceptions. But within adversity there is always opportunity. Rather than retreat in to shells, now more than ever is the time for local businesses to invest in research to become more competitive using current insights to comprehend how people feel.

I am not referring to R & D but in fact, qualitative and ethnographic consumer research to identify what people want and why. Local businesses need to invest in the kind of research that gets to the heart of what will motivate purchasing decisions in this new era, a time when the old models no longer apply. Unless local companies track these trends, this period to step front of stage in what is considered Asia’s Century, will pass countries such as Japan and South Korea by.

Local companies need to invest in international research trips to understand what consumers and leading edge companies are doing regionally, especially in economies that have experienced boom and bust cycles in the past. Consequently, this will inspire and promote a culture of innovation internally. It is only through the discovery of new knowledge and by looking at global trends will local companies move from following consumer trends to anticipating them.

The real issue here is that research is considered a value added service by many businesses and not an area of expenditure. The attitude appears to be, why pay for research when ideas can be ripped off from overseas, even if the downside is they may not resonate locally with consumers.

There is just a handful of independent companies in Seoul that work in the area of market analysis and trend forecasting. In New York and London there are hundreds of consultancies looking at change, converting new ways of thinking into innovation.

Businesses that copy rather than innovate will soon be overtaken by hungrier counterparts in India and China that are investing in culture’s of innovation.

As people scale back on purchases and reconsider the meaning of luxury, local companies that fail to bring something new to the table will find consumers choosing to eat elsewhere, most likely from an original and more imaginative source.

Nicole Fall

This article originally appeared as a front page “Think Piece” in The Korean Times.

The Mitsui Outlet Park Iruma opened in April.

2008 proved to be a big year for outlet malls in Japan. Four new locations opened around the country, bringing the total up to 36 malls which have been built since the concept was imported from America in the 1990s. Two other outlets expanded floor space, driving total sales in 2008 up to an estimated 520 billion yen ($520 million).

Outlet malls in Japan follow the pattern established by counterparts in the US, with brands such as Coach and Issey Miyake selling directly to consumers stores in locations far from the urban centers, but not too far to bring in big city shoppers. The Sano Premium Outlet in Tochigi prefecture, which opened in 2004 and expanded floor space this year, is a 90-minute bus ride from central Tokyo.

New outlets, such as the Mitsui Outlet Park Iruma, which opened in Saitama prefecture in April, drawing 37,000 visitors on its first day, focus not only on retail, but also family leisure, with a number of restaurants, cafes, and mini amusement parks for children, and play areas for pets.

This spring, three high-end jewelry brands, Tiffany, Van Cleef & Arpels and Cartier, held competing exhibitions in Seoul. These events, held in an art gallery, a department store and a national museum, were crowded with wealthy women and art connoisseurs. Koreans heartily embrace Western luxury brands:

• Van Cleef & Arpels’ sales increased by 130% from 2006 to 2007.

• Chaumet’s sales have increased as much as 500% since 2000.

• Tiffany’s sales grow 10-15% every year.

• In one day in 2007, Audi Korea sold 20 units of the R8 luxury sports car, which was all the units allocated to the country for that year.

• Premium home appliances such as Bang & Olufsen audio, Boss home theater and the De’Longhi espresso machine also show a steep rise in sales.

Rich Koreans are spending more on luxury products and services, while middle-class and poor Koreans worry about rising inflation and food prices. This ongoing socio-economic polarization raises concerns that Korea could be divided into three: North Korea, Rich Korea and Poor Korea.

Jeongmae Choi