The 108-room Quincy, which opened in February, operates under a flat-rate system where the room charge includes airport pickup, three meals a day, evening cocktails, Internet use, mini-bar, limited amounts of laundry and all local calls. This transparent approach is a clear pitch at businesspeople being squeezed by tighter travel budgets, but appeals to the broader traveler who no longer understand why they should be overcharged for essentials like Internet or non-luxurious extras like a canned drink.

Quoted net rates for early July are SG$228 a night (US$157), an all-inclusive price that is competative for the city-state and, for consumers, laudably easy to understand. By comparison, the same night at The Scarlet would cost SG$175, room only (SG$263 with breakfast and airport pickup). The Naumi is SG$260 including minibar but excluding breakfast or pickup.

This will be a tough year for Singapore’s hotels, with 4,500 new rooms due to come online, even as the number of visitors falls, according to Jones Lang LaSalle Hotels.

The change of economic mood means that consumers are less tolerant of murky pricing policies and hidden extra charges. They still believe they deserve to travel in style. But if they are going to spend their money, they want to know what they’re getting in return. The Quincy is one example of a business response.

“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.

The potential spending power of young, wealthy city-dwellers is well-documented. Eighty percent of wealthy Chinese are under age 45, according to a recent McKinsey report entitled The Coming of Age: China’s New Class of Wealthy Consumers. That’s compared with 30% in the US and 19% in Japan.

The economic crisis has shaken the assumptions of the Chinese middle class like anyone else. They are less likely to take risks, spend unnecessarily, or change jobs on a whim than they were a year ago. However, individual confidence – belief in oneself – remains remarkably high, especially among females.

Female consumers in their late teens and early 20s interviewed for the research have clear plans for their futures, which involve 1) early 20s: marriage, 2) mid-20s: having a child, and 3) late 20s: returning to work.

Rather than being a hindrance to a career, the young marriage age increases the opportunities for urban women, who expect to have their child (only one child) by their late 20s. The presence, normally, of four sets of grandparents mean that childcare is free and easy to find, so women don’t have to give up their careers, and most don’t want to. Unlike for previous generations, or for people living in rural areas, these women see work not only as a right they are not willing to give up, but also an escape from the pressures of home and family.

With these social/familial obligations taken care of at a relatively young age, but both men and women retain a sense of adventure and personal belief that might for people in the West or Japan peak in their 20s. This enthusiasm is often channeled into a career, the primary means of achieving money, status, friends and personal freedom.

More details of this and nine other consumer shifts are available in Five by Fifty’s China Shifts 2009 report. For a sample, contact us.

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.

McDonald's Premium Roast Coffee sells for less than half the price of Starbucks.

McDonald’s Japan is experiencing brisk sales of its “Premium Roast Coffee.” The coffee is made from South American beans, and packaged in a sleekly designed cup with a black lid.

The launch was prompted by research showed that while coffee had mainly been ordered as a side item for meals at McDonald’s, in recent years more customers have been coming to McDonald’s only for coffee. To launch the product, new standardized coffee machines were installed in all locations, to insure that consumers had the same taste experience at all shops.

Premium Roast Coffee went on sale in February 2008, for 100 yen, and the price was raised to 120 yen in August of that year. A short size coffee at Starbucks, by comparison, costs 290 yen. 160 million cups of McDonald’s Premium Roast Coffee were sold by the end of 2008.

The fim Lalapipo deals with people struggling an a harsh economy.

The Japanese film “Lalapipo: A Lot of People,” currently in release, deals with young people struggling in a harsh economy, dreaming of jobs they are unlikely to get. If the topic hits a little too close to home for some viewers, the theater Cine Quint in Shibuya, Tokyo is sweetening the deal by offering discounts to movie goers who are temp workers, and therefore lack job security.

In the current economic climate point cards, which are issued everywhere from small restaurants to airlines, could become an important tool not only to increase customer retention and grow spending, but also to win new customers.

According to some of the numerous surveys on the topic, more than 95% of Japanese consumers own at least one loyalty card, and 30% of Japanese women under 40 carry ten or more cards in their wallets.

Almost every retailer in Japan, from small restaurants to large companies such as airlines, department store chains and credit card companies, has a loyalty card program. However, until recently the use of these cards was limited to a single company – reward points collected at retailer A could only be used at stores of this particular chain.

But this limited use of loyalty cards mainly to drive loyalty and therefore sales is increasingly a thing of the past. More and more Japanese companies are discovering them also as a tool that also allows them to attract consumers from non-competitors, and launching cards that can be used at a wide range of stores and service providers.

One such format is the T Card, which was originally introduced as a loyalty card for members of rental video chain Tsutaya. The company has now turned it into a stand-alone brand that allows it’s almost 30 million members to collect and redeem reward points at over 30 retailers with more than 27,000 stores nationwide, including convenience stores, electronics stores, cinemas and restaurants.

In September 2009, T Card went mobile and subscribers of Japan’s largest mobile provider DoCoMo were able to collect points on payments made through their mobile phones. In February 2009, the service was extended to include Japan’s other two mobile phone companies.

T Card website (Japanese)

Cariru offers rental services for brand bags and other high-end items.

Amid the drop in spending on luxury fashion symbolized by Louis Vuitton cancelling its plans for another flagship store in Tokyo, the website Cariru.jp (which means “rent” in Japanese) provides an innovative solution for frugal consumers with a rental service for designer bags and other high-end fashion items. Users need to register at the site, and then can select a bag from a wide selection of designer brands. Their item of choice is then shipped to the user’s home. A weekly rental of a Gucci or Louis Vuitton bag starts at 6,000 yen (around $60). After the rental term, users can return the item, rent
it for a longer term, or choose to buy it.

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.

Shoppers browse in Japan

When Swedish fashion retailer H&M opened its first Japanese store in the upscale shopping district of Ginza, more than 5,000 people lined up to be the first in Japan to wear H&M goods. The fashionable, yet reasonably priced clothing has scored a hit with cost-conscious savvy savers admist an economic downturn in Japan. Now that H&M has opened a store in the street fashion center of Harajuku and is planning a third in the nearby youth mecca of Shibuya, many are wondering about the effect it will have on smaller, pricier Japanese brands.

On September 13th, H&M, the popular Swedish fashion chain, opened the doors of its first store in Japan, located in Tokyo’s Ginza district. After having conquered Europe, North America and large areas of Asia and the Middle East, taking on the Japanese market next seemed the logical next step.

Shoppers show their excitement on H&M

Established in 1947, H&M currently has over 1,500 stores in 28 countries, making it the world’s No. 3 clothing retailer, but it has taken the fashion giant over half a century to break into the Japanese market. Most analysts attribute this to the historically exclusive attitude of Japan’s fashion-crazed consumers.

While Louis Vuitton and other big name labels were able to cash in on the obsession with designer brands that came with the bubble era of the late 1980s and early 90s, it is only recently that discount chains have been able to find their niche in Japan.

With jeans priced at 3,290 yen and men’s tailored suits coming in at under the 30,000 yen mark, H&M will be competing with other international chains such as Gap and Zara from Spain, as well as the local favorite UniQlo. With the Japanese and world economies suffering a downturn, consumers are turning to retailers such as these to satisfy their hunger for the latest trends without breaking the bank.

H&M’s CEO Rolf Eriksen was in Tokyo on Thursday for the opening “shopping” party of the new Ginza store, and he confirms that the company has grand expectations for its new market. Two more stores are slotted to open in Harajuku and Shibuya within the next year.

Kelly Wetherille