“New luxury” and “trading-up” in Japan

When it comes to purchasing decisions, consumers are becoming more and more unpredictable, tending to make judgements based on their own standards and peculiarities in taste instead of going conformist. They pay for individual lifestyles as a way of giving themselves identities, and in many cases prefer products because of their fascination for the design that fits their personality. This kind of aesthetic fascination has become a key trend throughout all product categories, an “aesthetization of consumption,” with distinctions between offerings becoming increasingly subtle, requiring clearer messaging and positioning than before (SIGMA 2005: 10; see also Ishiwata 2006: 7; Nunes et al. 2004: 57). The distinction between domestic and foreign brands is blurring, the variability in stores is increasing, and the fixation on foreign luxury brands is loosening. Brands are no longer the main factor in consumer choices and there is a greater tolerance for nontraditional lifestyle paths (Nikkei Weekly, July 16th, 2007, Debbie Howard, Japan's evolving consumer psyche creating opportunities, p. 32; Hirano and Miles 2006).
In the 2005 issue of the Nikkei hit product ranking, the first two places are made up by products situated in the upper and lower price categories. An increasing number of people spend big sums in areas emotionally important to them, while economizing in other areas, seeking harmony between luxury and low cost prices (Nikkei Konwakai 2005; Ishiwata 2006: 9; Danke 2005: 8; Chadha and Husband 2006: 60). This kind of consumption polarization was named “trading-up” by Silverstein and Fiske (2005), who identified it as a global phenomenon. While the trend in America may have slightly different underpinnings, the basic structure of the amassed wealth is the same in Japan. The relative nature of needs and wants and the relative elasticity of discretionary income are the basic principles of the trading-up phenomenon. Every consumer has a different idea of what is necessary for him and what he is willing to spend (Silverstein and Fiske 2005: 22; Shiozaki et al. 2005).
“New luxury” is a major and growing segment of the economy. While old luxury was defined by the object itself, its intrinsic qualities, new luxury is defined from the way the consumer is experiencing it, creating a personal, consumer-centric dimension of luxury. Companies that create new luxury products have constantly outperformed their competitors, and the segment is expected to reach $2 trillion globally by the end of the decade. More and more consumer good categories polarize by trading-up and trading-down, and companies that fail to differentiate their offerings by either lower price or added value get stuck in the middle, losing considerable market share (Silverstein and Fiske 2005: 55-58, 274: “There are many proud and currently successful companies with wonderful histories who are choosing to ignore the new luxury phenomenon, but they do so at their own peril.”; See also Danziger 2005: 19).
Luxury marketers must look at their products as the delivery mechanism through which they transmit a luxury experience to the consumer. Luxury today is about expert and insider knowledge, about sophistication and not simply the flaunting of status brands. Japan has reached a stage that Anterior Insight has named “conspicuous abstention”, where consumers become more refined and discerning, actively choosing their brands and the combination in which to add them selectively to their lifestyle (Anterior Insight 2008).
All these developments mean that success in the premium segment depends more and more on understanding the psyche and values of a fragmented marketplace. Japanese consumers accumulate products from different categories and price levels, creating a “consumption constellation.” Products help consumers to buy a link into a chain of associations by the means of a lifestyle shopping (Danziger 2005: 27; Graham and Matthews 2004). They are aware of the fact that brands provide “a reasonably reliable, efficient, and consistent method for signaling others” about who they are or who they would like to be (Silverstein and Fiske 2005: 49). Delayed marriage leads to a longer active and sophisticated dating culture where people are displaying taste, knowledge, and values through the products they are consuming, and which may therefore be considered more of an investment than simply conspicuous consumption. Shopping experiences become dating conversations, a nonverbal method of self-expression and social dialogue about the complexity, variation and subtlety in new luxury goods (Silverstein and Fiske 2005: 30, 51; Frank 2000).