Comments on McKinsey's Japan Luxury Report

McKinsey has conducted an extensive survey among 1.500 luxury consumers and many interviews with top executives in the luxury business. The result is a report that offers some basic insights into the luxury industry in Japan and recent developments. I will try to analyse parts of the report and give my own commentaries. All my comments are (of course) open to debate and criticism. Some judgments might seem harsh or overly biased. This is on purpose. I hope to start a discussion on my point of view. I want to talk about real reasons behind the statistics and not only about facts and insights that seem "publishable".

The report can be accessed online: http://www.mckinsey.com/clientservice/retail/pdf/Japan_Luxury_report.pdf

The report starts with a few notes on the research background, without giving detailed information about exactly how it was performed and under which criteria the people interviewed were selected. I suggest a strong bias here, first, towards limiting the questioned people to the greater Tokyo area and to people readily accessible. This excludes (most probably) really rich people with high assets, people who shop within closed environments and will not participate in such surveys, etc ... Neither a time frame nor demographics are given. Further, giving each respondent the same weight means missing the point. Taking into account the heavy influence of opinion leaders on the decisions of others, trying to get a picture of changed attitudes must include the internal influence of a few on the majority. The whole report does not include any references to word of mouth dynamics within networks.

Exhibit number 4 is problematic in many ways:
1) There is no additional information on the demographics of the respondents, nor on the distribution of wealth or luxury/premium luxury consumers among the different age groups. This is highly problematic as both wealth and consumer behavior tend to change with age.
2) The question "Shopping for luxury items at department stores isn't as special as it used to be" is a pre-conceived idea that can heavily influence the answer of respondents. People who suffered from the economic downturn might project their own economic situation on the perceived "specialness" of the department store. Also, what does "special" mean in this context? Which word is used in Japanese (tokubetsu 特別?). It could mean something different for every respondent. Department stores used to have a clear distinction in the 90s between foreign brand sections and domestic products sections. The change in this dichotomy might result in the perceived changes. Also, the question itself is very ambiguous.
3) There is no information on the distibution of age groups among the respondents. No information is given on the selection process for the online survey. Also, the problem of an online survey to include high-level customers which are generally less prone to participate in these surveys seems obvious (imagine a high-class member of Mitukoshi's private membership club completeing a survey for McKinsey online). Many services created for exclusive customers in the recent years as part of customer retention/loyalty programs (similar to mileage club benefits among airlines) heavily influenced the perception exclusive customers have of the department store shopping environment. I strongly doubt that these exclusive customers would participate in an online survey. There influence as opinion leaders and social network hubs is important.
4) LUXURY AND PREMIUM. There is no clear definition given for what the two categories "high end" luxury brands and "accessible luxury brands" mean. Coach is actually referred to by Japanese consumers as being "accessible", but this has to be clarified. What about Prada, MiuMiu, Celine and all the in-between brands? I personally disagree with this over simplified dichotomy. The term "item purchased" is not defined. What exactly is purchased, in what price category. These additional informations are not additions, they are essential if you want the question to have any relevance at all. The definition of the term "luxury" is a very delicate one. If you take the definition by Kapferer and Bastien (2008) then the ability to create a social distance is what defines luxury. Premium is not luxury. A LV handbag is a product from a luxury company, but can it be still considered as a luxury product that creates a social distance? The reasons for customers to buy certain brands are very complex and the difference between a LV handbag and a Coach handbag is very complex, indeed. Chanel does not even fall in same category at all (considering price and sales chanels). The major difference of a LV bag is not so much its quality standard or whether it is considered "high end" luxury or not. It is the market penetration that gives LV a special role, triggering a double effect of attracting customers looking for a secure choice and making others refrain from buying because of its ubiquity. Also the bags of Samantha Thavasa, mentioned in the end of the report, fall into a different category, and can by no means be considered luxury products, more likely fashion items. This applies to the sales channels, the advertising strategy with extensive use of celebrities and especially the perceived quality standards.
5) DEPARTMENT STORES. When you take Isetan department store as an example, the conclusions presented do not apply at all. Isetan has not only been tremendously successful, its image is very high-class. The success of Isetan has created a whole set of books (similar to the books on the success story of Starbucks or Seven Eleven) that explore the secret behind its success ( お客様はなぜ「伊勢丹」を選ぶのか
溝上 幸伸 (著), among others ). Isetan is not mentioned in the section on department stores, although it might present a perfect example to prove the suceess of the implications given by McKinsey. There is no distinction made between the classic department stores such as Mitsukoshi and Takashimaya and the train station department stores such as Keio and Seibu. The clientele is different, the same goes for the sales developments. The problem of department stores is not so much the store concept per se, more bad management in the years following the bubble and the inability of managers to adapt to changing market environments with new management practices. This can be considered basic wisdom, being mentioned in Larke and Causton (2005): Japan. A Modern Retail Superpower. No Japanese sources are needed to make these distinctions.

What would have been interesting is a cluster analysis from the data in order to create customer groups (shopping types) complete with demographic data, similar to the Sigma milleus by SIGMA.

I know the report represents only an overview of the results, but without additional information on the demographics of the respondents, the age-group differentiation is basically meaningless.

(to be continued)