DM in Japan

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TOKYO --- Despite the Japanese economic crisis American and other foreign direct marketers are unwilling to give up on a market most see as still lucrative and with enormous future potential, especially in financial services.


US catalogers have been hurt. Some have pulled out. Others are hunkering down. A few claim to show 1998 growth. But most vow to stay in the market, even with a reduced presence. Few, however, are totally candid about their situation.


Prestige International, a powerful US call center with a large Tokyo presence, claims still to represent Victoria's Secret, Bass Pro Shop and Neiman Marcus. Other sources say flatly that Victoria's Secret has left.


REI and Lands' End (see accompanying stories in this country focus) claim to be holding their own. Cabela's Sharon Robison said she was trying to "retain our customers and not making any overt effort at growing this market."


L.L. Bean, Neiman Marcus and Spiegel are all "in trouble," with their catalog sales, according to Isao Nakazawa, director of the International DM Institute.


Catalogers with retail stores, however, seem to be doing better. Koji Fujita, Executive VP of Dentsu Wunderman, Cato and Johnson, cited Eddie Bauer, L.L. Bean and J. Crew as positive examples.


But Fujita noted that retail sales have declined every month for the last two years. Japanese apparel catalogers have seen profits decline with US catalogers taking an extra hit because of the sliding yen.


Official data backs her up. Last year overall catalog sales in Japan showed the first slippage, down 1.3 percent over 1996, according to Japan's Direct Selling Association. The outlook for this year is worse.


DM agencies, on the other hand, are far more upbeat, both about current business and the changes for the better the recession is bringing about in Japanese marketing practices.


"Japanese clients are beginning to change how they think about marketing," Simon Dalby of Rapp Collins said.


"Increasingly we are getting involved in marketing and database building projects for large Japanese companies who wouldn't have considered doing that kind of thing in the past.


"New companies are coming in all the time with a different way of doing business and forcing them to change, to recognize that there are better ways of marketing their goods and services.


"Direct distribution of products is becoming more of an issue after companies like American Home Direct started selling car insurance through DRTV. Citibank has been offering telephone banking for a year."


Dalby believes, however, that change will be slow and that western agencies will have to engage in a massive educational process with Japanese marketers and consumers.


Integrated marketing has become a buzz word in the agency world, but implementation is speeding up "with the lingering stagnant economic situation," Atsuko Morimoto of Grey Daiko Japan said.


National newspapers are carrying more and more off-the-page ads for auto and life insurance companies and other financial instituions, Morimoto said.


The Internet is finding wider use as recession-hitcompanies realize they can push product on the web at vastly reduced cost. Grey has built a site for Dell to sell direct on the web.


It has also constructed databases for Mars, a food company, and for a number of mutual funds companies.


Suntory & Nikka, an alcoholic drinks company, is gathering names through TV, newspapers and sales promotions to boost customer loyalty and feed their database.


Midori Kaneko of OgilvyOne conceded that catalogers may be hurting, but said "other sectors are about to explode. The insurance industry will be deregulated by year's end, offering huge opportunities, she said.


The auto industry has started building databases to boost customer loyalty with BMW, Toyota and Nissan all doing so. Banks are using one-on-one marketing much more.


. "Our position hasn't changed," she said. "Response rates are hanging in there and we do seem to have a strong core of customers.


"But at this point we are trying to maintain and retain our customers by offering minor compensations like $10 coupons, prestickers and other thank you efforts.


"We're not renting lists for expansion of our Japanese file and not making any overt effort at growing this market. At this time Japan is just not a very exciting for us."
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