What:  Marketplace giants, local department stores and foreign e-tailers are fighting for the top spot in Japan as Japanese luxury consumers are becoming omnichannel shoppers.

Why it is important: Japanese department stores are seeing omnichannel purchasing journeys thrive as more shoppers embrace digital channels.

The pandemic-induced surge in e-commerce that was seen globally was even more pronounced in Japan. The country’s fashion e-commerce grew 27% between 2019 and 2021, rising to 2.4 trillion yen (USD 18 billion).

Although analysts believe the e-commerce market has peaked, experts suggest that companies will be able to get more milage out of the luxury segment. A survey conducted by McKinsey found that 41% of Japanese luxury consumers are researching and purchasing across channels rather than heading straight to department stores and boutiques.

Marketplace giants, Rakuten and Zozo are top competitors as they both have been adding luxury brands to their assortment in recent years, with their offerings focusing on luxury accessories.

The fate of Japanese e-tailers is important to global brands because digital channels have a growing role to play in what remains one of the world’s largest, most mature, and dynamic luxury markets. Bain estimates that sales of luxury goods in Japan are worth around EUR 24 billion this year, which amounts to half of the value of all other Asian countries combined, excluding China.

Japan’s luxury consumers also shop at foreign luxury e-tailers, however the barriers to purchasing from overseas platforms is high as poor translation can turn consumers off and the trust factor plays an important role in their purchase decisions.

In Japanese department stores, the security is trusted by consumers in terms of customer service and after-sales service, giving them a leg up in comparison to Rakuten and Zozo who are stronger in mass and medium-priced markets.

Many department stores were reluctant to embrace online sales before Covid, but most of the top department stores selling luxury goods- including Iestan Mitsukoshi, Daimaru Matsuzakaya, Takashimaya, and Hankyu Hanshin-are now seeing omnichannel purchasing journeys thrive as they increased efforts to digitize during the pandemic.

Isetan is among those with a fully-fledged international e-commerce service as they launched a shopping app to connect shoppers and sales associates in November of 2020.

Global luxury brands and Japanese consumers are still loyal to the department stores that served them for generations, however that loyalty is put to the test when their offering doesn’t align with customers’ expectations.

To benefit from the growth of the luxury market, these legacy stores will need to look beyond their current core demographic of loyal but older shoppers.

Multi-brand boutiques are also seeing success as they worked to grow their online business before the pandemic hit and capitalize on foreign demand for Japanese luxury brands.

Despite the progress seen in Japan’s luxury e-commerce market, there is still room for growth as most e-tailers are still lost when it comes to Gen-Z and social media. Online retailers will need to work harder to encourage more affluent shoppers to buy online and choose them over their rivals.

Who will win Japan’s Luxury e-commerce race?