New in label-conscious Japan: bargain hunting

A steady decline in consumer spending prompts some retailers to offer quality, low-priced goods.

Masaki Hosokawa steps out of the Uniqlo shop in Tokyo's Harajuku fashion district and instantly pulls on his new purchase, a moss-green fleece jacket.

"It is super reasonable and looks fine," says the university student, who's smiling because he spent just 1,900 yen ($17), about one-tenth of what he normally pays for chic brands.

A few years ago, Mr. Hosokawa would have been more likely to sport expensive designer clothing than show off a cheap fleece. But today, Hosokawa is one of many new converts who have broken a long-held prejudice here against things without a high price tag.

In the past two years, Uniqlo's casual, affordable fashions - sold through about 480 stores in Japan - have caught on as Japanese eschew the lavish lifestyle of the bubble years. Recession-battered consumers now prefer to save with discounters rather than splurge on the expensive designer suits and restaurant meals that were so common in the '80s. At the same time, the demand for quality lower-priced goods is coaxing Japanese firms into being more responsive to consumer tastes.

Economic indicators suggest that consumer spending, which makes up 60 percent of the economy, dropped 2.3 percent in November - falling for the 44th month in a row. But the figures don't reflect booming sales at specialty stores like Uniqlo or even McDonald's, where one can now buy two burgers for the price of one, a practice unheard of just a year ago.

Uniqlo's parent company, Fast Retailing, posted a 100 percent increase in sales and a 326 percent rise in pretax profits over the previous year. Taking that kind of activity into account, "consumer spending is already in a moderate recovery track," says Akiyoshi Takumori, a chief economist of Sakura Securities. Consumers here have long waited for price declines because they thought the balance of prices and goods was inappropriate, says Kazuo Ojima, editor in chief of Nikkei Trendy, a monthly consumer-trend magazine.

In boom times, well-traveled Japanese were exposed to products abroad that cost a fraction of what they paid at home. With the government's easing of protections on small retailers, and manufacturers' weakening grip on prices, the way opened up for discounters.

But Mr. Ojima points out that people here won't buy cheap stuff just because it's cheap. It's a question "of Japaneseness," he says. "When it comes to buying a shirt, they investigate the quality - stitches, button holes, and other parts - very carefully. If everything is perfect, they take it to the cashier."

Ojima's magazine recently featured a quality comparison of clothingmakers, including the Gap and Uniqlo. Consumers here normally equate quality with cost, and for a long time that meant pricey Western goods. But people now are much less willing to part with their money. In the past decade, the average monthly pay of Japanese workers rose by just 10 percent. It is in this environment that Ryohin Keikaku Co., which sells generic stationery, food, clothes, and furniture under the "Muji" label has enjoyed sales growth and increased profits since it started business in 1989.

"Our company is always discussing how we can keep providing better goods at better prices because our [customers want] further price cuts," says Masako Iso, Ryohin Keikaku's general manager of public relations. Everything at Daiso Sangyo Company's 1,600 stores, from a notebook to a wine glass, costs 100 yen (87 cents).

The new-style Japanese retailers "have the makings of becoming strong, worldwide competitors," says Maki Shinozaki, an analyst at Daiwa Research Institute. "To help them to do business easily, the Japanese government also must conduct the structural reforms."

Some companies here are optimistic, with ambitions that go beyond Japan. Fast Retailing is going abroad with the Uniqlo logo next year in London. "Experts here warn that it will be dangerous for us to market our products overseas, but we never know what the outcome will be unless we try," says Nobuto Fujiwara, Fast Retailing's spokesman.

(c) Copyright 2001. The Christian Science Publishing Society