* * * * * * TERRIE'S (TOURISM) TAKE - BY TERRIE LLOYD * * * * *
A bi-weekly focused look at the tourism sector in Japan, by Terrie
Lloyd, a long-term technology and media entrepreneur living in Japan.
Tourism Sector Edition Sunday, March 27, 2016, Issue No. 844
SUBSCRIBE to, UNSUBSCRIBE from Terrie's Take at:
+++ Why is Chinese Per-visitor Spending Starting to Fall?
In February the Nikkei newspaper started running articles about the
peaking of the inbound tourism income bubble, pointing out that since
the end of 2015 there has been a downwards shift in per-visitor tourist
spending, even as the numbers of actual arrivals increases. As usual
Nikkei is trying to be the first to identify a new trend, but I'd agree
with them that it does appear that the froth is disappearing from the
sector and that future growth from inbound tourism is going to be much
harder work than it was in the last two years. At the same time, I think
this is just a slow-down, not a reversal, and there is still plenty of
money to be made.
The Nikkei's articles highlighted home electronics and cosmetics
players, explaining why those companies' stock prices have been dropping
Take Shiseido for example. In January, the company announced that its
FY2015 results would show a growth rate of just 1% compared to a year
earlier, of which 5%-6% (of the 1%) would be due to spending by
tourists. While 1% up is better than 10% down, the problem is that last
fiscal year tourist spending accounted for an astounding 40% increase in
domestic sales -- so for Shiseido 1% feels like flat-lining. Overall,
the retail cosmetics sector is still confident that tax-free sales by
department stores will result in a sector-wide jump of 36% for FY2015,
but as the Shiseido news shows, confidence about similar growth next
year has been shaken badly.
Then there is Laox, the Chinese-owned home electronics retail chain.
Unlike competitor BIC, Laox depends on about 90% of its sales from
inbound travel customers (for BIC inbound sales are around 10%), making
it a canary in the coalmine concerning any inbound tourism spending
macro trends. The company had an amazing 300% jump in sales through to
mid-2015 and was having trouble re-stocking its shelves fast enough.
However, by January this year, the CEO was warning that per-customer
sales were expected to fall, and sure enough they dropped later that
month (y-o-y) from around JPY30,000 to JPY26,700, 14% less.
-------- Business Start-up Seminar by Terrie Lloyd --------
Have you ever thought about setting up your own company in Japan? Or,
are you already running one and wondering how to move up to the next level?
Local Australian/Kiwi entrepreneur Terrie Lloyd, is running a seminar
for people who want to form their own companies, on Saturday, April 2nd,
2016. Terrie has established 17 companies in Japan over the last 30
years, and has a lot of experience to share about how to structure and
run your business when first starting up, with particular reference to
his latest www.japantravel.com project. This will be one of only two
seminars this year.
The CEO is now saying that Laox's overall sales growth will be down 50%
year-on-year, although obviously at 100%+, this is still pretty decent.
The reason he's so concerned and is setting shareholder expectations
isn't sales growth, it's profits. Laox issued a warning in February that
its profits would fall 18%, causing the company's shares to drop 18% the
very next day. Right now the shares are down about 70% from their peak
So what is behind the slow-down in per-person inbound tourist spending?
My take is that it is an inevitable maturing of the market, where
yesterday's first-timers have become more prudent repeaters today, and
tomorrow's first-timers don't make as much money to spend, especially in
light of the economic slow-down going on in China. You might think that
the slow creep of the yen upwards also has a part to play, however,
studies around the world on tourism show that inbound flows are not
particularly sensitive to short-term FX changes, and that even long-term
ones have to be in the order of 20% (i.e., yen to be 20% more expensive)
before they start impacting peoples' plans to head to a particular
Instead, as the Japanese government opens its immigration spigots wider
to hit its inbound traveler targets, the spending power of that bigger
base of people is becoming diluted. As well, and as mentioned, those who
can spend more are instead becoming more sophisticated and are doing
what all FIT repeat travelers to a favorite destination do - they become
more informed and start exploring local lifestyle options. In short they
are moving from buying watches and cameras to buying food, experiences,
and entertainment -- which means they are behaving more like western
In my opinion this is a very desirable situation, because it means
people are interacting with Japan because they are starting to like it,
not just because it has cheap supermarkets and department stores. This
reminds me of how the British enjoy going to France or Italy each year
-- for the atmosphere, food, and wine. In fact the Q3 (Oct-Dec) JNTO
inbound survey, which is administered to about 6,400 people per quarter,
clearly shows changes are happening.
I do a lot of public speaking to Japanese companies and local government
organizations these days, and I often ask the audience three questions
to help them put the China traveler into perspective, and help them lose
some of their obsession about how much they can get the Chinese to spend.
The three questions I ask are:
1. Who were the top spending travelers by nationality visiting Japan in
2. If you exclude shopping and just focus on actual travel (hotels,
transport, experiences, entertainment, dining, etc.), who were the top
3. Who were the top spenders on accommodation only?
Most people quickly answer that the Chinese were No. 1 in spending
overall, and they'd be right. However, for the travel-only category the
Chinese rank 4th after Germany (JPY629K/person), USA (JPY586K), and UK
(JPY567K)... with China coming in at JPY563K. For the hotel-spending
category, the high rankers are: UK, India, USA, Canada, and Spain...
with China down around number 14.
----------------- Soy Sauce Recipe Contest ----------------
Your original dish could win you a cash prize! Send in your own recipe
for either a Japanese dish or one from your own country, that uses soy
sauce as an ingredient, for a chance to win ¥100,000! Deadline for
applications is May 31, 2016.
* Grand prize - 100,000 yen x 1 person
* Silver prize - 50,000yen x 2 persons
* Bronze prize - 30,000 yen x 7 persons.
The same JNTO survey also shows that 61% of Chinese travelers have
income of JPY5MM a year or less. I think this segment is where the real
long-term inbound growth is going to come from, because, as foreign
economists often note, once a Chinese family hits around US$35,000
(approx. JPY4MM) of income a year, they start to travel. There are not
many countries as close, convenient, and diverse as Japan, and so for
this large and steadily expanding audience, making repeat FIT trips to
Japan is becoming evermore viable and attractive.
Actually I am very interested about the relative and absolute economic
impact of north Asian travelers (as a group of countries with similar
values) to Japan, and profiled for comparison the traveler incomes for
Chinese, South Koreans, Taiwanese, and Hong Kongers (not sure if HK
qualifies as "north asia" but I stuck it in anyway...:-)).
* JPY10-19.99MM: Chinese - 8%, S. Korea - 15%, Taiwan - 6%, HK - 10%
* JPY20-29.99MM: Chinese - 0%, S. Korea - 2%, Taiwan - 1%, HK - 0%
* >JPY30MM: Chinese - 2%, S. Korea - 3%, Taiwan - 1%, HK - 3%
Note: These numbers are from a 6,400-person quarterly survey, so there
are probably more than zero Chinese and HK travelers to Japan making
JPY20-29.99MM of annual income
Interestingly, all 3 of the ethnically Chinese countries have high
percentages of travelers on relatively low income. With the mainland
Chinese I think that this means that while some people could be
financing their travels by buying and reselling goods back home, and
some are only coming once and so are splurging, most of them are
probably learning how to become FIT travelers and thus learning how to
travel cheap. The upside is that although there are only so many cameras
and rice cookers they can buy, they are also traveling further afield
for longer, consuming things that ordinary people in the countryside can
make. So I think Japan should be celebrating this trend shift rather
than fretting about it.
...The information janitors/
--------- [NEW!] Wildcard Incubator Program ---------------
KOEI COMPANY Inc. Presents its latest "Up Close" Tokyo Session 2016 seminar
KOEI COMPANY is a San Francisco based consulting/M&A practice, and the
co-founder of the Wildcard Incubation Program. We will be hosting our
latest seminar session in Tokyo for startups, entrepreneurs, and other
internationally-minded business people, focusing on the Inbound business
in Japan and how to launch a new businesses.
Main Speaker: Terrie Lloyd, Serial Entrepreneur, Founder/CEO Japan
Moderator: Nobu Kumagai, Founder, KOEI COMPANY, Inc.
Title: "The Real Deal of Running an Inbound Business in Japan"
Details: Complete event details at http://upclose201604.peatix.com
Date/Time: April 12, 7-9pm, 6:30pm doors open
Venue: Connecting the Dots co-working space, Shibuya, Tokyo
Cost: 2,000 yen, please purchase tickets via Peatix Event Page:
More information: firstname.lastname@example.org
SUBSCRIBERS: 6,788 members as of March 27, 2016 (We purge our list
+++ ABOUT US
Written by: Terrie Lloyd (email@example.com)
HELP: E-mail Terriefirstname.lastname@example.org with the word 'help' in
the subject or body (don't include the quotes), and you will get back a
message with instructions.
Send letters (Feedback, Inquiries & Information) to the editor to
For more information on advertising in this newsletter, contact
Get Terrie's Take by giving your name and email address at
http://www.japaninc.com/newsletters/free_sign_up, or go straight to
Copyright 2016 Japan Inc. Communications Inc.
----------------- Japan Inc opens up Japan ----------------
J@pan Inc authoritatively chronicles business trends in Japan. Each
posting brings you in-depth analysis of business, people and technology
in the world's third largest economy.
Visit www.japaninc.com for the best business insight on Japan available.
Terrie mailing list