MAGASTORE will launch first on the iPhone

One of Japan’s most powerful companies, Dentsu, is trying to extend its control of traditional media to the mobile arena with a new application that will force users to pay for online magazines and maintain its dominance over their ad space.

For years the advertising behemoth has been sitting pretty, thanks to its near-monoploy over media buying and the commissions that go with it. Last week, Dentsu announced the launch of MAGASTORE, a downloadable app that will sell access to magazines on mobile phones.

In fiscal 2008, the digital publishing market was estimated at ¥46.4 billion (US$500 million), up ¥10.9 billion from the previous year. Of that, mobile publishing accounted for more than ¥40 billion, according to research by Impress Holdings. Digital comic books are selling especially well, thanks to improvements in cell phones, with larger screens, faster Web access and simpler billing systems.

MAGASTORE, a collaboration with mobile software provider YAPPA Corp., will begin as an application for the iPhone on the Softbank network this summer, and later be made available to other handsets and carriers. After downloading the application, users can purchase magazines and store them to read anytime. Users will pay ¥115 to for the application and then ¥115 to ¥600 per magazine.

YAPPA has made one-off solutions for magazines in the past, such as Shufuntomo’s éf magazine. But Dentsu’s bundled app will be cost-effective for publishers. They will get access to viewer data as well as an online settlement system and, according to the company, “a new advertising solution combining the characteristics of magazine contents and the technology of mobile advertising.”

Among the publishing houses that have signed up for MAGASTORE are Asahi Shimbun, Fusosha (Numero, Spa!), Condé Nast Japan (Vogue, GQ) and a host of niche publishers of titles about everything from skateboarding and kimono to salt-water fishing.

The control of content by powerful corporations remains solid in Japan, even in mobile, where providers like DoCoMo and KDDI strictly control who gets access to users’ menus. (The App Store model developed by Apple for the iPhone fits nicely with this strategy.) When it comes to the question of whether online content should be free or paid, Japan clearly veers toward the latter. Consumers don’t expect mobile content to be free, and by the same token are more willing to pay for it.

Although the list of participating publishers in MAGASTORE is by no means comprehensive at this stage, Dentsu’s intention seems clear: to control the mobile publishing market by controling the delivery system, its model in print and television for decades, and one that has served the company well, if not the consumer.

Inside Angel Farm Fukui (photos via Nikkei)

Imagine going to the latest Ginza flagship store of an up-and-coming brand flagged as the “new Uniqlo”. You have to wait, as there’s a line of consumers around the block, hungry to get a piece of the latest trend. Inside, it’s a minimalist space, with light techno music. Produce is stacked up to the ceilings in cool white units. Literally cool, that is – these units are refrigerated. And what they’re chilling isn’t clothes but the latest must-have item: designer lettuce.

A taste of what may be the future already exists in Chiba Prefecture, east of Tokyo, at an award-winning produce store called Green Flavor. It sells vegetables grown in a “plant factory” located upstairs in the same nondescript apartment building. The plant factory is operated by Mirai Co. Ltd. and its 37-year-old founder, Shigeharu Shimamura. He calls his firm an “agricultural software company”.

Plant factories are slowly spreading in Japan, with support from the government. Vegetables are produced indoors and under controlled conditions. Lighting, temperature, humidity, carbon dioxide and water are all measured constantly to ensure stable production. For example, lettuce can be cropped twenty times a year.

Because the produce is grown in a clean room, it can be eaten without washing. That’s potentially attractive to consumers who want safe foods and restaurants that need to guarantee quality. The factories eliminate the need for physical labor in the countryside, so may create new jobs for young people in cities, according to the government.

Ozu Corp., a maker of traditional Japanese paper known as washi, turned its unused Tokyo warehouses into plant factories in 2008 in response to consumer concerns about unsafe food. The brand is called Nihonbashi Vegetables, after the central-Tokyo location of the company’s headquarters, where it plans to open another plant factory.

Another manufacturer, Fairy Angel Inc., has its main plant factory in Fukui Prefecture and others in Kyoto and Chiba. The Fukui factory’s temperature is controlled to +25°C by day and +18°C by night and is capable of producing three million plants a year, according to the Nikkei. Many factories are starting to use LEDs instead of fluorescent lighting to lower costs.

"Green room" veggies can go direct to the shelves

Mirai, which consulted on the Ozu project, says it receives 100 inquiries a month about the “green room” concept, including many from the Middle East and Africa. The government provided financial support for plant factories as part of its New Economic Growth Strategy in September 2008, and has pledged more as part of the so-called “Green New Deal”. However, concerns remain.

Plant factories consumer high levels of artificial energy compared with natural farming methods, raising the price of the produce, as well as questions about the net cost to the environment. When grown naturally, vegetables are a vital element of the food chain. The implications of their widespread removal from the natural environment are also yet to be measured.

This article was compiled using information supplied by the Japan Foreign Press Center.

For more of Five by Fifty’s consumer insights on “Part Time Greens”, contact us.

Suntory has been giving away a series of eight mini-goods by product designer Amadana with its Boss Silky Black coffee. Targeting design-smart businessmen in their 30s, the all-black and metal products include a USB memory drive cover, a tape measure, a “multi case” the size of an iPhone, a pen holder, a money clip, a bookmark, a “cord reel” for keeping headphone cords neatly in a suit pocket and a memo stand.

Amadana is a brand of luxury household appliances that have a modernist design aesthetic that has grown from niche to mainstream in a short time. Its product lineup includes everything from coffee makers and music systems to paper shredders and mobile phone handsets.

A quick look online shows the collaboration has spawned more than 70,000 blog posts so far this month, with comments suggesting that consumers actively bought BOSS Silky Black in order to collect the Amadana products.

To find out how Five by Fifty helps its clients innovate in the beverage sector, contact us.

“What’s different this time is that consumers aren’t simply looking only for low prices, they’re being more selective and hunting for higher quality and more fashionable products,” according to economist Teruhiko Mano. And analysis of Internet search data bears this out.

A review of keywords that experienced a surge on Yahoo! Japan in May leads to several sites that allow people to save on normally high-price items. (Of course, flu fears and the usual celebrity and sports news also featured heavily.)

Searches soared for “5.5 million yen house,” a keyword used by real estate agency Aqura Home for a new service offering made-to-order houses for 5.5 million yen, around US$55,000.

In mid-May, there was a huge volume of searches for sisyokukai.jp a new service that promotes new restaurants. Users receive discounts of 50-80% for meals in exchange for providing feedback to the restaurants, who are trying to perfect their service.

This week, there has been a large number of searches for “kane no tamago service,” which introduces consumers to apprentice nail artists and hairdressers, who provide manicures and cuts for large discounts or even free.

One luxury item that did enjoy increased search interest was the Segway, as the transport device is rumored to soon become legal on the streets of Yokohama.

S. Korean cosmetics retailer The Face Shop

One air-traffic route that hasn’t slowed amid the recession has been the one between Japan and South Korea. In February, Japanese tourist arrivals in South Korea were up 70% from a year ago, accounting for 48% of all visitors. Numbers were also up from China and Southeast Asia. The primary attraction is shopping, especially cosmetics.

Until now, the reason was the exchange rate, with the won tumbling and the yen soaring, making Seoul an attractive shopping destination. Although the exchange rate has since leveled off, South Korea remains attractive for Japanese, who see it as accessible and safe, and because many South Koreans in retail and hospitality speak Japanese.

The most appealing products are cosmetics, with Korean brands such as Missha, The Face Shop, Skin Food and Nature Republic selling high-quality products at affordable prices for Japanese. At the Nature Republic store in the Myeong-dong shopping area, around 80 percent of customers in April were from Japan, according to the JoongAng newspaper.

In February, the Korea National Tourism Organization chose IKKO, a Japanese transgender makeup artist, as an official ambassador. IKKO has advocated Korean cosmetics in the past.

IKKO, makeup artist and tourism ambassador

“Korean women have better skin than Japanese women,” IKKO said when appointed to the role. “I want to introduce the lifestyle of Korean women, who constantly detox their bodies and minds, to Japan.”

It’s not only the government that has wised up to the revenue potential. Retailers in Myeong-dong are adding Japanese- and Chinese- speaking staff and signage.

The most popular product is Korea-originated BB cream, short for Blemish Balm, which was Japan’s seventh most popular brand last year, according to the Nikkei newspaper. Some 2.6 billion yen (US$26 million) of BB cream were sold in Japan after its launch in April, according to its manufacturer, Hanskin. Eyeshadow, mask packs, mascara and lip gloss from mid-to-low range local brands like Etude House and Missha are also top sellers. Their focus on natural ingredients is an added appeal.

Photo: JoongAng newspaper

“Whenever I come to Korea, I buy around 10 BB creams and refrigerate them so I can use them over a year or so,” Japanese tourist Yoko Wada, 22, told JoongAng at a Hanskin store in Myeong-dong. The price is about half that in Tokyo.

With South Korean brands seen as increasingly trustworthy and desirable in Japan, and Japanese consumers being increasingly cost conscious, the opportunities for South Korean cosmetics brands are obvious. The exchange rate advantage they have enjoyed since October is evaporating, so instead of waiting for the Japanese customers to come to them, they will find it increasingly necessary to target Japanese consumers on their home turf.

To request a sample of Five by Fifty’s Korean Beauty Report, 2009, contact us.

A guest house in Tokyo with a stylish interior.

Some young Japanese are rejecting single-living and opting to share spaces with others, usually strangers, as they search for a sense of community. Guest houses (rental residences with private bedrooms and communal kitchens and bathrooms) are enjoying a surge in popularity, especially among Japanese women.

The number of guest houses in Tokyo and three surrounding prefectures was less than 100 in 2003. Today there are over 600. A website, Guest House Hitsuji (“Guest House Sheep”) provides a directory of guest houses around Japan as well as advice for choosing a guest house. In the past, guest houses were used mainly by foreigners staying in Japan for a short time, but non-Japanese now make up less than 30% of residents. According to a recent survey by Guest House Hitsuji, around 70% of guest house residence are single Japanese women, mostly in their twenties.

Popular guest houses emphasize communal living spaces.

One such guest house is “Bauhaus” in Minami Senju, a commuting hub, which boasts a stylish interior, luxury amenities such as jacuzzis and fireplaces, relaxing communal spaces and comfortable private rooms. Prices for a single room range 65,000-82,000 yen, which is slightly more than a small studio apartment.

Living with others offers a feeling of security, space and community, especially when compared with the tiny, often uniform apartment. It’s part of a growing shift – powered especially by the mobile Internet – of young Japanese creating new communities beyond the traditional realms of work and family.

Time to reward yourself with that new 24-inch iMac?

Recession fatigue is starting to show in the United States, where consumers are rewarding themselves by “trading up” items that play an important role in their daily lives, according to Boston Consulting Group (reported by WWD). In fact, marketers interested in this trend need only look to Japan to see how an extended downturn can actually boost sales of high-quality daily necessities.

The top ten list of “trade-up” items for the U.S. is dominated by what most people would consider 21st Century home necessities. No. 1 is the personal computer, and household electronics like home entertainment (5), kitchen appliances (8) and washers and dryers (9) also feature. At No. 2 is fresh fruits and vegetables, reflecting wellness trends as well as the basic importance of food, with other entries being meat (4), sit-down restaurants (7) and fish and seafood (10). The other entries are bedding (3) and automobiles (6). With the exception of restaurants, the list clearly shows the items consumers will start spending on first will be things that improve their daily lives and personal space.

A prolongued period of low growth in Japan bred innovation in small-ticket items, as consumers recalibrated their spending patterns

The changes in spending by Japanese a decade ago reflected their different priorities, with more emphasis on fashion (which doesn’t make Boston’s U.S. Top 10) and personal computers (mobile phones were always more useful here). However, the shifts in demand were similarly focused on improving consumers’ daily lives and, in the process, contributed to world-leading innovation in everything from functional home electronics and B2C mobile commerce to beverage flavors and cigarette packaging.

Contact us for details of ethnographic research and innovation programs to help your business anticipate consumers’ changing priorities.