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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.

UCC has introduced a limited edition Milk&Coffee collaboration with the latest Evangelion anime film, including six cans featuring six characters from the film.

Evangelion is one of the most popular manga series in Japan, with fans in a wide range of ages. UCC released tie-ups based on Evangelion manga back in 1997 and again in 2007, which were instant hits with fans in their 20s. This is the first collaboration with an Evangelion film.

This time, a new dimension has been added, with a sticker on each can containing a code which fans can enter into a campaign website for the chance to win a rare figurine of a figure from the series.

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.

If imitation is any sign of success, Tokyo Girls Collection, the live fashion show-cum mobile commerce event created by Branding Inc., should be flattered.

A Japanese printing company, Toppan, has announced that it will diversify into fashion and launch a series of catwalk shows in Tokyo in September, according to WWD and Nikkei.

In a concept almost identical to TGC, Toppan will sell clothing and accessories worn by models in the shows via a mobile website. It will also sell magazines and DVDs related to the event. Toppan hopes to attract 10,000 girls in their teens and 20s paying at least ¥3,000 (US$30) for a ticket. It expects annual sales of ¥3 billion (US$30) by 2011, and plans to export the shows to other cities in Asia.

Branding Inc. (formerly Xavel) held the first TGC in 2005. Attendees can instantly buy clothes they see from an affiliated mobile website, fashionwalker.com. Versions of TGC took place in Beijing in 2007 and 2008. The most recent event was held in Tokyo in early March and featured brandsincluding Alba Rosa, BEAMS, Jill Stuart and Milkfed.

McDonald's Premium Roast Coffee sells for less than half the price of Starbucks.

McDonald’s Japan is experiencing brisk sales of its “Premium Roast Coffee.” The coffee is made from South American beans, and packaged in a sleekly designed cup with a black lid.

The launch was prompted by research showed that while coffee had mainly been ordered as a side item for meals at McDonald’s, in recent years more customers have been coming to McDonald’s only for coffee. To launch the product, new standardized coffee machines were installed in all locations, to insure that consumers had the same taste experience at all shops.

Premium Roast Coffee went on sale in February 2008, for 100 yen, and the price was raised to 120 yen in August of that year. A short size coffee at Starbucks, by comparison, costs 290 yen. 160 million cups of McDonald’s Premium Roast Coffee were sold by the end of 2008.

In the current economic climate point cards, which are issued everywhere from small restaurants to airlines, could become an important tool not only to increase customer retention and grow spending, but also to win new customers.

According to some of the numerous surveys on the topic, more than 95% of Japanese consumers own at least one loyalty card, and 30% of Japanese women under 40 carry ten or more cards in their wallets.

Almost every retailer in Japan, from small restaurants to large companies such as airlines, department store chains and credit card companies, has a loyalty card program. However, until recently the use of these cards was limited to a single company – reward points collected at retailer A could only be used at stores of this particular chain.

But this limited use of loyalty cards mainly to drive loyalty and therefore sales is increasingly a thing of the past. More and more Japanese companies are discovering them also as a tool that also allows them to attract consumers from non-competitors, and launching cards that can be used at a wide range of stores and service providers.

One such format is the T Card, which was originally introduced as a loyalty card for members of rental video chain Tsutaya. The company has now turned it into a stand-alone brand that allows it’s almost 30 million members to collect and redeem reward points at over 30 retailers with more than 27,000 stores nationwide, including convenience stores, electronics stores, cinemas and restaurants.

In September 2009, T Card went mobile and subscribers of Japan’s largest mobile provider DoCoMo were able to collect points on payments made through their mobile phones. In February 2009, the service was extended to include Japan’s other two mobile phone companies.

T Card website (Japanese)