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Japan Travel Retail Market - Growth, Trends, COVID 19 Impact and Forecasts (2021-2026)

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  • 150 Pages
  • October 2021
  • Region: Japan
  • Mordor Intelligence
  • ID: 5458864

The Japanese travel retail market is evolving due to new business dynamics, changing consumer habits, and a continued surge in visitors from foreign countries. The Japanese travel retail market is expected to grow at a CAGR of nearly 10% during 2020-2026.

COVID-19 pandemic has hugely hampered the growth of the travel retail sector in Japan, and the closure of retail stores in travel hubs in the country has contributed to overall losses for many big brands. Players like Shiseido, which is a Japanese beauty giant, witnessed a nearly 18% decline in their travel retail division due to the disruptions caused by COVID 19. Furthermore, in 2020, domestic travel and foreign visitors' expenditures to Japan declined significantly 2020 due to the impacts of the COVID-19 pandemic. The number of domestic travelers in Japan amounted to approximately 293 million, in 2020 with a decrease of around 50% when compared to 2019 in the wake of the pandemic. However, now as the market activity is picking up airport retailers and downtown operators in Japan are braced for the restoration of full duty-free and travel retail services as they tread a cautious path to recovery.

As the inbound tourism market grows rapidly in Japan with strong spends among Chinese, Taiwanese, Koreans, and Hong Kong visitors, the potential of the travel retail market in the country has not gone unnoticed especially among the major international travel retailers. Growth in disposable incomes, consumer spending, and tourism and duty-free sales are some of the major factors fuelling the growth of the Japanese Travel Retail Market.

Travel Retail is a major component of aviation and maritime financing and has become an integral part of the traveling experience owing to Europe’s stronger base of luxury brands. The success of some of the popular product categories such as Japanese cosmetics is led by Shiseido group brands and confectionery is led by brands such as Royce and Tokyo Banana. Beauty brands are also introducing strategies, like Gamification, to increase the footfall of customers in the stores. For instance, in 2019, Shiseido launched Shiseido’s Optune, an IoT-powered skincare system, which integrates a mobile app that leverages AI to detect users’ skin conditions and then dispenses a personalized formula each day and Optune can deliver up to 80,000 possible combinations.

Japan’s duty-free import regulations were also changed in 2018 to allow inbound passengers to bring in two cartons of either foreign or Japanese cigarettes, or one carton of each. The change in regulations has benefitted duty-free arrival shop operators who are currently restricted to selling only imported liquor, tobacco, confectionery, and perfumes in their arrival shops.

Key Market Trends

Rising International Tourist Arrivals to Japan

Over the past five years, the number of foreign visitors in Japan has been growing steadily amounting to nearly 31.88 million in 2019. The majority of international visitors in the country arrive from East Asian regions, with Korean, Chinese, and Taiwanese visitors in the lead. The increased tourists in the country have led to increased infrastructure development in the travel- retail markets such as larger retail experiences which include shops, restaurants, bars, and other forms of retail.

The growing number of inbound visitors and the steadily increasing tourism expenditure show the rising popularity of Japan as a travel destination and to tap into the potential of the vibrant industry, the Japanese government also announced measures to reach its long-term target of 40 million tourists by 2020. However, in 2020, the number of foreign visitors traveling to Japan amounted to around 4.12 million, a sharp decrease from 31.88 million when compared to 2019 due to the travel restrictions imposed amidst the COVID 19 pandemic, however, the market activity is expected to pick up in the medium to long term.

Growing Number of Tax-Free Shops in Japan

The travel retail market in Japan is majorly is driven by the tourism industry, as many foreign investors visit the country for tax-free shopping. Japan is filled with stores offering tax-free shopping, from airports to chain shops around the country. Duty-free shops in the country are in airports and major cities, where the shoppers meet certain requirements and can be excluded from paying the standard 10% consumer tax on goods in Japan.

The number of tax-free shops in Japan has increased more than tenfold in the last few years as the expansion of the number of tax-free shops was one of the major incentives devised by the government of Japan to attract international tourists. By the end of March 2020, Japan had close to 55,000 tax-free shops spread over the country amongst which the Kanto region in Japan accounted for approximately 23,56,000 tax-free shops. Kanto, the area where Tokyo is located, was the region with the most tax-free shops in Japan, followed by Kinki and Kyushu.

Competitive Landscape

The Japanese travel retail market is highly competitive, with several international as well as domestic brands present in the market which include Lagardère, Shisheido, DFS, Lotte Duty-Free, and TIAT amongst others. Despite the lack of price competitiveness, the Japanese purchasing agents survive because they have access to some Japanese products which are not supplied to the foreign duty-free shops. In contrast to the high overall cashback in Korea, Japanese shops deliver much lower cashback rates.

Additional Benefits:

  • The market estimate (ME) sheet in Excel format
  • 3 months of analyst support

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Table of Contents

1.1 Study Deliverables
1.2 Study Assumptions
1.3 Scope of the Study
4.1 Market Overview
4.2 Market Drivers
4.3 Market Restraints
4.4 Market Opportunities
4.5 Value Chain Analysis
4.6 Porters Five Forces Analysis
4.7 Technological Innovations in the Market
4.8 Insights on Trends in Passenger Traffic by Channels
4.9 Insights on Government Regulations and Initiatives in the Market
4.10 Impact of COVID-19 on the Market
5.1 By Product Type
5.1.1 Beauty and Personal Care
5.1.2 Wine and Spirits
5.1.3 Tobacco
5.1.4 Food and Confectionary
5.1.5 Fashion Accesories and Hard Luxury
5.1.6 Others (Stationery, Electronics, Others)
5.2 By Distribution Channel
5.2.1 Airports
5.2.2 Airlines
5.2.3 Ferries
5.2.4 Other Distirubution Channel (Airline, Railway Stations, etc.)
6.1 Market Concentration Overview
6.2 Company Profiles
6.2.1 Lagardere
6.2.2 Shiseido
6.2.3 DFS
6.2.4 Lotte Duty Free
6.2.5 ANA Festa
6.2.6 LOFT
6.2.7 HIS Group
6.2.8 Daiso
6.2.9 Jalux
6.2.10 Fa-So-La
6.2.11 TIAT Duty Free
6.2.12 Donki*

Companies Mentioned

A selection of companies mentioned in this report includes:

  • Lagardere
  • Shiseido
  • DFS
  • Lotte Duty Free
  • ANA Festa
  • LOFT
  • HIS Group
  • Daiso
  • Jalux
  • Fa-So-La
  • TIAT Duty Free
  • Donki