This page features case studies of some classic marketing failures of foreign entrants in Japan:
- Vodafone
- Sephora
- Pret-a-Manger
- Carrefour
Vodafone in Japan
Vodafone is a UK based company that made its name when it developed a mobile handset SIM card that soon became standard across Europe. Today Vodafone Group plc is the world's biggest mobile telecommunications network company in the world, well established in over 35 different countries boasting an annual turnover of almost US$90 billion. Its senior management includes some of the most impressive and experienced players in the industry and its progress over the last ten years has been one of sustained and substantial growth.
Vodafone came to Japan in 2001 when it acquired J-phone, the third largest operator in Japan. Despite repeatedly renewing its efforts, including investment of billions of dollars, Vodafone never managed to perform well in the Japanese market. In 2006 they finally decided to pull out altogether and sold up to Soft Bank.
How did such a powerhouse fail to make it in Japan?
A critical analysis Vodafone's trouble in Japan highlights two key interconnected failings:
• Failure to generate a trustworthy brand image.
• Underestimating the particularity of the Japanese consumer.
The Lack of Trust
When they took over J-phone, Vodafone re-branded as themselves. They sought to lever themselves into a better position by shifting focus from the teenage/student market to professionals and the corporate world － the territory of the other big players, NTT DoCoMo and AU.
The decision to re-brand seems to have alienated their existing customer base and they didn't do enough to build up trust with their new market. In Japan, winning trust is critical at all levels of social interaction and as a newcomer it is important to take swift and substantive measure to create a trustworthy reputation. Dropping popular Japanese actress Norika Fujiwara from the ad campaigns and bringing in David Beckham did more for the British midfielder than it did for Vodafone; as an already foreign brand Vodafone might have done better to team up with a Japanese celebrity first.
It is not that being foreign is an obstacle in Japan, many foreign brands do exceptionally well, the point is that as a foreigner, it is important to be seen as being sensitive to Japanese tastes and culture as a part of the trust building process. But Vodafone chose to sell itself in Japan as a “global brand” and recycled marketing strategies that in brought in straight from Europe.
Worst of all Vodafone implemented a strategy that had brought them quick profits in Europe － they stealthily introduced a new pricing plan which effectively violated one of the 10 guarantees made to customers on their website. In a cultural context where trust is so fundamental, this constructed yet another barrier between Vodafone and its target consumers.
The Particularity of the Market
In the same way that Vodafone attempted to impose their global brand on Japan, they also tried to bring Japan into their global market strategy, neglecting to tailor their services specifically for the Japanese market. This one-sided approach to balancing the universal and the particular lurks behind by a number of clumsy decisions.
Vodafone's most celebrated mistake was the introduction of Nokia 3G handsets, straight from Europe. Alas, not only were they beaten past the post by NTT DoCoMo but when the handsets did appear they seemed outdated and clunky in comparison with their competitors'. They lacked the gimmicks and features offered by their rivals and thus failed to find favour with the in-crowd. Lack of understanding about the particular wants and desire of the Japanese consumer, and the assumption that these would be the same as elsewhere, was arguably the critical oversight here.
In 2004 Vodafone geared up for another stab at boosting their market share in Japan, this time in the form of prepaid handsets. Unfortunately for them the government brought in new regulations against such devices because of their propensity to be used by criminals. Whilst Vodafone may have been unlucky here their reaction to the issue again betrays a lack of understanding about both the particularity of the market and the issue of trust. They were slow to bring in their own regulatory procedures and did little to counter the effect of multiple newspaper articles that bracketed the words Vodafone and criminal together. Where trust is such a sensitive issue it pays not merely to compensate, but to overcompensate.
Summary
Vodafone's made many mistakes in Japan but on analysis two clear lapses in their approach emerge. They failed to appreciated the importance of winning the trust of the consumer, and they failed to tailor their business specifically for the Japanese market.
Sephora in Japan
Sephora, a venture of LVMH, opened up in Tokyo in 1999. They built up 7 stores all in high class location such as Ginza and Shibuya. Aiming to cash in on the large luxury market in Japan, Sephora's range of perfume and beauty products never made a profit here. When the economy took a downturn the firm decided to cut its losses and left by the end of 2001.
A study of the reasons for Sephora's hasty retreat from the Japanese market reveals that although the group may have been in the wrong place at the wrong time, it made matters worse for itself by a lack of appreciation of the specific cultural context in which it was placed.
Overlooking the Context
The cosmetics market in Japan is second only to the US and given the Japanese consumers love of European luxury brands and the fact that Sephora opened in prime shopping locations, it is easy to see why an experienced firm like LMVH thought that might be able to turn a profit in Tokyo.
Sephora had been successful in Europe and the US operating self-service cosmetics stores and believed they could offer a unique retail experience by providing the same in Japan. Furthermore, they already sold Japanese cosmetics products in these ‘foreign' stores.
Upsetting the suppliers
Yet, when they opened their first store they were still in negotiations with their wholesalers and had not finalised trading conditions with a number of the main sellers, in particular the domestic brands such as Kose, Kanebo and Shiseido.
These negotiations eventually faltered because Sephora wanted a cheaper supply
as, they reasoned, they did not require the additional sales-support that
had always been provided with these products when sold through department
stores that were not self-service. In the end, because of Sephora's unique
demands, they received a very limited supply from the domestic manufacturers,
who continued to sell most of their products solely through department stores.
Confusing the consumer
Once inside a Sephora store the first thing that would have struck Japanese consumers was the layout. On their three floors they placed perfumes on the first floor; an anomaly in Japan where the first floor is usually dedicated to skin products and cosmetics － perhaps reflecting the fact that perfumes corner only a 5% share of the market.
The self-service Sephora experience, where customers are free to try on
lipstick, sniff fragrances and pull things of the shelves into their baskets
without any need to wait for an assistant, did not work so well in Japan.
Here, such practices make the consumer feel slightly uncomfortable, particularly
at the luxury end of the market where ladies are used to being pampered and
chatted with for a considerable amount of time before they decide to purchase
anything. Where a Parisian might feel liberated a Japanese customer might feel
ignored. Without very careful consumer education procedures and clear signing
about where to put trash and used products Sephora may well have created fear
and confusion rather than the sense of peaceful meandering that they intended.
Summary
What Sephora perceived as their strength, their radical new concept of customer service, actually turned out to be a weakness in Japan.
By trying to forcefully introduce their current business model, that had been so successful overseas, into Japan they struggled with both their suppliers and customers.
Pret-a-Manger in Japan
Pret-a-Manger have been selling sandwiches in London since 1986 and has become something of a lunch time institution for professionals in the UK. In 2001 McDonalds bought a controlling share of the business and they have a small but growing number of stores in the US and Hong Kong. Pret-a-Manger had planned to establish 80 outlets in Tokyo and even more nationwide when it opened its first store in August 2002. Just 2 years later it had vanished from Japan completely.
With Japan known for its particular culinary tastes, and the UK known for its lack of a tasty national cuisine, one can see how Pret-a-Manger opening in Japan was ambitious. That said, the Japanese have a fondness for sandwiches and Pret had been surprisingly successful in getting the British to open up to sushi. Indeed, as the following analysis reveals, if they had taken a closer look at their surroundings they could well have succeeded in building a highly successful business.
Out to Lunch
Although Pret's management blame McDonalds' lack of interest for their failure in Japan, a closer look reveals that they also overlooked some key social conventions of their targeted market.
Initially, the firm did receive a fair deal of help from McDonalds without
whom it couldn't really have entered the market. However, bogged down with
its own troubles, McDonalds refused to help the younger company when it too
ran into difficulties. Pret was thus left without the funding it needed to
make the necessary adjustment for the Tokyo lunchtime market; adaptations
it could have got right from the start.
To be fair, for the first 6 months, Pret actually did rather well, benefiting
from high profile advertising and a honeymoon period fad status. However, once
the novelty wore off custom dwindled fast. A look at their pricing reveals
a basic lack of awareness about lunchtime in Tokyo. Charging 500-700 yen for
a sandwich and then another 300 yen each for a drink and a muffin, Pret's products
just couldn't deliver on size and quantity when the same amount of money would
buy more than double, including freshly made lunch boxes (bento), at a local
convenience store. Further, most of Tokyo's restaurants offer very high quality
lunch sets for round about 1000 yen, often with unlimited drinks and rice.
Not surprising then that Japanese customers tended to give it a wide berth.
Another key point about Japanese eating and drinking practice that seemed
to pass Pret by was Japan's coffee shop culture. Assuming that their high
quality coffee would immediately deter customers from well established chains
such as Doutor or Starbucks, Pret persisted with their less inviting “sandwich
bar” style interiors and underestimated the extent to which customers would
be drawn by habit rather than strong foreign coffee beans. When they did
finally start to address this issue, it was already too late.
The adaptations that Pret had made, such as replacing plastic packaging with
cardboard and introducing a green tea muffin, were probably helpful changes
but it is futile to do a good job on the icing and make a mess of the cake.
Pret's abandonment of their usual menu and introduction of Japanese style egg
sandwiches later on is more of a sign of their desperation than of having learned
any concrete lessons about the culture.
Summary
Pret-a-manger were unfortunate in that their main partner McDonalds was in a difficult situation when they most needed their help. However, lack of understanding about normal lunchtime practices and coffee shop culture in Japan led to errors in their pricing and interior design. Without these insights Pret were unable to adopt appropriately and successfully to the market in Japan.
Carrefour in Japan
As the second largest retailer in the world in terms of total sales Carrefour is also perhaps the highest profile retailer to have failed to crack the Japanese market.
Opening its first store in December 2000 amid great fanfare they ran into trouble almost immediately, losing money in their first year in business and hitting the headlines for all the wrong reasons.
Despite a remodelling of their business and stores in Japan and a subsequent minor reversal of fortunes, they eventually sold their remaining stores to Aeon Marche and left in 2005.
Failing to meet expectations
Carrefour's two main strengths with its overseas operations are its ability to offer low prices and create ‘exciting store space'. Furthermore, being French they also came to Japan with a preconceived notion of sophistication and selling high-end merchandise.
However none of these strengths and expectations were demonstrated here.
Instead, the shopping experience and merchandise quality did not find favour amongst the Japanese consumers. The expected discount luxury clothes were not being offered and the tall displays were described as oppressive by customers. Whilst its fresh food produce was cheap, thanks to Carrefour's ‘whole quantity acquisition' from farmers, it was of varying quality and was sold on a self-serve basis that the Japanese are not used to.
Compounding these early errors, the media carried reports that Carrefour had mislabeled low quality Japanese pork as higher-grade American product, and it was found to have sold other meat products beyond its sell-by date. These minor infractions in a country with very high levels of interest in food safety sought to further damage an already weakened reputation.
In response to lower than expected sales, Carrefour adopted a local market strategy and made changes that were more in line with the Japanese retail experience. However, this meant that it struggled to differentiate itself from other Japanese retailers losing its ‘foreign appeal' as well as its credibility.
Summary
Carrefour had hoped to enter Japan and expand quickly to enable it to benefit from the same economies of scale that it had overseas. It had hoped to provide the same discount food and clothing retail service in Japan for which it was renowned in Europe.
However, it never got this far.
By failing to properly consider the Japanese consumer and how their own brand may be perceived in Japan, they failed to meet local expectations and demands.
As they then reactively tried to adapt to a more traditional Japanese retail format not only were they operating outside of their successful business model but they found themselves unable to distinguish themselves from the local opposition.
