Why US brands are investing in Japan today

This post is based on a speech I gave on March 18th at an event to celebrate the opening of my network MullenLowe Profero’s new San Francisco office, attended by friends and clients. 

There is a lot written about Japan and it’s basket-case economy in the US press, and most of it is wrong. The reality on the ground is quite different, and I would like to tell you about a few of the smart American brands that understand this and are profiting.

In doing so I am going to try answer a pretty simple question:
Why do some great American brands choose to double down and invest in Japan today, while others pull out?

Is it hard to do business in Japan? Well, it’s not yet a vassal state of California, but it is a relatively easy country for brands to get up and running in, with the right governance laws, IP protection, an increasingly open minded and multi-lingual, though still diligent labour force.

Opportunities & Efficiencies in Japan

It’s digital advertising landscape too is perhaps the most similar to the US among major economies, dominated by Google, Facebook and Twitter with some noteworthy local players in the mix.

There are some great opportunities for efficient investment as well. For instance in Tokyo alone you have in one contiguous metropolis a population the same as California’s, but squeezed into an area the size of Los Angeles county. Tokyo alone has more consumers than Canada, and 50% more than Australia…

But Japan has not worked out for everyone. A great US brand that recently threw in the towel is FORD, who closed shop in Japan in 2015 after selling only a few thousand vehicles in the preceding 12 months.

Now you could say, well, that’s cars, and Japan is the last place you want to be selling cars. But in the same year Mercedes Benz celebrated its best year in Japan of all time, making over $100m in profit. You would think it’s hard to find double digit growth anywhere these days, but Mercedes notched up 15%.

Of course a few years ago a new American car brand was born not far from here, and TESLA is already a darling among Japan’s many millionaires. TESLA opened a bunch of new service centres in Japan in 2015, and is investing in Japanese language related usability & navigation.

Perhaps with Tesla in mind it is a good time to mention how much Japanese consumers love brands. This is not the shallow materialistic “me too” purchasing culture that frothed uo in 80s & 90s, and you see in other bubbles. It’s the long term, well researched, quality-seeking kind of love that leads to loyalty. It’s a love of brand stories.

Japan’s consumers are brand savants

When Steve Jobs passed away in 2011 I was one of the many thousands who went to Apple’s flagship store in Ginza where a mountain of flowers and messages spontaneously built up. It was interesting to see what those messages said. Although many did say “we love you Steve” it was not simply idolatry, since many belied a much deeper sentiment. In fact more than anything they said “Thank you”. Because Japanese consumers appreciated the fact that Steve Jobs respected Japan, it’s culture, it’s noodles. He understood their love for beautiful design, quality and authenticity, and made great products for them.

Another Silicon Valley brand, one that was spun out of innovation at Stanford back in 1985, has recently decided to double down on Japan. SunPower is breaking free from its Japanese partner distributor to go head to head with Panasonic at the high end of Japan’s residential and commercial solar installations. The solar marketplace is mature, and quite saturated with cheap Chinese makers, so this is not about a land grab. This is about giving consumers an alternative brand choice, with emotional differentiation as much as functional.

And if you think you can see a pattern in the types of brands I have mentioned, let me tell you about one more American brand thriving in Japan that is not known as a tech innovator. In fact it has barely changed in its 80 year history. SPAM. You would not think it had much to bring to Japan, but you would be wrong. It is marketed as a relatively premium product, costs more than fresh chicken by the ounce, and is loved by Japanese housewives. You certainly have to rethink how you tell the story, though, and that’s where we come in, but if you have something unique and authentic to offer, you are in business.

So did I answer the question?

If I had to tell you in single word why smart American brands are investing in Japan today it would be this one: MARGIN. Japanese consumers are prepared to pay for brands they see as offering unique value. That value is not just functional. Actually it’s mostly emotional. And it is created by telling brand stories in a very local way, and if you are lucky, by an agency that gives you an “Unfair Share of Attention”.