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The Five Es of the Service Industry

Meet the New Consumer

Meet the New Consumer

Source:CW

In an age of commodity overload, the key to success is getting back to what consumers really want. Noted analyst Hidehiko Sekizawa lays out the playing field of a future market where consumers are shrewd, green, savvy and mature.

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Meet the New Consumer

By Sherry Lee
From CommonWealth Magazine (vol. 439 )

Founded in 1895, Hakuhodo Inc. is Japan's oldest advertising agency. Ordinarily the target group market researchers refer to is "consumers," but at Hakuhodo they are referred to as "sei-katsu-sha" ("those who pursue life"), reflecting the reality that people's lives are not confined to the economic dimension, but also include psychological and social aspects. Tokyo Keizai University (Tokyo University of Economics) professor Hidehiko Sekizawa, a renowned trend analyst and senior consultant for Hakuhodo, recently sat down for an interview with CommonWealth Magazine and offered an in-depth analysis of how all commercial opportunities in the second decade of the 21st century will center around the so-called "Five Es." Following are highlights of the interview.

Economy

The first of the Five Es is "economy," that is, the shrewd, calculated economics the sei-katsu-sha pursue.

Recent fashion brands that have been hot in Japan and around the world, respectively, are Uniqlo, Zara and H&M. Japan's Uniqlo sends observers to various locales at the beginning of each fashion season to suss out the trends for the coming year, which they quickly imitate, using computer assisted design. Then it's on to production facilities in China, so the new fashions are ready for the following spring fashion season.

This sort of methodology seems slightly akin to a finger-guessing game, with Uniqlo showing its hand late, and thus guaranteeing victory. Most other companies take two to three weeks to complete the process, but Uniqlo's strength is its ability to seize upon fashion trends as they are created and complete the process within a week while producing decent quality. With its innovative sourcing, design, manufacture, distribution and retailing, Uniqlo provides consumers with the shrewd economics they desire.

Uniqlo's success is a reminder to many companies confronting an age of a surfeit of goods that they need to get back to catering to the real demands of consumers and not be focused on the mindless pursuit of excessive functionality. Developers must focus on what the sei-katsu-sha really wants. During the development process, a value that consumers can afford should first be fixed, then efforts must be made to bring down the unit costs of manufacturing. This makes it possible to produce well-designed, quality products at a reasonable price.

Ecology

The second "E" is "ecology." Faced with global environmental challenges, this word will be the most critical word in a variety of products and business opportunities.

In the automotive industry, for example, hybrids and fuel-efficient vehicles will be popular, but for the time being the batteries that are so crucial to the development of so-called "plug-in" all-electric vehicles remain either too heavy or too expensive. Due to increasing demand, companies will be encouraged to improve in this area and plug-in lithium ion battery-powered vehicles will soon hit the streets. One can imagine that roadside charging stations will begin to proliferate, and the subsequent price wars for electric charging will make electrically powered vehicles (EPVs) increasingly common. This means it will also become increasingly difficult for traditional midstream and downstream automotive manufacturers to survive. But companies associated with the EPV production chain are numerous, and this enterprise will have a lot of potential. And, of course, there are always bicycle sales, like Taiwan's high-end bicycles that are selling so well.

E-Life

The third "E" stands for "E-Life." This refers to the digital life spawned through the Internet. This "E" will bring huge changes to the future consumer landscape.

In a survey by Hakuhodo's Tokyo office two years ago, we looked at differences in modes of communication among people in several Asian cities. We found that compared with the residents of Hong Kong, Tokyo and Shanghai, Taipei residents were most keen on chatting and valued "word of mouth" marketing more highly than their peers in the other cities. (See Table.)

Taipei denizens really like chatting and blogging, but Tokyo residents can't even imagine posting their own photographs on the Internet, because that is seen as a scary, risky thing in Japan. How do you know that high school sweetheart you broke up with all those years ago won't come and track you down? Companies can put the unique characteristics of local users in each city to better use in their marketing and sales efforts.

The biggest impact of E-Life is on Internet shopping. Internet shopping in Japan will surpass total sales figures for convenience stores and department stores. Future consumer trends in Taiwan will see consumers increasingly shopping closer to the actual place where they live, that is in front of their computers. Of course, the development of express delivery and distribution services is a main reason behind this trend.

Elder

The fourth "E" stands for "Elder," commercial opportunities in the seniors market.

Taiwan's elderly population is growing and now accounts for 10 percent of the total. In Japan that figure is 20 percent, and 40 percent of all Japanese are aged 50 or over. Half of all revenue from the sales of eyeglasses in Japan derives from reading glasses for the farsighted elderly rather than those for myopia. And sales of adult diapers already surpass those for infants.

Japanese companies that ignore this senior market do so at their own peril. Japanese chocolate makers are even targeting the senior market with products suitable for elderly customers to eat. Seniors have an impact across a broad spectrum of industry, such as in the clothing industry, which has declining sales of suits. Elsewhere, the beauty and cosmetics industry is expanding, fueled by sales of anti-aging skin treatment products. In food and beverages, a few areas, like yogurts, will see increasing sales. In the automotive industry, there are devices to rapidly assist in braking a vehicle and other innovations catering to the slowing reflexes of aging drivers. Retirees who are healthy also often travel extensively, visiting destinations around Asia, the Middle East and Central Europe, taking in historical sites and learning in luxury.

Entertainment

The fifth "E" on our list is "Entertainment." People increasingly expect to laugh and enjoy themselves. Makers of foods and beverages, furniture and other goods must pay heed to this spirit of entertainment.

Products and industries that not only get an individual handle on all of the "Five Es" but can also intensify the effect of those "Five Es" will have greater added value.

One example is the marriage of environmental protection and the senior market. A lot of retirees now want to get back to rural towns and wooded locations. Many of the middle-aged folks who toiled during the period of high economic growth in Japan hope to one day retire to such rural and wooded locales, given the richness of Japan's natural environment. They appreciate classical Chinese literature and poetry, drinking wine and composing poetry out in Mother Nature. Confucius's Analects are well received among this group, many of whom pursue a healthy, active or laid-back lifestyle.

Another is the joining of "E-Life" with the senior market. It's now quite common for elderly women in their 70s to snap photos of grandchildren or pets with their cellphones and then send them to friends, and there are opportunities in developing electronic games designed to keep the mind active.

Perhaps another possibility is a merger of "Entertainment" and environmental protection. Eco-tourism does not despoil natural resources. Taiwan's boasts a rich natural environment, lush forests and a myriad of insect species other countries simply do not possess. There is money to be made if Taiwan can develop its eco-tourism industry.

Translated from the Chinese by Brian Kennedy


Taipei Residents Most Value Word of Mouth Marketing

Taipei Residents Most Likely to Collect Information from Websites

I believe speaking is the most important mode of communication.
 
I often look to commercial websites for information.
 

Hong Kong 72.5%

Taipei 77.6%

Shanghai 50.7%

Seoul 36.1%

Bangkok 23.4%
 

Mumbai 51.6%

London 63%

New York 68.2%

Tokyo 54.3%
 

Hong Kong 43%

Taipei 56.3%

Shanghai 13.4%

Seoul 27%

Bangkok 8.4%
 

Mumbai 22.2%

London 38.6%

New York 50.4%

Tokyo 25.2%
 

Taipei Residents Love Taking Photos: Seeing is Believing

Taipei Residents Value Visual Enjoyment

I own a digital camera.
 
I own an LCD/flat-screen TV
 

Hong Kong 88%

Taipei 91.3%

Shanghai 32.1%

Seoul 63%

Bangkok 30.3%
 

Mumbai 4.6%

London 64.8%

New York 85%

Tokyo 61.4%
 

Hong Kong 29.1%

Taipei 32.5%

Shanghai 6.1%

Seoul 9.9%

Bangkok 16.5%
 

Mumbai 2.3%

London 42.8%

New York 30.2%

Tokyo 30.5%

Source: Hakuhodo Global Habit Survey

 

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