New Market Demand and Business from the Japan Disaster

Osaka - Sunday, May 8, 2011




Nikkei, Japan’s leading newspaper specialized in business and economy, reported on May 7 that with the Japanese government’s policy of reducing energy in the peak of summer to minimize planned blackout, there are some unexpected possibilities of new demand to be created.



In this article, the author would like to explain the background of the policy and introduce the outline of the article with some possible insights at the end.



1. What is the background of the Japanese government’s policy?



The Japan disaster of earthquake and tsunami that broke out on March 11 triggered the Fukushima nuclear plant issue, leading to electricity supply shortage. For this reason, there have been some planned blackouts as mentioned in the previous article The Reality of Japan Disaster – Affecting Nationwide. It has been effective to some extent so far but has been negatively affecting some businesses as reported in recent TV programmes/news.



However, the real challenge comes in daytime of summer, the peak of electricity used because offices and factories are operating and everyone use air conditioner.



For this reason, the Japanese government had set a target of reducing maximum electricity use at the peak by 15% and requested industry parties to take measures to achieve the target. Some companies have been working on it such as shifting summer holiday and operating at night time; however, some experts estimate that the energy saving policy could mean reduction in productivity.



On the other hand, there have been some signs that the policy may trigger creation of new market demand and business.



2. What kind of new marketing demand and business is likely to be created, according to Nikkei?






1) Services targeting “overtime work refugees”



Many companies are to set room temperature at 28℃ or above at summer and turn off the air conditioner after official working hours. This means many business persons working in offices in cities to become “overtime work refugees”, getting out of their offices as soon as the official working hour ends because it is too hot and humid to work in the office after the air conditioner is turned off in Japan in summer.



Taking this opportunity, comic cafes that usually target young generation and other businesses started to exploit market targeting such business persons. For example, business owner that provides study room charging by hour has been providing seminars on accounting mostly at weekends but he is to change operating hours to evenings during week days to attract “overtime work refugees”.



2) Accommodation at summer resorts with discount rate



A business owner of a pension in Nagano, a popular summer resort in Japan, created a new discount plan to attract customers. The customer can benefit from 20% discount if he/she stays more than 5 nights.



The department in Mitsui Fudosan that runs hotels is to discount hotel rates for customers staying 2 or more nights in their hotels in Sapporo in Hokkaido (northern Japan, famous for cool summer) and other hotels located in summer resort area in Japan.



Some companies that use electricity supplied by TEPCO is planning to make their summer holiday longer than previous years as a counter measure of energy saving when many Japanese companies set their summer holiday only 1 week or less, making many Japanese people to enjoy their vacation “near their house, spending less, in short time”.



If more people get longer holidays, it is likely that they enjoy vacation leveraging discount rate of accommodations at summer resorts mentioned above, which could help tourism that is suffering from less revenue/business fewer tourists from outside Japan.



3) Energy saving LED bulbs



Power consumption of LED bulbs is half of LCD so although its price is 2,000 – 4,000 JPY which is higher than LCD bulbs and many people are now buying LED bulbs to benefit from energy saving. This is why recently there has been a crowd of people in LED bulb display corners of a leading mass merchandiser of consumer electronics in Tokyo.



METI (Ministry of Economy, Trade and Industry) has drawn up a blue print of replacing all bulbs in Japan to LED and other energy saving ones by 2030. The electricity supply shortage attributing to the Japan disaster is expected to accelerate popularization of LED.



4) “Energy saving biz” products (vs. “Cool biz” that has already become popular)



“Cool Biz” (the name of an energy-saving campaign the government started in 2005) products such as business casual clothes without neck ties for men has taken root and is a pillar of summer business for department stores, and this year it has started to spread to “electricity saving biz” products. This is because some companies are to approve their employees to come to their offices in polo shirts. Taking this opportunity, a few department stores imported fashionable polo shirts and plan to expand polo shirts　corner by 40%.



In addition, some business men who go to work without jackets started to buy sun screen creams as a counter measures to protect themselves from ultra-violet lights, which is an unexpected demand. Taking this opportunity, Shiseido, a leading maker in the industry, is operating at its maximum to meet such market demand to produce sun screen creams.



3. The author’s final thoughts



As Nikkei reports, industrial output index for March dropped by 15.3% from February, which the largest drop in the history attributing mostly to broken link of global supply chain due to the Japan disaster. Many experts say that the recovery of the index is to be in autumn or later. Thus, Japanese companies, especially manufacturers, are facing challenges that they had never faced.



However, “hot summer without sufficient electricity and air conditioning” can mean creation of new market demand meaning new businesses and this would stimulate consumer spending when “jishuku”, restraining from spending money, have been proliferating after the disaster, as mentioned in the previous article Impact of “Jishuku” (Self-Restraint) in the Japan Disaster Aftermath. Stimulation of consumer spending is a requirement for Japanese economy to recover.



The companies operating in Japan, both Japanese and non-Japanese (foreign affiliates), are expected to convert the challenges they are currently facing into opportunities for the growth of themselves and the economy.



As often said, necessity is the mother of invention. The author believes that under the current tough situation, companies will come up with breakthroughs by creativity and innovation to create and develop new products, services and businesses from which consumers and the companies benefit.





Resources:-

The Japan disaster triggering electricity supply shortage has been negatively impacting Japanese economy and businesses but there have been signs of new market demand creation and new businesses. Companies operating in Japan are expected to leverage this opportunity to grow their businesses and the economy with creativity and innovation, to stimulate consumer spending, a requirement for Japanese economy to recover.