The following research report contains market research, analysis, statistics and business intelligence relating to research on Young Women's Casual Fashion Market In Japan.

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ABSTRACT
Overall the Japanese wholesale apparel market in 2000 is estimated at yen 5,500 billion or $47 billion. With the sluggish economy and low average product prices, the market has shrunk considerably. However, after the U.S., the Japanese apparel market is still the world's second largest apparel market, with the young women's casual fashion market maintaining the largest segment in the apparel market. Based on the Japanese "Family Income and Expenditure Survey" and industry experts, the women's apparel market is approximately 60% of the overall market, or in terms of wholesale value, estimated at yen 3,300 billion or $28.0 billion.

Japan is open to apparel imports. Leading Japanese apparel manufacturers have been shifting to off-shore production leading to apparel imports from Asian countries that have increased by over 50% in 8 years. On the other hand, apparel imports from the U.S. and other European countries have been decreasing for the last several years.

Two themes of casual fashion may have potential for U.S. apparel suppliers: "street casual" including jeans and T-shirts, and "office casual" meaning U.S. sportswear that can be worn to the office. As a market segment, young Japanese women continue to seek new ways to appear trendy and fashionable. In either theme, clothing that is well designed to make women look more beautiful, has potential.

A reasonably-priced Japanese casual fashion chain experienced high sales in the fall of 1998 when they sold fleece pullovers and jackets at only yen 1,980 ($17). This chain offers simple and basic casual wear, such as T-shirts, shirts, pants, skirts, socks and outerwear at low prices, for example yen 1,000 ($8) for a T-shirt and yen 1,900 ($16) for a cotton twill shirts. Product quality is quite good for the price. In order to compete against such inexpensive products, U.S. apparel suppliers should offer value-added, well-designed clothing made from excellent materials.

In this report, we will discuss what has potential for the young Japanese women's casual market, listing specific items and themes. We will also discuss the competitive situation and how new-to-market U.S. companies can enter this fascinating apanese market. A. Market Highlights and Best Prospects:

1. Market Profile:

Overall the Japanese wholesale apparel market in 2000 is estimated at yen 5,500 billion or $46.7 billion. The market has been weak for the last several years because of the sluggish economy. Due to the remarkable success of a reasonably-priced casual wear chain from the fall of 1998, most mass merchandise stores dropped prices to compete against the chain. By significantly lowering the average price per item, they helped shrink the entire casual wear market. Leading Japanese apparel manufacturers and trading houses have reorganized their business lines, have reduced a number of brands significantly, and have started focusing on profit margins rather than just sales revenue. Shifting to overseas production is certainly one of the ways to reduce costs. The huge increase in imports from China proves that lower production costs result in more atractive retail prices. In 2000 imports from China represent 27.1% of the total market. According to the Industrial Survey by the Ministry of Economy, Trade and Industry (METI), local apparel production has dropped by more than 10% every year for the last two years. Japanese apparel contractors have been trying to specialize in value-added techniques to survive in the market.
Although most retailers dropped their prices once, department stores and smaller retailers, those who cannot compete against mass merchandise stores by price, have started looking for something else: value-added merchandise; inexpensive clothing that has good quality, but is very simple and basic in style. Retailers have started looking for unique and value-added items to attract customers. Such movement will surely help to increase imports from the U.S.
The apparel market is expected to contract for the next few years or in a best case scenario, stay at current levels. Unless the economy has a very strong recovery, there are no signs of a dramatic expantion in Japan. Not only with the apparel market, but also the entire market may be damaged by recent terrorist acts against the U.S.
U.S. products have basic acceptance in the market. Unfortunately, it is also true that some American products have bad reputation for low quality sewing and construction. Nevertheless, Japanese consumers usually have a good image of the U.S. and its lifestyle that helps make authentic U.S. apparel a popular market segment.

Table 1 (a): Total Japanese Apparel Market: (Unit: yen million)
2000 2001 2002 Projected Average Annual Growth Rate for Following 2 years Total market 5,683,516 5,509,947 5,399,748 - 2%
Local Production 3,673,336 3,195,802 2,899,191 - 8%
Exports 24,383 25,602 26,370 3%
Import Market 2,034,563 2,339,747 2,526,927 8%
Imports from U.S. 47,985 41,267 41,680 1.5%
Source: "Japan Exports & Imports Commodity by Country" published by Japan Tariff Association
"Industrial Statistics 2000" by Ministry of Economy, Trade and Industry
Note: This is an unofficial estimate.

Table 1 (b): Total Japanese Apparel Market (Unit: $ million)
2000 2001 2002
Total market 52,625.1 46,694.5 45,760.6
Local Production 34,040.1 27,083.1 24,569.4
Exports 225.8 217.0 223.5
Import Market 18,838.5 19,828.4 21,414.6
Imports from U.S. 444.3 349.7 353.2
Exchange Rates 108 118 118

- Estimated Future Inflation Rate: 0.2%

- Import Market Share in 2000:
U.S.: 2.4%; China: 75.8%; Italy: 4.7%; Korea: 4.5% and Vietnam: 3.1%
2. Best Prospects:

Young Women's Casual apparel:
Commercial Service Osaka (CS Osaka) believes that young women's casual fashion has potential. Even with the sluggish economy, fashion-oriented young women, aged from the high-teens to 30's, still buy clothing. In fact, they are the largest end-user group in terms of volume.
Roughly speaking, there are two types of casual fashion for young women. One is typical casual/street fashion, such as jeans and T-shirts. The other is sportswear in the U.S. that young women can wear to the office. Successful American brands in this category include Jill Stewart, Vivian Tam, and Marc Jacobs. Japanese working women dress more casually than American women do. Not many wear business suits: they may wear shirts or sleeveless light sweaters and/or a cardigan instead of jacket, a dress with a cardigan or a jacket, or ensemble (matching light sleeveless or short-sleeve sweater and a cardigan) and a skirt or pants are very popular. One reason for this is that company uniforms are still required for women in many companies, neccessitating a change when they get to the office. In this report, we refer to the first type as "street casual" and "office casual" for the second one.

Overall fashion trends:
Overall Japanese fashion trends follow the trends introduced at the Paris, Milan, New York and Tokyo Collections. There are local fashion trends, but basic trends in colors, motif and patterns follow the world's fashion trends.

Street Casual:
Vintage or used looks are popular. So-called "re-make" items, which are denim skirts made from a pair of jeans, and used (or "antiqued") jeans with embroidery or prints are popular. Items that are not mass-produced sell well.

Office Casual:
A fashion trend, so-called "conservative elegance," boomed among college students and working women in the spring and summer of 2001. Basic silhouette of the style is slim and elegant. Body lines were stressed to be good-looking. Compared to former loose-fit casual fashion trends, slim fit styles look better. So, young women are comfortable showing their contures and still look for items designed to accentuate their bodies. For example, they care about the degree of V-neck sweater/T-shirts. What degree of V-neck looks most beautiful when dressed. They care about armhole design and sleeve length; the most typical style a white shirt with turned-up collar, a knee-length tight skirt and a cardigan thrown over their back that is never worn. Individual Items:
- Jeans:
As reported in our International Market Insight (IMI) report, low-rise jeans are still popular and are expected to stay mainstream for some time However, since Japanese women do not like to show their bare backs or underwear when they bend over, jeans that have low-rise fronts but are higher in back sell quite well. Processed jeans, such as stone-washed, processed to be looked like used jeans, or studded jeans, are popular. Center-pressed jeans are also fresh. Another new style are jeans without back pockets, once again to accentuate the slim, simple look. Traditional materials are coming back, but stretch materials also do well. According to an industry expert, trend setters in Japan often visit California to look for new American trends.

Japanese men usually buy jeans from the leading makers, but Japanese women buy jeans that looks good on them. Jeans, which are constructed carefully to look good when worn have the most potential. Women care about the fit in the hip and leg areas: they want their hips to look smaller and legs look thinner and longer. Although average body sizes of American and Japanese women are different, American branded jeans still sell well here. The important issue is how carefully jeans are designed and constructed. For example, in the spring of 2001, Jeans from "Frankie B." sold well, and "Earl Jean" has been popular. "Seven" and "Paper Denim & Cloth" are becoming popular right now.

- Cut & Sewn:
Cut & sewn items, such as T-shirts, are popular. The type of prints seen on T-shirts differ from season to season. Logos and prints with messages sold well in the summer of 2001. Fruit themes were another popular print for the summer. Popular styles in Japan are similar to those in the States, which are rather close or slim fitted rather than loose. One thing to note regarding cut & sewn products is that Japanese consumers usually do not like items sewn by filament yarn.

- Pants and skirts:
Skirts: Although various length are available, a popular length of skirts is knee-high for office casual. For street casual, length tends to be slightly shorter than office casual. Denim is the material that is expected to sell very well. Stretch materials are still popular, as noted above, young Japanese woman like to accentuate their thin lines.
Pants: Low-rise and wide pants are selling well this fall. Stretch materials are still popular, too. Shorter length pants, (capri) maintain their popularity. Pants with a slim fit in the thigh and boot-cut/flares at the bottom made of stretch materials are also popular. Pants designed to make a women look thinner and taller have greater potential.

- Knitwear (sweaters and cardigans)
Twin sets (ensembles) are basic items for young women: a set of a matching round neck, V-neck, or high-neck sweater with a round neck or V-neck cardigan. Since Japanese women often wear them separately, solid colors are selling well. Basic colors, such as black, beige, white and brown always have good sales and light colors, such as light blue, pink, and cream yellow, do well also. Regarding materials, wool, pure cashmere, wool-cashmere, mohair and silk-blended materials are popular. Japanese women do not wear low gauge cotton sweaters as much as Americans do.

- Jackets:
Light fitted jackets are popular because they're easy to match with skirts, pants and dresses and maintain a slightly more formal look. Jackets with clean designs, shirt jackets, and belted jackets also sell well. Regarding materials, denim tailored jackets are expected to sell well. Wool, leather, and stretch materials, as well as other light weight materials are doing well. H.S. Codes included in this report:
H.S. No. 6101.10 - 6114.90: Knitted or crocheted apparel and clothing
6201.10 - 6211.49 Woven apparel and clothing
B. Competitive Situation:

When discussing the competitive situation, we must mention UNIQLO, the low-priced casual fashion chain operated by Fast Retailing Co mentioned above. UNIQLO, with an annual sales of $1,957 million (fiscal year 2000) and 486 stores throughout Japan, has had tremendous success in the weak Japanese economy. By planning, marketing, manufacturing, distributing and selling products by themselves, UNIQLO offers quality made basic casual clothing and accessories at inexpensive prices. The beginning of the boom was in the fall of 1989 when they ran a fleece campaign. They sold several types of fleece jackets and pullovers at approximately $17, less than half the price of fleece items available in the market at the time. In the fall/winter season, UNIQLO sold millions of fleece products. Also, UNIQLO developed advanced inventory control systems, and increased their potential sales which were previously lost due to lack of appropriate sizes and favorite colors.
To compete with UNIQLO, large retail stores tried to offer lower-priced clothing by making every possible cuts. This trend led to a drop of average yen spent per customer, and helped to shrink the whole apparel market. Smaller retailers, who do not have the financial strength to compete against UNIQLO and other mass-merchandise retailers with low prices, have started looking for value-added products to compete against them.

Because of the inexpensive apparel offered by UNIQLO and others, it might be true that imports of American casual fashion may have sufffered over the last few years. On the other hand, movement by smaller retailers looking for value-added products is a good sign for quality U.S. casual/street fashion suppliers. It is not easy to compete in price against apparel produced off-shore by Japanese manufacturers.

1. Domestic Production:
To reduce every possible cost, leading Japanese apparel manufacturers have been shifting to off-shore production, mainly in China, Vietnam, Thai and Indonesia. According to the Industrial Statistics by the Ministry of Economy, Trade and Industry (METI) in 2000, the domestic production (shipment) of apparel and related items dropped by 21.2% compared to those in 1998. Not only the shipment, the number of apparel manufacturing enterprises dropped by 15.2%, and the number of their employees dropped by 20.4% in 2000 compared to those in 1998. It is expected that domestic production will continue to decrease. To survive in this extremely competitive market, Japanese apparel contractors and manufacturers have tried to specialize in value-added techniques and/or trying to shorten lead time to deliver products.

Table 2: Domestic Apparel Industries:
1998 2000 %
No. of enterprises 53,595 45,447 -15.2%
No. of employees 543,692 432,523 -20.4%
Salaries paid (unit: yen million) 1,170,699 917,338 -21.6%
Amount spent for materials (unit: yen million) 2,281,714 1,774,755 -22.2%
Shipment (unit: yen million) 4,660,943 3,673,336 -20.7%
Value-added amount (unit: yen million) 2,225,768 1,764,523 -20.7%
Source: "Industrial Statistics 2000" by Ministry of Economy, Trade and Industry
Table 3: Domestic women's wear production: (Unit: 1,000 pcs.)
Total Jackets Pants Skirts Sweaters Blouses Outer shirts /T-shirts
1997 187,673 13,155 23,621 16,331 30,240 25,790 28,319
1998 172,258 11,215 23,087 14,484 27,941 23,267 25,924
1999 149,695 11,285 22,003 13,505 20,969 18,520 21,280
2000 140,234 10,228 17,953 13,683 23,538 15,930 18,476

1-6/2000 74,509 4,951 9,463 6,972 10,366 9,194 10,555
1-6/2001 64,562 4,163 8,150 6,194 9,497 6,736 9,348
*Source: Ministry of Economy, Trade and Industry, "Textiles Statistics"

Following are leading apparel manufacturers and trading houses.

Table 4: Leading Women's wear manufacturers/wholesalers in fiscal year 2000: (Unit: yen million)
Company Sales (Women's) % of Total Sales Brands
World 148,395 76.8% Aquagirl, Adabat, Untitled, Indivi, Ozoc
Itokin 124,840 87.7% MK Michel Klein, a.v.v., elle, Christian Aujard, Courreges, Onward Kashiyama 83,792 52.0% ICB, Kumikyoku, Jean Paul Gautier, Paul Smith
Sanyo Shokai 80,100 66.4% Sanyo, Krizia, Burberry, Paul Stuart, Sakuraya Shoji 68,449 100.0% Canteen, Sugarlessgal, Jokygal
Five Fox 65,638 45.5% Comme Ca Du Mode, Comme ca Comme ca Commeca, * Source: "Senken Shinbun" July 30, 2001
"Fashion Brand Guide 2001" Senken Shinbun
*Note: Sales figures are for fiscal year 2000. Beginning of a fiscal year varies, but often starts in April in Japan.
Table 5: Leading Apparel Trading Houses: (Unit: yen million)
Company Bane Sales
(Textile/apparel) Brands
C. Ito 761.9 Vivian Tam, Creige, Guess, Tommy Hilfiger
Marubeni Corp. 533.4 OshKosh, NFL, Lightening Bolt
Sumitomo Corp. 461.9 MLB
Mitsui & Co. 360.7 Versace, Versus, Burbarry
Tomen Corp. 355.3 O'neil
Mitsubishi Corp. 347.9 Marc Jacobs, Spalding
Chori 253.9 Kenzo Paris, Miss Sixty, Zanolini
Sumikin Bussan 178.4 Top Flite, Popeye, Bugle Boy, Pacific Trail, Soul Train, Fox
*Source: "Senken Shinbun" July 25, 2001
"Fashion Brand Guide 2001" Senken Shinbun
* Note: Sales figures are for the fiscal year 2000. 2. Third-Country Imports:
Japanese apparel imports have increased dramatically for the last several years because of offshore production by leading apparel suppliers. Japanese apparel imports in 1993 were yen 1,300 billion, compared to yen 2,035 billion in 2000 - - a 56.4% increase over eight years. China supplies 76% of the imported market in terms of value and 85% in terms of quantity. Since most imports from China and other Asian countries are produced offshore by Japanese companies, it's not reasonable to compare these figures with quality U.S. apparel. Imports from Italy, France and Britain should be equivalent to imports from the U.S. European products are usually regarded as high quality, high-end products. However, imports from these countries have been decreasing since 1996. Table 6: Japanese apparel imports in the first 6 months in 2001
Knitted products Woven products
Unit:
1,000 items
yen million 2001/2000
(%) Average price per item Unit:
1,000 items
yen million 2001/2000
(%) Average price per item
Quantity 842,723 13% 334 563,338 11% 748
China Amount 281,330 22% (7.9%) 421,494 19% 7.3%
Quantity 70,763 -21% 382 3,940 -5% 972
Korea Amount 27,013 -26% -7.0% 3,829 -22% -18.1%
Quantity 16,145 -2% 318 15,102 13% 1,192
Vietnam Amount 5,131 3% 5.5% 18,004 15% 2.1%
Quantity 19,559 -1% 365 5,416 -15% 921
Thailand Amount 7,133 14% 14.8% 4,990 -3% 13.5%
Quantity 7,996 18% 582 12,580 -2% 667
Indonesia Amount 4,650 33% 12.2% 8,389 18% 19.9%
Quantity 3,418 -11% 320 14,877 4% 535
India Amount 1,095 -4% 7.9% 7,966 8% 3.7%
Quantity 1,710 -26% 1,971 1,019 -6% 7,218
France Amount 3,371 -10% 21.6% 7,355 8% 15.1%
Quantity 3,705 8% 4,020 2,774 2% 9,413
Italy Amount 14,894 11% 3.4% 26,111 13% 10.6%
Quantity 15,659 -26% 756 2,295 -31% 3,479
U.S. Amount 11,846 -12% 19.2% 7,985 -17% 21.4%
Quantity 1,004,382 7% 370 632,339 10% 836
World Total Amount 372,018 12% 5.0% 528,664 16% 5.6%
Source: "Japan Exports & Imports Commodity by Country" published by Japan Tariff Association
Leading foreign apparel supplying countries in 2000 are: China (75.8%); Italy (4.7%); South Korea (4.5%); Vietnam (3.1%) and U.S. (2.4%)
3. U.S. Market Position:
Japanese consumers have two images regarding U.S. apparel. One is New York as the world's fashion leader, and the other is California as a leader of casual/street fashion. Casual street fashion buyers tend to go to California to look for merchandise, while office casual buyers go to New York. According to buyers interviewed for this research, they go to the U.S. to look for something unique - - the unique use of colors, superior materials or engineering, innovative designs and functions.

One major reason for the decrease in imports from the U.S. is offshore production by U.S. apparel suppliers. Such products are shipped directly to Japan from their production bases in Asia to save transportation cost. So the decrease does not neccessarily mean that American brands do not sell in Japan. Although it is an excellent business strategy for U.S. manufacturers to shift to overseas production, we would like to note that the "Made-in-the U.S.A." label itself has great value to many Japanese consumers. It is said that the Japanese market has two extremes: inexpensive or high-end. People don't want to spend money on basic products, but are willing to pay extra for value-added products and services. Even under the cuurent recession, Japanese consumers spend money on products that they think are worth the price. European and American super brands, such as Chanel, Louis Vuiton, Bulugari and Prada, have been expanding their presence in Japan for the last several years. Offshore apparel are usually inexpensive but basic and simple products, and domestic products and imported products from Europe and the U.S. are rather high-end or value-added products. To compete among the lower priced offshore and high-end products U.S. suppliers need to emphasize their value-added product features, such as materials, techniques, designs in details, etc. Imports of American branded apparel will expand largely for the next few years, however, apparel imports from the U.S. may decrease slightly or stay at the current level.
Major American companies and brands in the Japanese young women's fashion are:
- Jill Stewart
- Polo Ralph Lauren
- GAP
- Calvin Klein
- DKNY
- Vivian Tam
- X-Girl
- Roxy
- Earl Jean
- Anna Sui
C. End-User Analysis:

Young Women - Powerful Customers:
Japanese young women in their upper teens to 30's are generally fashion-conscious and are interested in making themselves look as beautiful as possible. As Japanese women's average marriage age is getting higher, single working women have more flexibility to spend their income. According to "the Single Workers' Household Receipts and Disbursements Survey" by the Ministry of Public Management, Home Affairs, Post and Telecommunications, the average monthly income of single working females aged younger than 35 is yen 270,232 (approximately $2,502 at $1 = yen 108) in 2000, and the average monthly apparel and footwear expenditure is yen 12,461 ($165). Compared to yen 9,565 spent on apparel by a family, it clearly shows that they are a powerful customer group.
Table 7: Average age of marriage:
1970 1975 1980 1985 1990 1996 2000
Male 27.6 27.8 28.7 29.3 29.7. 29.8 30.4
Female 24.6 25.2 25.9 26.4 26.9 27.3 28.2
Source: Ministry of Health, Labour and Welfare "Vital Statistics"
Table 8: Average of monthly income and expenditure by family and by a single working women younger than 35 in 2000: (Unite: yen)
Current Income Expenditure on Clothing Expenditure on shirts/sweaters
Family
560,954 6,284 3,281
Single working female aged younger than 35 270,232 8,769 3,692
Source: Ministry of Public Management, Home Affairs, Post and Telecommunications "Family Income and Expenditure Survey" and "Single Household Income and Expenditure Survey"

According to industry experts and a survey on "Family Income and Expenditure Survey" Ministry of Public Management, Home Affairs, Post and Telecommunications, even with families, women's expenditure on their clothing is 60% of the entire family's expenditure on clothing. Table 9: Average monthly apparel expenditure (Unit: Japanese yen)
Total Clothing Women's Clothing Women's Share Total Shirts and Sweaters Women's Shirts andSweaters Women's Share
1997 7,746 4,301 55.5% 3,724 2,157 57.9%
1998 7,064 3,954 56.0% 3,617 2,135 59.0%
1999 6,919 3,887 56.2% 3,533 2,117 59.9%
2000 6,284 3,625 57.6% 3,281 1,983 60.4%
* Source: Ministry of Public Management, Home Affairs, Post and Telecommunications "Family Income and Expenditure Survey"
Design, materials and influence by magazines and celebrities:
Japanese young women read or see magazines or celebrities on TV programs to learn where to get information about upcoming fashion trends and plan their buying for the coming season. They usually have clear ideas on what kind of items they want before they go shopping, for example, a white cotton slim fit shirt or a knee-high boxed skirt. At stores, they first select items by design, then check the materials. Price is not so important compared to the design and the quality of the product.

What are they looking for?:
Because of the recent "conservative elegance" trend, young Japanese women continue to search for clothing that will make them look good. Here, it means clothing that fits close to the body and is designed to show the body as beautifully as possible. Young Japanese women often have concerns about the size of their hips, lower stomach and waist, and many don't like the length or shape of their legs. Some women hesitate to show their upperarms because they think they are are chubby.
Fashion Trends in the Summer 2001:

We would like to introduce what sold well during the spring and summer of 2001. The following is a top ten list of hit items and patterns from the young women's market reported by Senken Shinbun, a leading apparel industry newspaper. We hope that this information will give you a better idea about Japanese fashion trends compared to those in the U.S. 1. White shirts: Wear it with turned up collar to have the look of "conservative elegance"
2. Belts: Wide belts, such as sash belts, sometimes studded
3. Low-rise jeans:
4. T-shirts: Logo and "message" prints were big hit.
5. Bare tops:
6. Cropped pants:
7. Window pane: Most popular pattern for the "conservative elegance."
8. Cardigans Solid colors 9. Underwear Low-rise to accomodate low-rise jeans
10. Pantyhose Fishnet or textured

D. Market Access:

1. Import Climate:
Japan is open to imported apparel from the U.S. And, apparel is one of a few sectors where the U.S. enjoys a large trade surplus with Japan. In this section, we will discuss labeling requirement and the Japanese sizing systems.

a) Regulations: Importers in Japan must show certain information on a label under the Labeling of Household Articles' Quality Law. Details vary from product to product and includes:

- Types of fabric and textile yarn content, with percentages for linings, thread, materials, etc.
- Care and washing instructions
- Metric measurements
- Name of manufacturer/supplier or officially registered number with the Ministry of Economy, Trade and Industry (METI)

Importers (who sell in Japan) are responsible for labeling. In general, Japanese importers send you care labels in the Japanese language, and you attach them to products. Or, Japanese importers will do so in Japan.

For exact labeling requirements, please contact the METI office below.

Textile and Apparel Products Div., Manufacturing Industries Bureau, Ministry of Economy, Trade and Industry
1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100
Tel: 011-81-3-3501-1511 Fax: 011-81-3-3501-0316
b) Size Standards:

1) Japanese people are in generally smaller and shorter than Americans. Below are average sizes of height, bust, waist, hip and sleeve (center of back to wrist) of young Japanese females by age group.
Table 10: Average height of Japanese females by age group
16-19 20's 30's
cm feet/inch cm feet/inch cm feet/inch
Height 157.7 5'3" 158.2 5'3"1/2 157.1 5'3"
Bust 82.3 36.6 83.1 36.9 83.1 36.9
Waist 64.8 28.8 63.8 28.4 66.8 29.7
Hips 91.2 40.5 90.5 40.2 91.1 40.5
Sleeve 52.3 11.2 51.8 23.0 51.4 22.8
*Source: Research Institute of Human Engineering for Quality Life
2) JIS Sizing Systems:
JIS (Japanese Industrial Standards) for ready-made women's garments serve as a guideline to the standardized sizing system for ready-made women's apparel. Below is an example of the JIS sizes and a general classification based on the sizes of bust, height, waist and hips.
Table 11: For height of 154 - 162 cm: (Unit: centimeters)
S M L LL
Bust 72-80 79-87 86-94 93-101
Hip 82-90 87-95 92-100 97-105
Waist 58-64 64-70 69-77 77-85
Height 154-162 154-162 154-162 154-162
Complete information about the Japanese sizing system is available from the Japanese Standards Association (JAS). They also publishes the women's clothing sizing information in English. Interested U.S. companies can obtain a copy of the publication at JAS's agent in the U.S. CS Osaka suggests that apparel suppliers who want to enter the Japanese market refer to this sizing information as one of their sales strategies to readily meet the requirements of Japanese buyers.

Japanese Standards Association 4-1-24 Akasaka, Minato-ku, Tokyo
Fax: 011-81-3-3583-0462
Web site: http://www.jsa.or.jp email: sitemaster@jsa.or.jp

Publication: "Sizing Systems for women's garments" (JIS L 4005-2001
Price: yen 2,500
Contact: Global Engineering Documents
15 Inverness Way East, Englewood, CO 80112-5704
Phone: 303-792-2181 Fax: 303-397-7935
c) Custom Duties and Consumption Tax:
A duty of approximately 10-16% will be applied to CIF costs. A 5% consumption tax will be added to the price after customs duties. For exact custom duties applied to specific products, please contact the Japanese Customs office.
Japanese Customs Agency website: http://www.mof.go.jp/english/tariff/tariff.htm
2. Distribution/Business Practices:

The Japan Textiles Importer's Association (JTIA) reported on the Japanese market in their report "The Japanese Apparel Market in Imports" some interesting points are:

It is a highly sophisticated consumer's market, full of information and requires small-lot and short cycle supply delivery.
Consumption is very diversified.
The market is constantly oversupplied, and is flooded with more than enough merchandise.
It is a severely competitive market.
Consumers demand extremely high quality.
Consignment sales to retailers, which is a traditional business practice in Japan, is still carried on in some sectors.
The SPA (Speciality store retailer of Private label Apparel) type of companies are on the increase.

This is a good snapshot of the Japanese market. It may sound extremely difficult to enter the market for foreign apparel suppliers, but there are foreign companies recording great successes in Japan, including many from the U.S.
a) Distribution Channels:

It has been said that Japanese distribution channels are complicated, this is true, but these days it has become a little easier. Importers used to sell goods to wholesalers, but these days they often sell directly to retailers, as do some manufacturers. Consignment sales exist at department stores and other mass merchandise stores. However, to reduce costs, such large scale retailers are changing some of their buying habits. Chain stores and large-sized retailers often purchase from manufacturers and importers, sometimes directly from foreign suppliers through a trading company. Small mom and pop shops usually do not buy directly from manufacturers, but from wholesalers. There are cash & carry wholesalers for these small shops, where mainly inexpensive products are sold.

Manufacturing retailers, such as UNIQLO, have been doing well because they are very responsive to customers preferences. In Japan, two months is the shortest lead time from developing to delivering goods to stores. According to a buyer at a leading department store, he attemps to foresee new fashion trends only two months in advance, instead of a traditional six months lead time.

The pricing structure in Japan varies according to the type of distribution channel and service that an importer or wholesalers may provide (e.g. inventory, marketing, packaging, financing, acceptance of unsold/returned goods, etc) It is important for U.S. companies to pay attention when quoting prices to potential agents or distributors - to confirm where the Japanese company fits in the distribution channel. Some discounters directly import goods from foreign suppliers. However, if goods are sold at a discount store, it badly hurts the image of the brand. One example of the pricing structure follows:

Table 12: Example of pricing structures
FOB Price: 100
Shipping/Insurance 20% 120
Duty 15% 138
Consumption Tax 5% 145
Importer's Commission & Cost 30% 188
Retailer's profit - Consumer 60% 300

b) Entering the market:
Here are three different ways to enter the Japanese market depending on the marketing strategies of a U.S. company.

1) Direct Export:
Direct export is the easiest and most common strategy for new-to-market companies. Many U.S. companies want to have an agent or a distributor for their products in Japan from the beginning. However, it is not easy to find an agent or a distributor because the market is still soft and no one want to carry much inventory. Also, CS Osaka has learned that Japanese companies do not want to represent a U.S. apparel manufacturer unless the U.S. company has a full line of products, from tops to bottom and probably some accessories, as they want many kinds of products to fill a corner or a shelf at their retail shops.
CS Osaka suggests that U.S. suppliers that do not have a full line, to start with small orders. Retailers may be more active to find new sources than wholesalers by visiting trade shows overseas and exploring the internet. You may sell directly to retailers at slightly higher than your regular FOB prices, looking at future opportunities of having a wholesaler/importer as an agent. Usually, wholesalers do not like the items that have already been sold directly to retailers. However, if you can give big enough discounts for wholesalers to make a profits, you may be able to have an agent/distributor and pass all your retail customers to the agent/distributor.

2) Establishing presence in Japan:
If the U.S. company has a strong financial background, it may consider establishing a subsidiary or a joint-venture company in Japan. This is probably the most costly option, however, the subsidiary can monitor and control inventory, management, pricing, marketing, distribution, brand image, intellectual property, and fashion trends.

Many leading foreign fashion brands have entered the Japanese market through a Japanese agent or distributor. Because the Japanese market was quite unique, it was smart for them to work with a Japanese partner.
3) Licensing Program:
A U.S. company might wish to consider licensing its brands. Licensing is the least costly market entry alternative and offers the ability to adjust design, prices, and production quickly to suit the market and consumer tastes, including producing the products in the correct sizes for the Japanese market. It is true that the number of licensing agreements between U.S. and Japanese companies has been increasing. However, without a control of the brand image, licensing may result in damage to the brand image, if licensees sell to discounters or go bankrupt. By licensing out, a U.S. company also loses one of the strongest appeals of American fashion --its "Made-in-the-USA" authenticity.

Japanese companies often want a licensing agreement. Industry experts say that it's not easy for Japanese importers to make enough profit by selling only importing goods. Importers always have to take risks in case that goods don't sell. In addition, if the goods sell very well, the importer have to deal with parallel imports. So, to protect and improve their profit, Japanese importers sometimes would like to import some products from the States to offer real American taste to customers, and would like to produce some items under a licensee agreement to meet further market demands and to make more profit.

c) Tips when entering the Market:
Based on interviews with industry experts, the following are some suggestions to serious U.S. women's wear suppliers. We would like to suggest that you keep the information in mind for your success in the market. Japanese companies are looking for new suppliers, domestic or overseas, who respect long-lasting and beneficial business relationships.
1) Complaints/comments from Japanese companies:
- Wrong colors, wrong sizes, wrong quantities:
Japanese companies complain most often that foreign suppliers ship the wrong products without notice. They find products in wrong colors, wrong sizes, and shorted quantities. Importers place orders to foreign manufacturers based on orders received from retailers. If the importer cannot deliver the goods as ordered by its customer, customers will lose trust in the importer.

- Quality:
Japanese end-users are probably the strictest customers in the world. They may find tiny rips, sewing mistakes, that other customers may not realize. Japanese customers will not buy such low-quality products if they find any mistakes at a store. If they find them after their purchase they typically ask for exchange or a refund and will never buy the brand again.

- Late Delivery:
In Japan, retailers start selling spring items in early February and start bargain sales in early July for the summer season. They sell fall/winter items from late July to early August and start bargain sales in early January. Therefore, late delivery means that importers lose sales opportunity and cannot sell the products.

- Built based on shrinkage:
Because dryers are commonplace in the U.S., clothing items are usually produced slightly bigger to make up for shrinkage. This does not apply to the Japanese market where most families air dry on an outside line.

2) Complaints from U.S. suppliers:
- Huge orders on one specific style in a year, but no order the next year:
Some U.S. suppliers complain that many Japanese importers purchase the same specific styles one year when the styles are very popular in Japan. However, the next year, if the trend dies, nobody wants to buy the styles. For example, an Australian surfing brand was extremely popular among Japanese girls in 1998. So, everybody imported T-shirts and other items of the brand in 1998. This year, the boom is gone. No one wants them. U.S. suppliers complain that such buying practices makes it difficult for them to plan production.
d) Comments by CS Osaka: Easy to Export!
CS Osaka suggests that high-quality and new-to-market U.S. apparel manufacturers prepare for the time and effort it will take to become successful in the Japanese market. The Japanese market is huge. Exporting itself is not difficult. Japan is open to imported apparel as U.S. suppliers do not need a license to export. U.S. export prices are usually FOB at their warehouse/factory. So, basically importers will take care of transportation to a port in the U.S. and to Japan and clearing Japanese customs. If you are sending a small order to a Japanese retailer, you can use regular U.S. Mail, a courier service like FedEx, UPS or DHL. Your local U.S. Export Assistance Center or freight forwarder should be able to help you with filling out the forms. Also keep in mind that to build good business relationships, a U.S. company may need to come to Japan regularly and must ship orders as promised.
3. Financing:

Japanese commercial banks provide financing to importers based on the financial situation and credit standing of each company. Payment to the U.S. supplier is, in general, made by irrevocable L/C (Letter of Credit) or wire transfer. The U.S. exporter receives payment from the transacting bank after the shipment is completed. For small quantity sample orders, payment by cash remittance through a bank transfer is usually preferred.

For domestic transactions, importers normally issue bills to the wholesaler at the end of each month, and a couple of weeks later receive a kind of promissory note called a "tegata" with a 30-90 day term. Wholesalers pay with a 90-120 day "tegata." Wholesalers, in some cases if necessary, provide retailers with further financial support. However, due to the current economy, more companies prefer cash payments rather than a promissory note.
4. Trade Promotion Opportunities:
CS Osaka believes that showing actual products to buyers is the most effective way to enter the market. There is only one international apparel trade show in Japan, the International Fashion Fair. The show features everything from children's wear to women's and men's wear, and is held twice a year in January and in July. The U.S. Department of Commerce and the Commercial Service Japan organize the U.S. Apparel Show at the International Fashion Fair in January, featuring 100% made-in-the U.S.A. casual fashion.

International Fashion Fair(IFF)
Organizer: Senken Shimbun
31-4 Hakozaki-cho, Nihonbashi, Chuo-ku, Tokyo 103-0015
Phone: 81-3-3664-2341 Fax: 81-3-3639-8031
http://www.senken.co.jp

DISCLAIMER
Information in this report relies on sources including Government Publications, Opinions of industry experts and other public sources. Infomat can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. All prices subject to change without notice.

$3500 USD
For the 2008 Edition

Published: 2006 August
Market: Womens
Region: Japan
Industry: Apparel
Pages: 45
Delivery: 7-12 Business Days
SKU: infre0000285