With most of its indicators pointing downwards, the Japanese economy is going through a challenging period. However, after hitting a low in 2010, the Japanese eyewear market appears to be showing some small signs of recovery. In spite of lingering difficult conditions in certain segments of the market, there are some structural factors in the country that should support its growth in the next years.
According to national industry experts whom we met at the IOFT trade show in Tokyo in October 2014, the total value of the Japanese eyewear market at retail for lenses and frames increased in 2010 for the first time in many years. It reached 409.9 billion yen (€3,065m-$3.431m) before VAT in 2013, up by 1.5 percent as compared to the previous year, and 4.6 percent higher than in 2010, according to Gankyo Publishing. Another piece of good news from the market was that the average price of a pair of prescription frames with lenses increased in 2013 for the second year in a row by about 2 percent, after many years of falling.
However, it's still not sure whether the recovery continued in 2014 after the increase in the local sales tax in April and in a general context of decreasing overall consumption (-0.9%) and GDP (-0.2%), while inflation came back and salaries remained stable.At least when it comes to lenses, the market declined in 2014, according to the two main players in the segment.
Hiroshi Suzuki, chief executive of Hoya Corporation, said a few weeks ago that the Japanese (ophthalmic lens) market has been contracting at a pace of between 5 and 6 percent annually, although the actual volume of the market has remained mostly stable lately. Hoya's main competitor, Essilor, said a few days ago that it was able to record stable sales in a declining market. In commenting on the results and the strategy of his company (see separate article in this issue)., Suzuki noted that prices have dropped to around ¥18,000 (€134.6-$150.7) in Japan even for more sophisticated ophthalmic lenses.
Over the longer term, the total market value in 2013 was 33 percent lower than in 2004. Two main factors behind the downward trend, which lasted until 2010, are a decline in the number of people buying glasses from 18.5 million people in 2004 to 16.8 million in 2010, and a decrease in the average price of a pair of glasses (lenses + frames) from ¥28,374 (€212.2-$237.5) to ¥22,061 (€165.0-$184.7).
The deflationary trend can be explained in part by the growing competition in the retail market, which is still undergoing a strong consolidation process. The number of optical shops went down from 16,533 in 2007 to 13,834 in 2013, less than half of them being independent stores.
The market is now dominated by growing retail chains such as Megane Top (896 shops), Paris Miki (842 shops) and Megane Super (306 shops). There is a trend for these chains to offer special packages to Japanese customers, best represented by JINS, a retail chain that has been offering a pair of glasses for as little as ¥5,000 (€37-$42), advertising massively to the public on radio and television. JINS has enjoyed high growth in the last couple of years, almost doubling the number of its stores to 272 in 2014. The fierce competition among the chains has been affecting prices much more than internet sales, which experts estimate at less than 2 percent of the total market currently.
There is no system in place for the reimbursement of expenses on eyewear for Japanese customers, either from the social security system or private insurance. This is probably another reason for the downward trend in average prices. It certainly also explains the relatively low replacement rate for eyewear - one new pair every 4.9 years - as compared to the rates in most western countries.
In spite of these factors, industry experts are rather optimistic for the future, mostly because of the aging population in Japan. They also estimate that the high-end segment, consisting of lenses and frames worth more than ¥30,000 (€224-$251) at retail, represents about 20 percent of the market. It's the segment that many foreign brands are targeting, with varying degrees of success, often relying on local manufacturing for fitting and styling purposes.
The number of people who bought corrective eyewear has already increased significantly in the past five years, 17.8 million people in 2013 against 15.5 million people in 2009, and the upward trend is expected to continue. The total population of people wearing eyewear in the country was estimated at 76.3 million at the end of 2013, 60 percent of whom were over 45 years old, and there is expected to be an increase in the next years. Officials from Tokaï, for example, estimate that the number of progressive lenses sold should grow to represent 35 to 40 percent of the total lens market in Japan in 2023 as compared to 28 percent currently.
It has been difficult to obtain precise figures on the production of frames in Japan. Industry experts estimate the production volume at about 3.5 million pairs, down from almost 9 million pairs in 1998, while officials from the Fukui Optical Association mentioned a current production level in the range of 6 million pairs.
About 70 percent of the production is sold on the national market and exports are mostly split between Europe/Asia (50%) and the U.S. (30%). There are still currently about 120 producers of eyewear frames in Japan, employing 10,000 to 12,000 people, mostly in the Fukui region. Titanium frames represent about 70 percent of the volume. The biggest producers by far in the country are Charmant, followed by Aoyama, Sunreeve and Hamamoto.
Japanese frame producers have been suffering from growing competition from producers in other parts of Asia - China mostly, but also South Korea - in recent years.
In 2013, imports from Asia represented ¥85.2 billion (€637.2m-$713.5), followed by imports from Western Europe and North America at ¥68.4 billion (€511.6m-$572.6m) and ¥13.3 billion (€99.5m-$111.4m), respectively. We could not determine the more recent trends in trade flows and the effect of the recent depreciation of the yen.
Most of the figures in this article come from the market data collected and published every year in an impressive 450+ page report, full of charts and figures, by Gankyo Publishing, a leading Japanese trade publication, which is in Japanese.