JADMA

OVERVIEW OF DIRECT MARKETING MARKET IN JAPAN

December, 2002

Direct marketing has been changing dramatically in recent years.

The total sales derived from direct marketing in fiscal 2001 are estimated at 2.49 trillion yen. This is an increase of 100 billion yen or 4.2% on the previous year and the highest amount since we started the survey.

The total sales amount had increased continuously from the first survey of fiscal 1983 to fiscal 1996 and then saw declines in 2 consecutive years. This downturn, however reversed in fiscal 1999 and the total sales amount has returned to its increasing trend.

The sales declines of 1997 and 1998 were caused mainly by the poor business results of bigger general merchandise marketers. In 1999, the power balance of the industry was rewritten due to various reasons: the negative impact of bigger general merchandise marketers was weakened; the specialised direct marketers grew sharply; smaller businesses achieved better results; and manufacturers entered this market newly. With all these changes the direct marketing market in Japan expanded. This structural transformation of the industry is expected to be accelerated by new technologies including the internet, and the market size will be enlarged by the new entrants. It is certain that direct marketing will gain a more important position in the Japanese market.

However, competitive price offers by specialty store retailers or private label apparel (SPA) like UNIQLO (a brand from Fast Retailing Co., Ltd, which is similar to GAP) came to be generally accepted by consumers, and accordingly it became difficult for direct marketers to appeal by virtue of lower price. Under these circumstances, it is easily expected that direct marketers will face stiffer competition in the retail marketplace.