Uniqlo had a 12.3% share of the Japanese apparel market in 2018

Uniqlo had a 12.3% share of the Japanese apparel market in 2018

Japan is not only one of the world's largest apparel markets, it is also one of the biggest clothing importers, providing new opportunities for fashion brands and retailers. Here, Julia Huott and Sheng Lu from the University of Delaware, take an in-depth look at selling and sourcing patterns in the country – and some of its unique characteristics.

Japan is one of the world's largest apparel markets, totalling US$67bn in 2018 and ranked third after the European Union (US$380bn) and the United States (US$284bn).

Like many other developed economies, most clothing consumed in Japan is imported, making the country a huge sourcing and marketing opportunity for fashion firms and sourcing agents around the globe.

Based on the latest market and trade data, including the re:source by just-style strategic sourcing tool, this in-depth analysis of the Japanese apparel market and its sourcing patterns will help fashion brands and retailers explore current and future opportunities.

Overview of Japan's apparel market

The Japanese apparel market has several unique features.

First, it is huge – but growing slowly. Between 2015 and 2019, annual apparel retail sales in Japan were stable at around US$66bn, with no significant expansion or decline. Similar to many other markets, of the items sold in 2017, 62.1% were women's wear, 29.0% were men's wear, and around 9.0% were children's wear.

While the market growth rate is less "exciting" than some emerging economies, the overall size of the Japanese apparel retail market remains attractive – in 2018 it was 123% as large as India, 433.2% the size Mexico, 283% the scale of Brazil and 262.9% the size of South Korea. On top of this, thanks to a gradually improving Japanese economy, forecasts show the value of Japan's apparel retail market could increase by 1.3% annually in the next five years to reach around US$71bn in 2023 – although such a growth rate still would be less than the 4.3% world average over the same period.

Table 1: Brands with the largest share in Japan's apparel retail market

BrandNationalityMarket share in 2017 (by retail value) (%)Market share in 2018 (by retail value) (%)
1UniqloJapan11.512.3
2ShimamuraJapan4.84.7
3GUJapan2.62.7
4MizunoJapan1.51.5
5Cross PlusJapan1.41.3
6WacoalJapan1.31.3
7GunzeJapan1.21.3
8AdidasGermany1.11.1
9AokiJapan1.11.1
10NishimatsuyaJapan0.90.9
11ZaraSpain0.80.9
12GapUS0.80.8
13SanyoJapan0.80.7
14RenownChina0.70.7
15Louis VuittonFrance0.60.7

Second, the Japanese apparel market is competitive – and local brands are big players. There are over 105 regional and global fashion houses, including well-known international brands such as Adidas, Zara and Gap. However, a unique feature is the dominance of mostly Japanese brands, led by Uniqlo, whose market share has increased steadily from 8.5% in 2012 to 12.3% in 2018 (see Table 1). In comparison, the biggest player in the US apparel retail market – Nike – had just a 2.5% share in 2018, and non-US fashion brands are also more visible.   

This is an important reminder that even though Japan is thought to be highly exposed to western culture, ordinary Japanese consumers still seem to prefer traditional and local-oriented products. On the other hand, fast fashion brands appear to be more popular and successful than luxury brands in Japan, which is notably different from other Asian markets (such as China and South Korea) and those in Europe (such as Italy, France and the UK).

Table 2: Apparel sales in Japan by distribution channel (%)

Distribution channel200520102015201620172018
Store-based retailing89.385.081.880.980.279.2
Specialty clothing stores59.556.654.753.953.953.2
Department stores16.915.615.715.414.914.9
Others12.912.811.411.611.411.1
E-commerce10.715.018.219.119.820.8

Third, while e-commerce has been growing particularly fast, Japanese consumers still shop mostly at brick and mortar clothing stores. As shown in Table 2, apparel is sold through a mix of traditional and new formats. However, despite the increasing competition from e-commerce, conventional store-based retailers such as specialty clothing stores and department stores still play a dominant role in the market. As of 2018, Japanese consumers purchased nearly 80% of their clothing in physical stores. In comparison, only 20% of clothing was sold online in Japan that year, much lower than nearby Asian markets such as China (32%) and South Korea (29%). The unique consumption culture and social norms in Japan could contribute to the ongoing strong performance of brick-and-mortar clothing stores.

Apparel sourcing patterns in Japan

Regarding Japan's apparel sourcing patterns, three things are worth noting.

First, the total value of Japan's apparel imports has been growing steadily in line with consumption patterns. Specifically, data from UN Comtrade shows that between 2010 and 2018, the value of Japan's apparel imports enjoyed a 2.7% compound annual growth rate, which was lower than the US (3.4%), but higher than the EU (1.9%) and the world average (1.3%) over the same period. With regards to products, the value of knitted (HS chapter 61) and woven (HS chapter 62) clothing items was divided almost equally. However, due to market demand, women's wear typically accounts for around 60% of Japan's total apparel imports versus 40% for men's wear.  

Table 3: Japan's top apparel suppliers (by value) 

Rank20052005201020102015201520182018
Exporter%Exporter%Exporter%Exporter%
#1China80.9%China82.2%China67.1%China59.0%
#2EU7.4%Vietnam4.5%Vietnam10.3%Vietnam13.9%
#3Vietnam2.7%EU4.4%EU4.9%EU5.3%
#4South Korea1.9%Thailand1.7%Indonesia3.2%Bangladesh3.8%
#5USA1.3%South Korea1.3%Bangladesh2.7%Indonesia3.6%
Top 5 in total94.3%Top 5 in total94.2%Top 5 in total88.2%Top 5 in total85.5%

Source: Re:Source (2019); UN Comtrade (2019)

Second, while China remains the top supplier, Japanese fashion brands and retailers are also diversifying their sourcing bases. As shown in Table 3, since the elimination of the quota system in 2005, China was for a long time the single largest apparel supplier to Japan, with an unparalleled market share of more than 80% measured by value. However, as 'Made in China' is becoming more expensive, China's market share has been declining in recent years and dropped to a record low of 59% in 2018.

Similar to their counterparts in the US and EU, Japanese fashion brands and retailers are actively seeking alternatives. Imports from Vietnam, Bangladesh and Indonesia have been growing particularly fast, even though their production capacity and market shares are still far behind China. For example, Uniqlo, the largest Japanese apparel retailer, used to source nearly 100% of its products from China. But since 2018, Uniqlo had also strategically developed production capacity in Vietnam, Bangladesh, Indonesia, India and Turkey. As Japanese fashion companies source from more places, the total market shares of the top-five apparel suppliers dropped from over 94% back in 2005 to around 85% in 2018 measured by value.

Table 4: Source of Japan's apparel imports (by value) 

Region2000200520102015201620172018
From Asia88.6%90.1%93.6%93.1%92.8%92.8%92.5%
From rest of the world11.4%9.9%6.4%6.9%7.2%7.2%7.5%

Source: UN Comtrade (2019)

Third, Japanese fashion companies are increasingly sourcing from Asia. As illustrated in Table 4, a growing share of Japan's apparel imports now come from the Asia region, thanks to deeper regional economic integration and a more efficient regional textile and apparel supply chain.

However, a good proportion of Japan's apparel imports from Asia actually contain fibres and yarns originally made in Japan. For example, it is not difficult to find clothing labelled 'Made in China' or 'Made in Vietnam' that also includes phrases such as 'Using soft, slow-spun Japanese fabric' and 'With Japanese yarns' in the detailed product description.

The strengthening regional trade bloc in Asia has also created unique challenges for apparel suppliers from other regions of the world interested in the Japanese market. As of 2018, only 7.5% of Japan's apparel imports came from non-Asian countries (mostly western EU countries), a notable drop from 11.4% back in 2000.  

Tariff barriers and free trade agreements

Trade policy, including tariff barriers and free trade agreements, is another critical factor that affects where Japanese fashion firms source their products.

Table 5: Tariff rate for apparel in 2018

CategoryJapanUSEUCanada
Average applied tariff rate9.0%11.7%11.5%16.5%
Highest applied tariff rate13.0%32.0%12.0%18.0%
% of duty-free 6-digit HS code*2.1%2.8%0.0%5.4%

Source: Re:source (2019); WTO (2019)

*Refers to the share of duty-free HS six-digit subheadings in the total number of subheadings under HS chapters 61 and 62.

Overall, Japan sets a lower tariff barrier for apparel than other leading import countries. For example, as shown in Table 5, Japan's average applied tariff rate for apparel items (HS chapters 61 and 62) was 9.0% in 2018, lower than the tariff rate set by the United States (11.7%), EU (11.5%) and Canada (16.5%) that year. Meanwhile, its highest applied tariff rate was 13.0%, which was also lower than 32% in the United States and 18.0% in Canada.

Free trade agreements (FTAs) and trade preference programmes (TPAs) offer important duty-saving opportunities for Japanese fashion companies. According to re:source by just-style, as of September 2019 there were around 15 FTAs and TPAs in force in Japan, whose members include several 1st tier apparel supplying countries in Asia, such as Vietnam, Bangladesh, India, Indonesia and Cambodia.

Most of these trade programmes adopt the so-called "fabric-forward" rules of origin (also known as "double-transformation" rules of origin), meaning fibres and yarns may be produced anywhere, but each component starting with the fabric used to make the garments must be formed within the free trade area. Such a rule of origin is more liberal than the "yarn-forward" rule typically required by US or Canadian free trade agreements. The less-restrictive rules of origin also make it easier for Japanese apparel companies to take full advantage of the duty-saving benefits provided by these trade programmes and give them more flexibility in textile raw material sourcing.

Additionally, Japan is actively engaged in negotiations on a trilateral free trade agreement with China and South Korea, and the Regional Comprehensive Economic Partnership (RCEP), which involves Japan, South Korea, China and members of the Association of Southeast Asian (ASEAN) countries. Once reached and implemented, these trade agreements will provide new exciting duty-saving sourcing opportunities, including from China, the top apparel exporter in the world.

In conclusion, Japan's apparel market and its sourcing patterns will continue to evolve in the years ahead. Factors such as the growth trajectory of the national economy, consumer shopping behaviours and preferences, and the implementation of new free trade agreements are among the key factors shaping the future landscape. Apparel suppliers in Asia, in particular, could find Japan a promising market to pursue, if they haven't done so already.

About the authors: Julia Huott is a research assistant in the Department of Fashion and Apparel Studies at the University of Delaware; and Dr Sheng Lu is an Associate Professor in Fashion and Apparel Studies at the University of Delaware.

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