Ikea, Shein, Zara all learned the hard way: why the Japanese market is a tough nut to crack, and expert tips on doing so

Many retailers have failed to establish a foothold in the Japanese market, though some successfully do so after adjusting their strategies and trying again

Industry insiders break down the difficulties, from partnerships and government regulations to local tastes, and give tips on the best steps to success

Reading Time:5 minutes

People wait in line for the opening of a new H&M store in Tokyo in 2009. Global lifestyle fashion brands and retailers often find it hard to break into the Japanese consumer market. Photo: Getty Images

Published: 4:15am, 20 Sep 2023

A number of successful foreign retailers have famously flopped in their initial attempts to establish a foothold in Japan, with some of the biggest names withdrawing from a potentially lucrative market – but one fraught with idiosyncrasies.

Walmart walked away, as did Ikea and American Eagle Outfitters, after failing to make the cultural leap. But the fact that the latter two returned suggests that retailers that can learn from their mistakes can indeed be big in Japan.

Given local consumers’ obsessions, fashion is arguably one of the most promising sectors for overseas firms, with all the big names – from Shein to H&M, Gap and LightInTheBox – firmly established in Japan and others considering the market, in bricks-and-mortar outlets, e-commerce, or a hybrid of the two approaches.

And while Japanese ministries do not resist foreign fashion firms entering the market, analysts say that local legal requirements must be met and there is a subtle preference for domestic companies in the sector.

An American Eagle store in Tokyo. The retailer returned to Japan after exiting the market in 2019. Photo: Getty Images

“There has been promotion of local champions, of course, going back to significant backing of [retail company] Fast Retailing in the 1990s after Gap entered the market in 1994, via Mitsubishi Shoji,” says Michael Causton, co-founder of research firm JapanConsuming and an expert on Japanese distribution and marketing.

“You see the same patterns with [furniture store] Nitori when Ikea returned here in 2006 and then Workman when Decathlon started pushing in from 2017-2018,” he adds. “But the support is very background and more in the form of proxies – like the big trading firms, especially Mitsubishi, Mitsui and Itochu – providing generous financing and OEM [original equipment manufacturer] support to help expansion faster to reach scale.