By HIROKO TABUCHI


TOKYO - Not long ago, many Japanese bought so many $100 melons and $1,000 handbags that this was the only country in the world where luxury products were considered mass market.

Even through the economic stagnation of Japan’s so-called lost decade, which began in the early 1990s, Japanese consumers sustained that reputation. But this recession has done something that earlier declines could not: turned the Japanese into discount store shoppers.

In seven years operating in Japan, through a subsidiary called Seiyu, Wal-Mart Stores, the king of discount retail, has never turned a profit. But the retailer expects that to change this year: sales have risen every month since November.

Discount retailers in all sectors are reporting increases in revenue - while just about everyone else is experiencing declines, in some cases, by double digits. As a result, the luxury boutiques, once almighty here, are reeling.

Sales at LVMH Moet Hennessy Louis Vuitton, makers of what has long been Japan’s favorite handbag, plunged 20 percent in the first six months of 2009.

In the 1970s and ‘80s, and even as the economy limped through the ‘90s, many consumers spent generously on Louis Vuitton bags and Hermes scarves - even at the expense of holidays, travel and, sometimes, meals and rent.

Now, the Japanese luxury market, worth $15 billion to $20 billion, has been among the hardest hit by the global economic crisis, according to a report by the consulting firm McKinsey & Company. Retail analysts, economists and consumers all say that the change could be a permanent one. A new generation of Japanese fashionistas does not even aspire to luxury brands.

“I’m not drawn to Louis Vuitton at all,” said Izumi Hiranuma, 19. “People used to feel they needed a Louis Vuitton to fit in,” she said. “But younger girls don’t think like that anymore.”

In the new environment, cheap is chic, whatever the product. In supermarket aisles, sales of lowly common vegetables - like bean sprouts, onions and local mushrooms - are up.

And instead of melons, Japanese shoppers are buying cheap bananas, pushing imports up to records. “I’ve cut down on fruit since last year, because of the cost,” said Maki Kudo, 36, a homemaker shopping at a Keikyu supermarket in central Tokyo. “Instead of brands, I now look much more at cost.”

Thrift is being expressed even in unlikely measures like umbrella sales, which have spiked as more Japanese opt to brave rainy weather on foot rather than hail a taxi, according to a survey by the Dai-Ichi Life Research Institute.

A heated price war has erupted in the already cut-rate category of “imitation” beers, a poor man’s brew made with soy or pea protein instead of barley and hops.

In July, Seven & I Holdings Company, which runs the 7-Eleven chain, introduced a new line of imitation beer for $1.35 a can; the same month, the Aeon shopping center brought out its own beer beverage for about $1.09. The Daiei supermarket chain then lowered prices on its beer to less than a dollar.

Seiyu has ignited a price war of its own, with its “bento” lunch-in-a-box of rice and grilled salmon for 298 yen (about $3.25). Abandoning a custom here for supermarkets to make their bento boxes on site, Seiyu cut costs by assembling the lunches at a centralized factory.

Seiyu bet that Japan’s frugal consumers would not care about the change, as long as the bentos were cheap. Seiyu was right; the bentos have set off a line of competing supermarket bentos.

“Price is No. 1 in my mind,” said Chie Kawano, an elderly shopper at Seiyu’s Akabane store in northern Tokyo, a bento box in her basket. “I don’t need anything fancy.”


Discounters across Japan, like Seiyu (a part of Wal-Mart Stores), are doing well while luxury boutiques are reeling.