Japan’s ¥10 Trillion Growth Opportunities, What do Millennials and Gen Z Want? — Report CEO Brief

The old saying that customer complaints are a gold mine should be a guiding principle for winning the battle for customer experience, particularly in the Land of the Rising Sun. Indeed, the growing trend of firms failing to meet Japanese consumers’ expectations is worrying, to say the least.

Arguably, most companies want to grow as quickly as possible in this age of artificial intelligence. However, disruptions and the relentless pursuit of efficiency have distracted many firms from taking consumers’ expectations regarding their products and services seriously, as they should. The results are predictable: low growth, poor customer satisfaction, and a lack of loyal customers who are willing to buy from them regardless of the state of the economy, whether it be recessions, supply chain disruptions stemming from COVID-19, or tariffs.

Japan’s ¥10 Trillion Growth Opportunities in Customer Experience Improvement

Since the advent of the World Wide Web in the 1990s, which coincidentally signified the onset of Japan’s so-called ‘lost decades,’ subsequently followed by the digital age and further exacerbated by globalization, the number of Japanese consumers expressing dissatisfaction with their products and services—measured by significant complaints—has risen by more than fourfold. This trend is troubling, particularly in today’s age of artificial intelligence. Moreover, when we compare the levels of dissatisfaction to those of 1984, they have increased by more than seven times.

While consumer complaints and dissatisfaction may seem natural across economic sectors in this age of sky-high customer expectations, not all industries and companies are created equal. In 2022, for instance, just 10 industries accounted for 32% of dissatisfaction, leading to significant outcry, including general goods, real estate lease contracts, and construction, among others. With many capital-intensive industries topping the list, it’s no surprise that consumers spend trillions in purchase and contract value.

Therefore, players across industries must pay closer attention to prioritizing their customer experience in this era of a complex, volatile economic landscape, exacerbated by trade wars.

Trends Across the Food Industry: Millennials and Gen Z

As average food expenditure among millennials and Generation Z declines, companies in the food industry, including restaurants and ingredient suppliers, must take proactive measures to reverse this trend by strategically reorienting themselves to enhance the customer experience. For instance, the average expenditure of single men under 30 was approximately 50,000 yen in 1999. However, by 2014, this figure decreased to approximately 38,000 yen, representing a 23% decline over a short period, primarily due to a reduction in dining out. Similarly, spending by single women aged under 30 has also declined significantly over the same period, from nearly 35,000 yen to 28,000 yen—a 20% drop. Collectively, these emerging consumer trends among millennials should serve as a critical wake-up call for the food industry.

When analyzing the trends across the food industry among men, women, single households, and households with two or more persons, the situation appears even more dire. In one-person households, men’s spending has decreased by nearly 12,000 yen, while women’s spending has fallen by almost 7,000 yen. Among all age groups in one-person households, the situation is similarly grim, with a drop of nearly 5,000 yen, except for prepared foods, which have shown resilience, maintaining positive customer spending of around 1,100 yen.

Among households with two or more individuals, food expenditures have declined. However, within this demographic, the sole resilient category has been prepared foods, which have maintained a positive performance, approximately 1,700 yen, during the same timeframe.

In households with two or more people, food spending has decreased slightly. But there’s good news! Prepared foods are performing well, maintaining a steady price of around 1,700 yen during the same period.

Linking Consumer Behavior to Customer Experience in the Digital age

Through a comprehensive analysis of consumers’ digital footprints, as evidenced by activities such as video and photo capture, our findings indicate that images taken during dining experiences surpass those captured during shopping excursions, social gatherings, and event attendance across all age demographics in Japan. Such digital engagement is notably prevalent among millennials, Generation Z, and individuals aged 70 and above.

Companies must devise a successful strategy to enhance the consumer journey by leveraging these digital activities to elevate the customer experience in this era of Generative AI. Given the widespread popularity of photography, including selfies, businesses should incentivize their patrons to engage in similar activities after meals, thereby raising awareness of their restaurants and the menu selections made by each consumer.

The Experience of Millennials and Gen Z in Aesthetic Services

An increasing number of millennials and members of Generation Z have expressed disappointment in Japan with hair removal, slimming, facial, and other aesthetic treatments across the country, which warrants attention from the industry’s service providers before the opportunity is lost.

Across various age demographics in Japan, these types of consumers are becoming increasingly prominent and are displaying diminished tolerance for services that do not meet extraordinarily high expectations. A comprehensive understanding of these circumstances should enable service providers to enhance consumer experiences. It is noteworthy that hair removal ranks at the pinnacle of disappointments in aesthetic treatments, followed by slimming and facial treatments. Other treatment types exhibit significantly lower relative disappointment ratios compared to the other three categories in meeting the expectations of Japanese consumers.

Medical Cosmetic Treatments and Customer Experience

Again, among Japanese age demographics, millennials and Generation Z consumers top the list of dissatisfied customers by a wider margin than those aged 50-60 or older.

Like the treatment cases mentioned elsewhere, service providers need to capitalize on these findings to enhance customer satisfaction, boost loyalty, and drive growth in the highly competitive Japanese market. Indeed, in the medical treatment segment, women lead the dissatisfied consumers across all age groups, meaning the issue is serious and widespread, extending beyond the imagination of most players, as commonly thought, and requiring serious attention.

In summary, the significance of customer satisfaction, achieved through an enhanced customer experience, is paramount in the contemporary era dominated by artificial intelligence and must be prioritized accordingly. Success requires a keen awareness of underlying issues, which can be achieved by diligently implementing necessary changes, particularly in light of the concerning yet often overlooked increase in dissatisfaction with the products and services of numerous companies in Japan over recent years. Indeed, the adage that customer complaints represent a valuable resource remains relevant, as they present opportunities for product and service improvements before customers divert their patronage to competitors that provide superior experiences.