WHY Japan only has 10 Apple Stores (and probably more on the way)
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ハングリーであれ。愚か者であれ。
- スティーブ・ジョブズ
Stay hungry. Stay foolish.
- Steve Jobs
It would seem that the number of Apple Stores in a given country or geography should correlate with the size of the market. So if the United States with a population of 328 million has 271 Apple Stores, why does Japan, with a population of 126 million and the second-largest economy among democracies worldwide, only have 10 Apple Stores? Comparing apples to apples, Japan’s GDP (PPP) of $5.44 trillion is 26.8% of the US GDP (PPP) of $21.44 trillion, but Japan’s 10 Apple Stores only represents 3.5% of total combined stores between the two countries.
A timeline of Apple Retail in Japan, from 2003 to 2020. In 17 years, Apple has opened only 12 stores, and closed 2 (so far). Click to expand.
Was Apple late to Japan?
I wondered, is it because Apple got to Japan later in their plan? Not really. Here are Apple’s first store openings by country (Note: I am only listing the first 7 in order, stopping with China):
United States, May 19, 2001, Tyson’s Corner in Virginia
Japan, November 30, 2003, Ginza, Tokyo
United Kingdom, November 20, 2004, Regents Street in London
Canada, May 21, 2005, Yorkdale Shopping Centre, Toronto
Italy, March 31, 2007, Centro Commerciale Roma Est, Rome
Australia, June 19, 2008, June 19, 2008
China, July 19, 2008, Sanlitun, Beijing
Now, let’s look at the exact same list, in the same order, and look at the current number of stores together with total population:
United States, 271 stores (pop. 328 million)
Japan, 10 stores (pop. 126 million)
United Kingdom, 38 stores (pop. 68 million)
Canada, 29 stores (pop. 38 million)
Italy, 17 stores (pop. 60 million)
Australia, 22 stores (pop. 26 million)
China, 42 stores (pop. 1,439 million)
What’s going on here? Japan is the world’s second-largest democratic economy and it has the second largest population among the world’s largest democratic economies in this list (China obviously excluded. We’ll come back to China later), yet it still has the smallest number of Apple Stores.
What about marketshare?
Ok, we need to look the same list, in the same order, one more time. In Q3 2020, iPhone represented 44.3% of Apple’s total revenue worldwide, and the iPhone has consistently been Apple’s most valuable product over the past ten years. So what does iPhone marketshare look like in these same countries?
United States, 271 stores (pop. 328 million) 46%
Japan, 10 stores (pop. 126 million) 62.7%
United Kingdom, 38 stores (pop. 68 million) 49.24%
Canada, 29 stores (pop. 38 million) 50.02%
Italy, 17 stores (pop. 60 million) 24.94%
Australia, 22 stores (pop. 26 million) 52.84%
China, 42 stores (pop. 1,439 million) 18.55%
Doing the math, Japan has about 79 million iPhone users. That’s more than half (53%) of the 150 million US iPhone users. Good grief. Still, Japan’s 10 Apple Stores only represents 3.5% of total combined stores between the two countries.
So why does Japan have so few Apple Stores compared to the rest of the world? It’s certainly not timing. Japan was the second country Apple invested in, right after the US.
It’s not population. Japan has the third largest population of the first seven countries Apple opened stores in.
It’s definitely not brand marketshare, at least when looking at Apple’s most popular product, the iPhone. Japan has the highest iPhone marketshare by percentage of all these countries.
Is it the economy?
I wondered if it’s the economy, but that doesn’t make sense because 39% of all new phone sales in Japan last year were iPhones. The top three phones sold across the entirety of Japan are iPhones, and the iPhone 11 and iPhone 11 Pro together make up 31% of all phones sold in Japan last year.
Despite three decades of economic malaise, Japan as a nation continues to truck along just fine. Where I live in Kobe, a city of approximately 1.5 million people, you would be surprised just how many people drive new and late-model BMWs, Porsches, Mercedes, Maseratis, and even Teslas. It reminds me of Newport Beach or Beverly Hills back in California. Go to any Starbucks in most Japanese cities, and you’ll see about the same frequency of latte-fueled people hunched over notebook computers furiously working away, except you’ll typically see more Macs in the mix of computers. Japan has traditionally been one of Apple’s most prized markets, and Japan was very possibly Steve Jobs’ favorite country on the planet. It’s a country that aligns with so much that Apple is about, because so many things about Japan influenced Steve strongly: Creativity, passion, hard work, quality, design.
When you’re a carpenter making a beautiful chest of drawers, you’re not going to use a piece of plywood on the back, even though it faces the wall and nobody will ever see it. You’ll know it’s there, so you’re going to use a beautiful piece of wood on the back. For you to sleep well at night, the aesthetic, the quality, has to be carried all the way through.
- Steve Jobs on quality
Maybe Japan Isn’t an underserved market
My next theory was maybe that the low number of Apple Stores had something to do with the abundance of mobile phone shops across Japan. There are more mobile phone shops in Japan per square kilometer than Starbucks in San Francisco. If Japan were a mobile-only market, this would make sense, but it’s not, and the service at these mobile shops is nothing compared to an Apple Store; You typically take a ticket and then wait. When you’re finally called upon, the reps have low product knowledge, and there is virtually zero post-sales support aside from third-party insurance claims.
There are also computer and electronic shops like Yamada Denki and Yodobashi Camera, but the service and support there is lacking as well, and reminds me of the typical low-level retail service in the United States that inspired Steve Jobs to begin exploring retail himself. Don’t get me wrong, the service level within the stores is generally high. Omotenashi is close to ubiquitous in Japan. Staff in most businesses are professional, attentive, accurate. It’s just that they don’t have that extra magic that Apple Stores create for their customers that makes you want to buy more Apple products.
17 years after Apple’s first store opened in Tokyo, it appears that Apple customers in Japan are still underserved. I live in Kobe, Japan’s sixth largest city with a population of 1.5 million. The closest Apple Store from my home is 1-2 hours away in Osaka. Apple Store Nagoya is the next closest, over two hours away by shinkansen (bullet train). In the other direction from Kobe, three and a half hours away by bullet train, is Fukuoka Tenjin. Train or bullet train tickets cost anywhere from ¥2000 and ¥25,000 (about $18-$235 USD) just to get to an Apple Store, and that’s not considering the 1/2 to entire day of travel time back and forth.
Is it competition with other Japanese mobile phone makers?
Is it competition with other electronics makers in Japan? I don’t think so. In a 1985 interview, Steve Jobs said something about Japanese competition in computer technology that turned out to be prophetic, and applies to the iPhone today:
Japan’s very interesting. Some people think it copies things. I don’t think that anymore. I think what they do is reinvent things. They will get something that’s already been invented and study it until they thoroughly understand it. In some cases, they understand it beer than the original inventor. Out of that understanding, they will reinvent it in a more refined second- generation version. That strategy works only when what they’re working with isn’t changing very much—the stereo industry and the automobile industry are two examples. When the target is moving quickly, they find it very difficult, because that reinvention cycle takes a few years.
- Steve Jobs
Playboy, 1985
Japanese companies began building smartphones in 1999. 13 years after the iPhone’s release in 2007, it’s still the most popular phone in Japan with no close second place.
What about geopolitical tensions?
What else could it be keeping Apple from opening more stores in Japan? Is it geopolitical tension? I don’t think so. Japan is a peaceful place. The economy may be down, but you wouldn’t know that living in Japan, and in the context of the world markets, it’s been a rather stable under-performer for years. Post WWII Japan doesn’t wage wars and generally focuses on its own house, not on other countries’ issues.
Compare this to China, where Apple has invested in 44 stores since 2008.
One year ago, Forbes ran an article, “Apple’s China Risk: $43 Billion” when Apple was under fire by the Chinese government for allowing a police tracking app called HKmaps, an app pro-democracy demonstrators used to track protests and police activity including roadblocks, to remain in the App Store in China. Privacy is basically illegal in China, and Apple is all about privacy.
Today, less than a year later, it looks like Apple’s investment in China is in bigger danger. Bloomberg reports in “Apple’s $44 Billion China Market Threatened by Trump WeChat Ban” that Trump’s ban threatens to turn iPhones into expensive “electronic trash,” because WeChat is perceived by most Chinese as one of the most essential apps on his mobile. This time, it’s not up to Apple to comply with Chinese policy. This time, Apple’s compliance with US law may put iPhone at a serious disadvantage in China.
The Profit Imperative
Sometimes the simplest answer is the correct one. If you ask almost any MBA student circa 2005 which country was talked about as the “biggest” opportunity, and they’ll tell you it was China. When I was in business school back in 2000-2003, no one talked about Japan, except for a few of my older professors who remembered the 1970s and 1980s with great fondness.
Apple appeared to have forgotten Japan around the time they started major investment in China. Seven stores were opened between 2003 and 2006, then only one throughout almost a decade. Now, as tensions rise with China, it appears Japan is getting some much needed attention and love, with four new stores and two original stores were closed down completely.
That Japan is underserved as measured by Apple Stores is an example of the danger that comes with focusing too much on markets just because of their size. 18.55% marketshare of a total market population of 1,439 million Chinese mobile phone users is a HUGE FREAKING AMOUNT OF $$$. It’s like 2.7 billion phones. Those numbers hurt my head. On the other hand 62.7% of 126 million people is only 79 million phones. Japan’s a teeny tiny market compared to China. When you manage by spreadsheet and live by the dividend, it’s tempting to look at 1,439 million potential buyers, despite some pretty big red flags.
I do wonder what kind of arguments came up 15 years ago against investing in more stores in Japan. It’s easy to look at 79 million people and think, they already bought our number one product. The Japanese market is fundamentally different from the US and almost any other market on the planet. You don’t just come to Japan and say “Let’s do this.” There is serious work involved in communicating and serving Japanese customers the right way. Business and operating models must be localized, not just translated. If you do it right, however, you build the kind of trust that transforms Japanese customers into loyal, lifelong fans.
Apple already has the foundational formula: Bring them into your stores and help them experience more of the magic that is Apple products. Something tells me Apple’s thinking about Japan a lot more recently. Warren Buffet is. So are other heavy hitters, like Sequoia Capital.
Apple, if you’re listening (or rather, reading) please open a store in Kobe. Motomachi is waiting.
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Also, check out this anime-inspired Apple ad made for the Japan market:
