The Price of Being a Japanese Consumer

While shopping at one of our favourite local Japanese shops in the GTA (Greater Toronto Area), I noticed an attractive traditional New Year's decoration. I had already promised my wife that we wouldn't buy one this year, but when I saw it included a coveted miniature kadomatsu (an arrangement with three pieces of bamboo in the middle), I bit the bullet and paid the $30 they were asking, knowing that with import costs and an unfavourable exchange rate, it probably retailed for half as much in Japan.

After returning home, I couldn't resist looking up its domestic price on the Internet just to see how big of a sucker I really am. I typed in おてがる飾りTY-1号 and clicked the first website to see the jaw dropping price of ¥12,400 (13,020 with tax). That is exactly $152.85 Canadian at today's exchange rate, a mere five times what I paid for it. And no, it wasn't reduced, damaged, or even the last one being sold on clearance. We left four others on the counter at the same price completely unaware that we could have snapped them up and sent them back to Japan for family and friends and impressed them with our wealth and generosity.

Just to make sure I hadn't accidentally stumbled upon extortion.co.jp, I went back and tried another site. This time, I selected reputed Internet retailer, Rakuten. Their price, ¥11,400 ($140.52). As a last ditch effort, I tried a comparison shopping site that I haven't been able to find again, but their best price out of four or five sites was about ¥10,900 ($135.36).

Clearly, the price for the same product was much higher in Japan than in Canada. My mind searched for explanations:

- My set is a plastic replica of some ornately carved wooden original.
- My local retailer has an "in" with the importer.
- They are selling it at a loss as some sort of public service.
- The decoration is priced higher in Japan to convince consumers it is a quality product.
- Japanese only shop on the Internet when they're not looking for bargains.
- Japanese consumers want to pay more, as a sign of appreciation for its symbolic value, the same way they buy $100 cube-shaped watermelons for their friends in the summertime to show how much value they place on their relationship.

All of these possibilities paled in comparison to the more likely explanation that this was a symptom of a Japanese economy known for having layers of middlemen between manufacturers and retailers, each layer extracting their piece as the product makes its way through the labyrinthine supply chain. My first thought was "at least these middlemen have jobs, so if people are willing to pay. . ."

That's when the armchair economist in me kicked in and imagined a Japan where consumers paid 15% the price of a product like this, had almost ¥10000 still in their pockets for other goods and services, and the manufacturer and retailers still made their profits. With all that extra spending power, how many more jobs would be created meeting this consumer demand than would be lost by the "wholesalers" who jack up prices along the way? It would take a team of trained economists to answer that question and a strong-willed group of politicians to manage the short term economic disruption, but if more Japanese consumers start asking questions like this, someone will have to scramble to provide the answers.

Happy New Year.