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Marketing Evaluation Of SPAO

Also the next Hallyu, "Korean wave, " has just started in Japan. Some of the most popular Korean gal bands, such as "Girls' Era" and "Kara, " have entered japan entertainment market and are extending the first Hallyu, that was mainly directed at middle older Japanese women, to teens and twenties. These Korean superstars are popularizing Korean culture and the Korean nationwide brand image.

The E-Land Group, the parent company of SPAO, is broadening itself in the Asian fashion sector. Presently, seventeen brands under E-Land Group, such as "Teenie Weenie, " are functioning in China, with sales nearing one trillion Korean won. The group will enter in the Indian market soon, but currently hasn't entered the Japanese one yet, even though Japan is one of the greatest economies in the world.

The situation happens to be favorable for E-Land Group in japan fashion market because of the increasing demand for SPA brands and growing attractiveness of Korean culture. The E-Land Group, with its expansion strategy throughout Asia, will probably enter the Japanese market one day. Although global SPA brands already are in Japan, taking into consideration the factors talked about above, SPAO would be wise to enter the marketplace now for this reason ideal opportunity.

What is SPAO?

SPAO is a brandname launched by Korea's largest fashion group, the E-Land Group, and is also directed at the SPA market of the style market. SPA, meaning "Specialty store for Private label Clothing, " is a business model introduced by the American fashion brand Difference in 1986. The characteristics of SPA include the company taking care of all processes ranging from design, manufacture, circulation and sales. A few examples of SPAs are Uniqlo, Zara, Mango, and H&M. Instead of distributing its products through shops, SPAs save costs by straight taking care of the stores, that may eventually lower the price of products. SPAs are also known as "fast fashion" because they can react to the customers' demand and the market situation quickly by changing their supply within one to two weeks.

The E-Land Group launched its first SPA brand SPAO in July 2009, and exposed its first store in Myeongdong, Seoul on November 25, 2009. The brand opened up as a jv with SM Entertainment, Korea's major entertainment group. Current advert models of the brand will be the boy band Super Junior and woman band Girls' Generation, both groups belonging to SM Entertainment. Each one of the groups offered as salesclerks on the starting day and two days later respectively. On the fourth floor of the Myeongdong store is "Everysing, " a shop run by SM Entertainment advertising goods related to stars of the company. It has a synergy effect with the fashion brand because of the fandom of the younger technology on those celebrities.

The performance of the first starting month was extraordinary. Sales earnings was two billion won, which is the largest launching revenue ever before for an E-Land brand. This number is not too not the same as other global SPA brands, but considering that idea that SPAO is a very young brand, and this it generally does not are powered by Sundays, its performance is in fact towering above other similar companies. The costs are 30~40 percent cheaper than Uniqlo, and in terms of quality and design, SPAO is considered to be equally as good. Currently there are thirteen stores operating in Korea while in Myeongdong store alone the sales reach about 1. 3 billion Korean earned each month.

SPAO is directed at all age groups, from teenagers to the people in fifties. The most significant sets of customers are young adults and people in their twenties, followed by those in their thirties. Nevertheless, customers in forties and fifties also accounted for ten percent of the sales, so that it can be said that the brand is normally favored across all age groups.

Japanese Clothes Industry

The Japanese apparel market has several distinguishing characteristics, especially set alongside the US and Korean market. In such a part, we discuss the characteristics of the market segments in generally three parts: market movements, distributional characteristics of the marketplace, and differences between your Japanese and Korean marketplaces.

First of most, in terms of market fads, the Japanese market has been subject to serious downturns because of the country's long-term recessions. The clothing sector, along with other consumer products market segments, experienced serious slowness in conditions of sales and profit expansion. In 2007, Japanese department stores noted 7, 705, 200, 000, 000 JPY of earnings, but this itself was a decline from the prior years. The apparel section, that used to be the primary drive of income, exhibited a 2. 3 % lower while the food and beverages section became the new top earnings area.

Along with this, the use of Japanese-produced textiles decreased. Japanese outfits brands used to work with Japanese-produced fabrics a lot; however the outfits market has shrunk to under 10 trillion JPY, which is more than 30% decrease in comparison to its peak size of 13 trillion JPY. International SPA (Specialty-store/retailer of Private label Attire) brands, such as Inditex's Zara, H&M, the Gap are flooding in to the Japanese market, and the Japanese competitors are currently going through serious downturns and restructuring within the market. Uniqlo, a Japanese SPA brand that is famous for its comfortable and cheap clothes, is an exception as the business model is quite a lot like its international counterparts.

The second attribute of the Japanese market is reviewed in conditions of the circulation channels. Traditionally, the apparel designers used two types of distribution networks; directly managed shops, such as flagship stores on the street, and regular membership stores easily within department stores. Account stores are currently declining along with department stores in general, because the membership commissions do not make reasonable income. Instead, select outlets, a store of picked items from clothes, shoes and fashion accessories, are increasing. BEAMS, United Arrows and Dispatch will be the representative chains of the select retailers and show appealing revenues.

Also in conditions of distributional characteristics, japan market is described so the peak and off-peak conditions are clearly segregated. Even more explicitly than its traditional western counterparts, the marketplace gets the product distribution cycle of 4 weeks. In January and Feb, the spring and coil new arrivals come to market and they are sold out in March and April. Summer time products come to advertise in June and July, and they are finished in July and August. Winter products, as well, come in September and Oct, and their cycle is completed in November and December. The peak deal conditions are January and July, and the grand good deals are huge even compared to other Western european and American markets.

There are also major differences between your Korean and Japanese clothing marketplaces. The Korean market, in comparison to japan market, recognizes less importance in the men's clothes sector. Nowadays this area shows indicators of progress in Korea, but considering that there are department stores focused on men's products like Isetan Men and Marui Men in Japan, the percentage of men's products in Korean market is incomparable to its Japanese counterparts.

Also, the fashion trends of japan apparel market are extremely different from other market of the world. Consequently, when a international brand like Korean SPAO targets this sector, it is strongly recommended to develop Japan-specialized products.


Competitors within the Japanese Market

The Japanese fashion market has usually been saturated with high-end products from the very best designers. However, there's been a change of direction in areas like the fashion districts of Shibuya and Harajuku as consumers have modified their fashion styles from the priciest brands to cheaper options. It has caused a large flux in Japanese habits as luxury stores have been obligated to shut down while clothing merchants such as Zara and H&M have transferred in. Even though the change has been alternatively recent, the reverberations have already been felt tremendously. Japanese companies such as Uniqlo have seen their profits surge, while a wide variety of foreign opponents have changed in during the last 5 years. Despite this enormous fluctuation, there continues to be a huge and untapped market for SPAO to move in given the amount of differentiation in ideas as well as target market. To be able to make clear this further, it's important to check out Zara, Uniqlo, and some other minor competitors.


Uniqlo is a subsidiary of Fast Retailing and is currently led by the richest individual in Japan, Tadashi Yanai. It includes expanded at an incredible rate over the last 15 years and it is a very hard competitor for any clothing store that is seeking to enter into Japan. It mostly relies on extremely cheap clothes that are made in China, while still concentrating on being comfortable and providing a variety of colors. Its talents though are also its weaknesses. In Japan, it can be regarded as being clothes that you'll wear around the home but not automatically wear to a interpersonal event. This means that although Uniqlo will sell a huge volume of clothing for each day material, it generally does not really compete with the SPAO brand considering that the target market segments are very different. SPAO focuses on fashionable and cheap clothing intended for a primarily young market section which Uniqlo has more-or-less been unsuccessful at handling. Uniqlo recently has attempted to increase its occurrence towards the youngsters market though, which signifies that SPAO may choose to act prior to Uniqlo delving into its center competency.


Zara, which is owned by Inditex, can perhaps supply the best model for a successful clothing company growing into Japan and finding a distinct segment. Having experienced Japan since 1998, Zara has create a huge customer base around its stores that are usually situated in high-end areas. This has provided Zara an excellent brand image, despite the fact that Zara is perfectly known for not promoting their products through comprehensive advertising. This makes Zara unique compared to other foreign sellers in Japan, which have attempted to break right into the country via intensive marketing campaigns. Zara also emphasizes fast fashion and targets being able to turn concepts into products faster than other clothing companies. The quickness and variety of fashions, in addition to still being cheap enough to appeal to the normal consumer, has made Zara an overwhelming force in the Japanese market.

There a wide range of features that Zara has that overseas companies can study from if they want to go into Japan, but you may still find many ways in which SPAO differentiates from Zara and can even eclipse it over time. First, 64% of Zara's creation takes place in European countries. While Zara acclaims that allows them to quicken production times and improve quality, SPAO's cheaper production facilities in China would allow them to market clothes for under Zara is able too. Furthermore, Zara's image is geared towards adults who can afford their clothes and desire to remain appropriately stylish. SPAO on the other hand targets a young market and has thus far relied much more on advertising and superstar endorsements. Therefore while Zara can provide as an creativity for SPAO, it generally does not aspire for the same specific niche market as SPAO does indeed.

Other Large Retailers

While Zara and Uniqlo offer an interesting dichotomy of how clothing stores have reacted to the change in Japanese styles, there are a great many other big clothing sellers which may have made forays into the Japanese retail market. Both largest ones, Space and H&M, provide interesting circumstance studies on what works and doesn't work currently. Gap, which includes competed internationally for quite some time, has started to falter due to its lack of innovation and a rise in competition. Despite having 123 stores in Japan, Gap's emphasis on comfortable clothing and basic fashion has essentially been duplicated by Uniqlo. In fact, Uniqlo's approach to expansion was structured off of Gap's SPA (Specialty-store and merchant of Private label Clothing) insurance plan. H&M in addition has recently moved in to the Japanese market, but considering that it has been around in Japan for significantly less than its competition, there isn't much to learn so far for SPAO. You can find though a concern that H&M's costs may in fact be too low and may frighten away some customers. While there are other large companies that contain begun to increase in Japan, such as Forever 21, most of them do not have similar market segments as SPAO and for that reason wouldn't in the beginning be major challengers.

Teen and Young Adult Niche Stores

SPAO has differed itself from most of its potential competition by concentration, price-structure, and method of advertising. However, there are a few minor competition that overlap in some areas with SPAO. The major one which includes just entered Japan is Abercrombie and Fitch. This American company does follow the strategy of targeting teenagers and adults, but it is extremely recent & most analysts consider it did a poor job of adapting to the Japanese market. On its first day at its new flagship store in Ginza, Abercrombie and Fitch were rumored to acquire made 50 million. However, almost all of this has been attributed to desire for the eccentric methods of business. For example, Abercrombie and Fitch hired many employees who didn't speak Japan and selected instead to check out an American business style rather than a normal Japanese store culture. In the same way, Abercrombie and Fitch will low fat towards upscale in its costs composition, which would exclude the target market of SPAO. Thus, given that Abercrombie only has its main store which its pricing model excludes most Japanese youth, SPAO's ideal market portion is still available for the taking.

Entry method

SPAO's international strategy is based on that of its mom company (E-Land) which includes set a goal of earning global income of 15, 000, 000, 000, 000 Korean Won by 2015. SPAO is planning to make itself a brandname that works worldwide. To carry out so, it has already started operating in China, Vietnam and India. As stated above, since the characteristics of Japanese fashion industry is turning favorably to the fast fashion model business, it is an opportunity for SPAO to extend itself into the Japanese market. To be able to enter in Japanese market, you have to first decide which accessibility method the company should use. There are numerous ways of accessibility that SPAO could consider, however in brief the key options they may have are of the next: licensing, jv, export, collateral alliance and complete ownership.

Licensing can be an entry method where the father or mother company allows a local company to work with its brand name for several period. Utilizing the licensing method, SPAO can decrease the price tag on entering as they'll be utilizing a local company's resources. However, this is an entry method SPAO shouldn't use for two reasons. First, when using licensing, it is hard to keep up the product quality. The neighborhood company might not maintain the quality of product enough, which could result in hurting SPAO's brand image. Second, SPAO's brand image is not more developed enough to reach your goals in using the licensing method in Japan. When using the licensing method, it is important to have a strong brand power but SPAO's current brand electric power is very weakened in Japan.

There are numerous benefits of choosing the joint venture method. First, SPAO can utilize the already founded facilities and circulation stations of its Japanese partner. Second, you will see less disturbance from the Japanese government as the jv company will be looked at partially a Japanese firm. Third, it'll be less costly to enter due to the fact that the potential risks are distributed to the joint venture partner. Regardless of the advantages, we believe that SPAO shouldn't choose a jv as their entrance method either. When using joint projects it is hard to produce a quick decision because two spouse companies have to come to an agreement in order to act. However SPAO's central competency, fast fashion, requires the company to do something quickly which a joint venture would have trouble doing. For similar reasons which were previously mentioned, export and collateral alliances are also poor options. They may be either very costly and/or SPAO would have too little control to do something quickly to market changes.

In summary, SPAO should enter in japan fashion market by the ownership entry method in order to ensure long-term success. SPAO's business model, SPA, takes a company to own full control over production, retailing and syndication channels. Along with the control, SPAO can decrease costs and ensure fast product cycles to be able to provide up-to-date trendy fashionable products at an inexpensive price. However, this is impossible to accomplish with other accessibility methods because they are either too gradual in decision making or too costly. To make certain that SPAO has a long-term steady position in Japan, it is best to enter using the ownership entry method.

Marketing Strategy - SPAO with SM Entertainment

SPAO's main campaign strategy is movie star marketing. They collaborate with SM entertainment to promote their brand image and advert, benchmarking Gap's advertising method. The popular Korean woman and boy categories, Girl's Technology and Super Junior, are the key spokespeople for SPAO. In the short term, celebrity marketing plays a significant role to obtain customers' attention and press coverage. It is expected that this method will have a bright future in Japan.

24The Korean influx or Korean fever refers to the significantly increased acceptance of Southern Korean culture across the world. It is also referred to as Hallyu(") using the Korean pronunciation. The Korean wave hit Japan and a lot of Japanese people are fascinated by Korean culture. Korean companies have been taking benefit of Hallyu in their marketing, which has helped increase exports. Nowadays young lady groups have grown to be a new source of Hallyu entertainment. The young and lovely young ladies have been criticized for not having true skill, but it seems that they have morphed into another important pathway to pass on Korean culture.

25Girl's Generation, one of famous pop teams in Korea, was ranked second in Japan's regular Oricon chart melody which is called "GEE". They will be the first non-Japanese Asian group to take action and the next foreign woman group to attain this high in 30 years. Girl's Generation has become favored by many Japanese young ladies, and in the process the band has become a fashion icon. Japanese teenagers have looked for to imitate every one of the band's life-style selections, especially in the areas of cosmetic makeup products and clothing. As a result of this, SPAO probably has a really powerful advertising item. For example, in advertisements, star models could wear SPAO products, which would build-up knowledge about SPAO's styles and affordable prices. Through these marketing skills, and using strong intimacy and positive images towards its potential users, the brand would have the strength to develop in a new market.

SPAO from the beginning faces a significant difficulty for the reason that it must compete with global opponents like Inditex, H&M and Uniqlo. The fast fashion market, or SPA market, is already filled with such international brands. SPAO has showed its ambition not simply for the Korean market also for the entire world market. The Myeongdong flagship store is one of the primary stores around at 3, 000, and also has various entertainment places inside the building including a cafe, karaoke room and a family group restaurant. So far, it has been successful both among Korean and overseas tourists.

Just like the Myeongdong flagship, we imagine SPAO should kick off its first Japanese flagship in a downtown area such as Ginza or Shibuya. Preliminary capital expenditure will of course be huge, but a flagship store in a central area would be helpful for making the first impression that SPAO goals, that SPAO clothes are cheap and exceptional in quality. The Japanese flagship may also be a combo of attire store and entertainment goods store, which will develop a spill-over advertisement result too.

Another possible accessibility technique for SPAO is assistance with a Japanese entertainment company. SPAO has already been a joint venture between SM entertainment, the top-level Korean entertainment company and E-land. AVEX or General Music Japan, under which SM entertainment's female/boy groups are functioning, would give a good partner to advertise to the children market. An contract with these well-known entertainment companies will lessen the entry hurdle, as well as further the brand image through hiring idol superstars for models, like SPAO doing right now in Korea.


Overall, SPAO has a perfect opportunity right now to enter the Japanese market given its current strategy in Korea. If SPAO acts to market Hallyu in Japan while at the same time focusing on its pop-star powered marketing, it can definitely fill the space in the growing Japanese SPA portion. Although it continues to be a comparatively young brand, SPAO must branch out quickly if it wishes to join the rates of such companies like H&M and Zara. By following a model of main ownership while together dealing with Japanese entertainment companies, SPAO would be able to market to japan youth and twenties generation in a manner that others aren't right now. While SPAO is mostly centered on the Korean market now, with this advice it could be the next-big-thing in Japan as well.

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