2021 was a tumultuous year for the world’s third-largest economy, with a looming crisis in rising Covid-19 cases as the country hosted the delayed Tokyo Olympics. Japan managed to contain the spread and lifted the emergency period, which was extended multiple times since 2020, by the end of September 2021. This was attributed to the successful vaccination campaign and the long-ingrained habit of mask-wearing among the public. The road to quick and robust recovery was underway with the Japanese government’s significant stimulus package and other measures to boost the economy.Human movement data is powerful data on people and places to understand visitation patterns, visitor origin, consumer profiles and more.
But contrary to initial expectations, recovery has been slow, especially for industries that require interpersonal contact such as hospitality, restaurants, retail, and entertainment.
The Nomura Research Institute examined the slow recovery and reported that the policy adopted at the beginning of the pandemic of reducing contact by ‘70-80%’ has hindered these industries’ recovery. Most of these industries depend on consumer footfall, and the restrictions imposed during the emergency period and kept through (date the restrictions were lifted) had the largest impact on them.
To better understand the impact of the Covid case trend on each of these industries, we compared the month-over-month (MoM) change in Covid cases and footfall for each industry segment. Here’s what the data shows:
The Food Industry – QSRs and Restaurants
The restaurant and dining industry in Japan has been severely impacted by the pandemic. According to a report by the Teikoku Databank Corporate, there have been a total of 2,989 bankruptcy cases attributed to the pandemic, with a staggering 489 cases belonging to the restaurant industry.
The data for MoM change in footfall compared to the number of Covid cases similarly showed a very slow recovery. The biggest rise in footfalls was recorded in December as Covid case numbers reduced towards the end of the year. When compared to behavior in other countries, people in Japan were and are still extremely cautious about resuming pre-Covid behavior, but recovery is on its way.
(Month-Over-Month growth rates of Footfall vs number of Covid-19 cases)
The Retail Industry - Essential Retail, Department Stores and Fashion
1. Essential Retail
While most companies have pivoted to online sales during the pandemic, smaller shops and vendors were not quick to pivot to digital, which affected the retail industry. The first half of the year saw a slow recovery until April, after which the rising number of cases caused a downturn lasting until the end of the emergency period. Within this segment, grocery stores fared better than convenience stores and 100 yen shops. For all three segments, foot traffic showed recovery post-June but the pace of recovery was slow.
(MoM change in Footfall to Retail Industries compared to the Covid-case trend)
2. Department Stores
Department stores showed a different trend when compared to other segments, with foot traffic was not as heavily affected by rising Covud cases. This was the only sector to see a positive increase in foot traffic in June and recovery was faster post the end of the emergency period in September. However, the rise in foot traffic decreased post the peak in November and continued to decrease in December despite it being the peak holiday season, due to increasing Omicron variant cases.
(MoM change in footfall to departmental stores vs the number of Covid-19 cases)
Luxury brands were slower to recover compared to budget and mid-range brands in the Fashion segment but otherwise, the trends were similar to other sectors.
(MoM change in footfall to luxury fashion brand stores vs the number of Covid-19 cases)
The Tourism Industry - Domestic Tourism
The tourism industry in Japan was hit the hardest by the pandemic and recorded the lowest figures in 2020 and 2021. Consumption by foreign visitors was down by 85% in 2020 and agencies could not recover the estimated 4 trillion yen expected from foreign spending during the 2020 Olympics. Furthermore, the number of foreign tourists declined by 87% in January 2021, compared to the same month of the previous year (source).
We studied data for domestic tourism to understand travel patterns among the Japanese population. The data revealed a consistent MoM decrease beginning in May and lasting until August. After that foot traffic slowly increased from September through November, before declining again in December, due to rising Covid-19 cases from the Omicron variant. Considering that the emergency period was extended multiple times and public spending was at an all-time low, domestic tourism also did not fare well in 2021. The Omicron variant caused another slump at the end of the year.
(MoM change in footfall to tourist destinations compared to the number of Covid-19 cases)
On the whole, 2021 was a slow year in Japan for all the sectors we studied, with the boost in sales post the lifting of restrictions in September lasting only a few months due to the rise of Omicron. According to an article by Reuters, consumer spending for the period after the restrictions were lifted in September returned to a level higher than that observed during the same period in 2019. The Omicron variant has made it likely that the numbers for the first quarter of 2022 will also be low. However, as the number of Covid cases steadily decreases, recovery might not be far away. Experts predict that as conditions improve in 2022, these industries will perform better, aided by the return of travel and a $490B stimulus package proposed by Japan’s government.