How to compete with eCommerce in Japan
As a channel, eCommerce is a growing alternative to traditional retail. Between 2015 and 2018, the channel experienced almost 30% growth in share of retail distribution and made up 6.2% of total sales in 2018. eCommerce has almost doubled its share of total consumer spending since 2012.
Ease of use, convenient delivery and popular payment methods are critical to success. Japanese consumers are conscientious of value and demand style and high quality products. It is important to understand market trends and adapt to local tastes regarding product appearance and online presence.
Data collected in 2019 shows average spending of $154 being purchased per household per month. The households whose head is in their 30’s purchase online the most ($185), followed by the households whose head is in their 40’s ($182) with households whose head in their 50’s and 20’s & younger ($173, each) tied as the next biggest spending groups. Seniors spend below average on all categories.
Leading purchase categories include Travel-related products and services ($35); food and beverage ($20); entertainment related ($20); clothing and footwear ($17); home electronics and furniture ($14). There are significant differences amongst age groups depending on purchase categories, notably in the entertainment and home appliance/furniture sectors. The households whose head is in their 20’s purchase entertainment related products and services 53% more than average ($30 vs. $20). Also, they purchase electronics and furniture 51% more than average ($21 vs. $14).
This data was sourced from the Monthly Expenditure on Goods and Services Ordered over the Internet per Household by Age Group of Household Head (Total Households: Workers’ Households) of the Survey of Household Economy conducted by Ministry of Internal Affairs and Communications (MIAC), and with an exchange rate of JPY 110 to US$1. About 66% of consumers who purchased online charged the costs to his/her credit or debit cards.
While credit cards are the most popular payment method, there is another popular method – paying at convenience stores. Japan has more than 58,000 convenience stores where 31% of people pay for purchases. Payment on delivery is also a popular method, used by almost 30% of buyers.
Rakuten, Amazon Japan and Yahoo! Shopping are the major online shopping platforms. Rakuten is the largest platform with more than 100 million registered members and its gross merchandise sales (GMS) in 2019 exceeded $27 billion. The GMS of Yahoo! Shopping in 2019 was approximately $7.0 billion. Based on the 2018 annual report by Amazon, the net sales attributed to Japan was $13.8 billion.
Rakuten is known to screen stores very carefully so that consumers enjoy shopping without worrying too much about security and quality of products and services. It’s also known for a well-balanced membership in demographic terms. Data indicates that more middle-aged men shop at Amazon.jp than alternative online options.
U.S. companies can maximize their opportunities with Japanese eCommerce by developing a Japanese-language website and conducting various promotions to increase traffic to a website. It is advisable and easiest for a U.S. company to sell online in Japan by working with a Japanese partner and have them build an online store suitable in the Japanese language.
If a U.S. company, without a Japanese partner, wishes to proactively sell directly to consumers, there are a couple of options. Fulfillment By Amazon by Amazon Japan is the only platform for a foreign entity to sell directly to consumers without setting up an office in Japan. To compete on other platforms is possible but requires an agent to support the U.S. company.
Please note that if a U.S. company starts selling directly to Japanese consumers through eCommerce, it will be difficult to find a distributor later. One of the major concerns will be on end user pricing and the impact on distributor mark-ups.
Also, please make sure that your product meets all Japanese regulations and is eligible for importation into Japan. See our “eCommerce Growth in Japan” report for additional information.
CS Japan monitors the growth of eCommerce and we encourage you to contact Hirono Taki, Senior Commercial Specialist at Hirono.Taki@trade.gov.