Japan is home to 127 million people and the third largest economy in the world, after the U.S. and China, with the fourth largest ecommerce market, offering great opportunities for businesses. Even if Japan is not a direct part of your growth strategy, it should be considered as part of the wider economic picture.
After reading this guide you will understand the opportunities presented by Japan and how to take make the most of them, as well as have a general understanding of Japan’s place in the global balance of powers and why this affects businesses.
2 Growing your business in Japan
When planning how to grow your business abroad, it’s important to consider the current climate of the market you’re planning to enter.
Japan is home to 127 million people and the third largest economy in the world (after the United States and China). Total GDP is valued at $4.94 trillion USD and per capita GDP is nearly $40,000.1
Japan’s healthy urban economy supports its standing as the world’s fourth largest retail ecommerce market. Sales are valued at over $111 billion USD and projected to reach $134 billion by 2019.2 More than 8% of all retail transactions happen online and the market continues to grow.3
Japan is a long-time leader and powerhouse in the supply chain industry, and the World Bank ranks it 12th globally for logistics. Due to the country's size, density and efficiency, distribution costs are very low by international standards — according to figures from the Japan Institute of Logistics Systems, they amount to just 5% of total sales for the manufacturing, wholesale and retailing industries in Japan (by contrast, the U.S. reports 9%).
3 Quick facts
Around 92% of Japanese people use the internet, but physical store retail shopping is still preferred1
Mobile commerce is projected to reach $60 billion by 20202
Major ecommerce categories include media products, clothing and footwear, food and beverage, consumer electronics and beauty and personal care3
Rakuten and Amazon are the biggest Japanese ecommerce sites by market share. Rakuten is the dominant player (24% market share, compared to Amazon’s 12%). Amazon has had challenges scaling in Japan because it is a foreign company4
Japanese packaging standards are very impressive and damaged shipment numbers are some of the lowest in the world
Major e-commerce sites in Japan (Source: Acapture.com)
|Site||% Value share|
4 Customer trends
It’s crucial to think about customer behaviour when expanding in new markets. How does your target customer usually buy products? What’s their preferred method of delivery? The following factors will help you consider how customer trends will affect the way you go about doing business in Japan.
71% of ecommerce purchases are paid for via credit card or bank transfer, but generally cash is the preferred payment method. Providing alternative payment methods like PayPal, Mobile Suica, Pay-easy and convenience store payments is recommended. Cash On Delivery is also popular, accounting for 18% of ecommerce payments1
While Japanese consumers are price-conscious, recent studies indicate that brand and quality are the most influential factors in purchasing decisions
Speed of delivery is considered in shoppers’ purchasing decisions, and one-day shipping is nearly standard. Fast delivery speeds are enabled by Japan’s efficient logistics industry and the country’s size
Japanese customers prefer to receive their packages directly from the delivery driver (packages are rarely left at the door)
Studies indicate that Japanese shoppers are less likely to buy from foreign marketplaces than any other shoppers around the world2
There is a clear preference for national carriers; in the absence of a national carrier option, a well-respected global option is the next best thing. Shoppers’ concerns for quality consistently outweigh cost considerations
Japan reports one of the lowest online return rates in the world (standard policies indicate no returns)3
99% of the population speaks Japanese, so it’s important to host your website and display your product in Japanese4
Japanese shoppers prefer a wide assortment of products displayed all once, so consider using marketplaces to reach a larger audience
Local payment methods are strongly recommended, so consider JCB/Amex
Cultural awareness in this region is perhaps the most important factor in determining the success of your brand
5 Fulfilment models
Cross-border into Japan
Over 10% of online shoppers in Japan shop from overseas websites. The U.S. and China are major destinations for cross-border exports and imports from and to Japan.1
Many companies wanting to fulfil into Japan consider using a bonded area (a secured site where goods may be manufactured or stored without paying duties) in China, or will fulfil into Japan from Hong Kong. Products are often manufactured in China, so keeping them there can be cost-effective as well as strategic in having a single pool of inventory from which to serve the Asia Pacific region.
Many ecommerce companies use consolidation companies in their native countries to store all the goods together and largely to avoid language barriers.
Given the density and size of Japan, the entire population can be reached in as few as three days. Ports include Kobe, Nagoya, Osaka, Tokyo and Yokohama, and the heart of Japan’s logistics triangle is found between the cities of Tokyo, Nagoya and Osaka.
Small parcel carriers
20% of the time, Japanese consumers are not home to receive deliveries and packages are typically not left at the door. Redelivery at a later time is very common and free of charge for customers.1 The most common parcel carriers operating in Japan include:
- Yamato Transport (50% of market share)
- Japan Post
Larger-than-truckload (LTL) and truckload (TL) carriers
Japan’s landscape means that freight is not often transported via road. Instead, it’s common to use trains with last mile delivery via a smaller truck. Smaller ship movements are another popular option; product is first transported via ocean along the coast, then floor loaded onto a train and finally supplied to small trucks for door-to-door delivery. Common carriers include:
- Nippon (Nittsu)
7 How to get started
When weighing up your move into the Japanese market, think about the pros and cons of incorporating a new company to do business, and the type of company structure that might suit you. Find a fulfilment centre and carriers that provide coverage in the areas you’re targeting, and consider using a distributor to reach more customers with more ease. You should also understand the regulatory requirements of ecommerce in Japan and determine whether you need to register any trademarks.
Market Finder contains a breakdown of the World Bank’s Doing Business Index, where you can get a heads-up about the ease of doing business in Japan. It ranks on a scale of 1 - 190 how easy it is for a business to set up and run a local firm in each of the world economies. 10 topics are assessed to gain the score. These include the ease of getting electricity, the ease of getting credit, and the potential for cross-border trade.
When trading in a new market, it’s good to know the administrative, regulatory, and logistical challenges that may lie ahead. Navigating legal requirements and working out logistics is made a lot easier with Market Finder - find further support and tools including in-depth guides and insights.
Ingram Micro Commerce & Lifecycle Services provides logistics solutions to help businesses connect supply and demand.
The materials provided on the site are for informational purposes only. For financial, tax, or legal advice, consult a specialist.