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The competitive landscape of Japan

Buying from overseas

Cross-border purchasing by Japanese online

In 2014, the Japanese purchased £1.3 bn from US websites, and a further £0.15 bn from Chinese sites. This was up over 100% on the previous year, and sales just from these two countries alone represents about 3% of all retail ecommerce. 

The percentage of Japanese who have shopped from an overseas website is relatively low: only 32% compared to 73% of Germans or 66% of Australians (but only 29% of Americans). 

Global retailer/brand presence

Amazon.jp is now the largest online B2C retailer in Japan (using its own website – but see below for a discussion of marketplaces), with online sales of around £4.7 bn p.a. in 2014.

This is more than the next 9 combined. (Askul, Senshakui, Yodobashi camera, Dell, Nissen, Dinos-cecile, Joshin, Ito Yokado, Japenet Takada).

Whether you consider Amazon to be a local retailer is, of course, open to interpretation.

International brands such as H&M and Zara have fully localised Japanese versions of their sites already active.

UK retailer activity

Some UK brands have also activated localised sites. Next, for example, has a Japanese language version of its nextdirect site.

Many UK brands already ship to Japan without having fully localised presences. Examples include Harrods, M&S, Jack Wills, Asos, New Look, House of Fraser, JD Sports, River Island and Boohoo.

BUT … a few that you might expect, and that actively offer, and promote, international shipping to many countries both inside and outside the EU, do not include Japan. The most significant examples are Debenhams and John Lewis. A possible reason why is most obvious by looking at Debenhams international options to countries it does cover: there are evidently territory licensing issues for many of the brands it sells. The Harrods site is very explicit about this too. For multi-branded retailers, territory rights are likely to be a significant issue outside the UK; own-label brands may of course face strategic complications competing with their local distributors via ecommerce, but typically at least own the rights to do so.

Why buy from outside Japan? – an individual perspective

As a bit of a break from a relentless deluge of statistics and charts, here’s a very personal perspective from the principal Japanese-language researcher for this paper (a masters student studying for a year in the UK – she’s credited at the end), given to the author as we were wrapping up the final pieces of the research, about why she shopped cross-border from within Japan:

"Japanese tastes in young women’s fashion are different to here in the UK. For example, right now I’m meeting you wearing trainers; even as a student in Japan, I’d never wear trainers, always heels. Upper body clothing is generally much more modest, you don’t usually display your shoulders for example, although skirts and shorts can be quite short. Generally it’s a bit more formal.

I used to buy online from brands like Mango, even though it could take a couple of weeks for my stuff to get delivered. Why? Because Japanese young women’s clothes tend to be not only a bit formal but also rather bland colours, and tend to look rather ‘cute’. I wanted to stand out, wear stronger colours, look a bit different."

While a sample size of one is hardly representative, I’ve included it simply because of the interesting issues it raises, both potential challenges and potential opportunities. It feels like a good moment to reiterate a key piece of advice to prospective cross-border retailers: never target a country you haven’t personally visited, preferably in the company of a local.

Marketplaces

Rakuten

Japan is a marketplace country. Marketplaces are not totally dominant in the way they are in China for example, but they do have a huge share, estimated at roughly 40%. The elephant in the space is Rakuten, and the simplest way to tell their story is to let them do it themselves (Figure 18):

The first thing to do is translate ¥2.1 trillion of GMS: it’s about £14 bn of transactions (including consumption tax introduced during the year). The next is to point out the portfolio of different types of transaction taking place (see note 2 on the collage above e.g. "golf"); the best indication from the accounts is that just over half of this is what might be termed "retail". Much of this is, of course, C2C rather than B2C.

Putting that into perspective, it’s about double what eBay does in the UK (excluding cars). On the one hand Japan is twice the population of the UK. On the other, its ecommerce is about the same size. So while Rakuten is indeed large, in both absolute terms and as a proportion of activity in the country, it isn’t Alibaba.

Many large western brands use Rakuten as a route-to-market. It doesn’t have the stigma associated with eBay back home. Neither, however, is it as "clean" as using Tmall in China: the result is more of a compromise between your brand and Rakuten’s templates (Figure 19):

Figure 19 - Adidas on Rakuten

The others

Unsurprisingly, Amazon Japan operates a marketplace, and equally unsurprisingly, statistics about its size are extremely elusive.

The "other" main marketplace in Japan is Yahoo-Japan. Yahoo in Japan is effectively a separate entity from the source brand in the US, and has real credibility there. (As we’ll see below, it’s prominent in search too).

Essentially Yahoo is where the small-scale pseudo- C2C stuff happens. Rakuten (sort of) has a minimum retailer-seller fee of c£1500 per annum, which clearly positions it in at a certain scale, while Yahoo doesn’t have this entry-barrier. There are 340,000 "shops" on Yahoo compared to 42,000 on Rakuten.

In short, Yahoo probably only makes sense as a route-to-market if you’re pretty small.

Local retailers

Multichannel

Just as in the UK, pretty much every local retailer has a transactional website. They may not take quite the percentage share of sales transactions they do in the UK (yet…), but they exist and are often well integrated, increasingly presenting a joined-up multichannel proposition to the customer.

(In the logistics section, we’ll take a walk through the checkout journeys of a couple of high-profile local retailers, to illustrate this point in more detail).

Points make prizes

One notable feature of Japanese retail is the prominence of points-based loyalty schemes, which often translate quite obviously into cash rewards – it helps when your base currency unit is worth less than 1p! – and are not confined to the grocery retailers. Website checkouts often include a simple points-burn option to include in your payment.

Rakuten has a high value points scheme, and of course since it sells far more than just retail goods, the customer can accumulate points quite rapidly. So do many larger local retailers including the big department store chains that still make up a much higher percentage of retail than they do in the UK.

This is obviously something that an infrequently shopped cross-border site will struggle to compete with, and might be a factor nudging a borderline decision towards choosing Rakuten as the entry-to-market option rather than a local own-domain website.

Summary

  This is a mature, competitive online environment; it could perhaps be summarised as resembling the UK as it was 3-4 years ago in terms of multichannel maturity, with the added challenge (or opportunity) of a much more dominant/relevant marketplace in the B2C space (as distinct from the C2C space).

  Amazon is big and well developed in Japan.

  Rakuten is a significant marketplace, with aspirations to resemble China’s Taobao/Tmall, but it doesn’t dominate the online retail landscape. Marketplaces in general have about a 40% share of online retail including C2C.

  Rakuten has brand credibility to a much greater extent than you might be used to when consider eBay as an option at home.

  Many UK retailers are shipping to Japan already. A few have Japanese sites. However some are not, and a likely reason is territory rights to sell brands there.

Global retailers such as H&M, Zara and IKEA have transactional websites in Japan which are clones of their home sites.

 Points-based loyalty schemes are very popular in Japan

"Taste", obviously very subjective, may be different in Japan. If you’re serious about Japan, especially in a fashion category, go visit and see for yourself!

 

 

 

Japan's retail landscape

Japan's online shopping behaviours

Marketing in Japan

Legal framework and regulation in Japan

Internet usage and connectivity in Japan

Payment and Logistics in Japan

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