Direct to Consumer Brands Entering in Japan Seminar 1 ( USA to Japan )
94% of the total Japanese population ( 126.5 million ) uses the internet. Not only that Japanese B2C E-commerce business is steadily growing. Japan is the world’s third-largest e-commerce market following China and the United States.
The Japanese eCommerce market accounts for $163.5 billion in sales in 2018 alone. And the sales are going up every year just like how Between 2012-2018, the total e-commerce sales in Japan doubled.
Three marketplace platforms— Rakuten, Amazon, and Yahoo Shopping — account for over one-third of online transactions in Japan. Shopping accounts for over one-third of all online retail transactions in Japan and comprise nearly 100 million users. ( 126 million total populations)
Understanding Benefits of Rakuten, Amazon, and Yahoo Shopping for customers
Better pricing. A competitive market to win a customer drives the price lower ( lower quality, cheaper)
Better customer service. Lots of stuff is shipped by Amazon, which means consistent experience, fast shipping, easy returns, etc.
Large collection
Product reviews. Let other customers help you sort out the good from the bad.
Saved shipping address and payment info makes "couch commerce" much easier.
Amazon prime
So why shouldn’t all direct to consumer brands jump right on to Amazon?
Well, some companies like Nike and Ikea actually decided that selling on amazon was not the right strategy for them and left Amazon. But why?
Pro:
Brand awareness. A lot of customers buy intent search for new brands on those shopping sites because these sites already show customers related information including estimated arrival time, price and product review at a glance. Basically, a site likeAmazon has replaced Google when it comes to finding products. - Speaking of reviews, customers do use these sites to check reviews before they buy from other channels as well.
Amazon ads can be cheaper than ads on somewhere else since customers are already in the buying mode.
Cons:
You can’t build brand loyalty. Marketplaces increase visibility and stimulate growth in sales but brands can be viewed more disposable. Because of the nature of the platforms, these marketplaces can make your brand less personal and leave you with only the price, convenience, and product quality to compete against competitors. This therefore could even end up damaging brands in the long run.
Imagine if you are selling a high end, luxury product which you worked very hard to create a brand image for on your website and take that very product on amazon with a bunch of other copycats with cheaper prices. In order for you to win the competition, you’d have to drive your price down which makes your brands feel disposable like others much more than exclusive high end brands.
You don’t get full control in customer insights and data, process of sales but Amazon will. Amazon is known for having their own private level called Amazon basic, if your product sells really well on Amazon, they can collect your customer data and make their own to sell their products. Another thing to remember is that once they launch their own private-labeled product, they will of course have every reason to want to show their product before their competitors (a.k.a yours) to the customers within their own search engines.
Meeting fast turnaround time between orders and fulfillment, accepting free returns policy can be challenging with a downside of getting negative reputations for failing.
Harvard Business reviews says : If the goal is quick sales that boost cash flow, selling on Amazon will do the trick. But it won’t necessarily lead to long-term growth and profitability.
So what does make long term growth and profitability ? The answer is a strong brand which makes strong trusting relationships with the customers. When it comes to Japan this is especially true.
Japanese consumer behavior
Japanese consumers require a lot of information before they make a purchase (which is important for companies from other countries to understand as it has a direct impact on the look and feel of product listings and website design.) ( information)
Out of the 27 nations surveyed by the Edelman 2016 Trust Barometer, Japan ranks the lowest in terms of trust in business and media institutions. Results from the same also found that verification behavior is especially high in Japan, with search engines the most trusted source of information. Therefore, businesses should not expect that most Japanese consumers will take marketing messages at face value ( trust)
Japanese are considered the most demanding customers when it comes to quality. The explanation behind this is that quality evaluation does not end with the product, but includes service during the sales process as well as after-sales service. In addition, Japanese consumers value brand information, service, delivery, packaging & advertising as key factors in evaluating quality and in making purchase decisions. ( Quality)
Most Japanese do not read English or other foreign languages and buy only from Japanese language sites. Japan is a tough market for outsiders to break into, with one of the lowest cross-border shopping rates. Just over 10% of Japanese consumers shop on overseas websites versus 54% of US shoppers. ( Localization)
In Japan, value for money is a dominant purchase driver. Customers love points & reward systems ( create brand loyalty)
Solutions:
Get discovered + build trust + build personal interactions
Localize your brand + improve products and service for Japanese customers. Listen to what they want.
You can build customer loyalty by product quality, value for money, customer service for many direct to customer e-commerce brands, on top of that if you are a clothing, luxury, fashion food and beverage brand, quest for innovative products, shared values (21%) and personalized communication (17%) are marked twice as important than the value of money.
WRITTEN BY
Foreign Connect Helping Japanese companies launch businesses in America & American companies to launch in Japan
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