In this blog post, we will cover the Japanese e-commerce environment by asking ourselves questions such as how do people shop in Japan? What platform do they use to shop? What are pros and cons of being listed on these marketplaces ?
Japanese e-commerce environment
97% of the total Japanese population (Approx. 125.8 million people ) use the internet. In other words, over 122 million people have access to online shopping.
Japan's E-commerce market is the fourth-largest e-commerce market after China, the US, and the UK.
The Japanese eCommerce market accounts for $163.5 billion in sales in 2018 alone. And the sales are going up every year. The total e-commerce sales doubled between 2012-2018.
Three marketplace platforms— Rakuten, Amazon, and Yahoo Shopping — account for over one-third of online transactions in Japan and comprise nearly 100 million users.
See more detailed overview of the Japanese commence market.
Understanding the benefits of Rakuten, Amazon, and Yahoo Shopping for consumers
There are several reasons why people shop online over physical stores nowadays, which we cover in our presentation.
Specifically, Rakuten, Amazon Yahoo Shopping are chosen platforms by Japanese people since there are perceptions from the users that these sites offer the following things.
Better pricing
Better & consistent customer experience
Large collection
Product reviews
Saved shipping address and payment info
Prime Membership ( Amazon )
Should all DTC brands be on these platforms?
Actually, Nike and Ikea decided to take off their products off of Amazon.
And below were what these companies had to come to realize.
Pros:
Search engine for shoppers: By using these sites, brands can appear in front of customers who are actively looking for products to buy. Unlike just browsing the internet for general information, we know that these people came to these sites to buy. Amazon also show information like estimated arrival time, price, and product review at a glance which also contribute in people's buy decision.
The power of reviews: Customers use these platforms to check product reviews. These reviews can be a very dominant determiner for users to decide which products they would choose to buy out of many choices.
Amazon ads can be cheaper than running ads else where since you can target people with buy intent.
Cons:
You can’t build brand loyalty. Consumers when they are on these platforms tend to be at the state of looking for something cheaper and convenient. Hence what matters to the consumers the most when they are looking for products on these market places, are prices, convenience that balance with quality. Let's say that you are selling a high-end, luxury product and take that product on amazon next to bunch of other cheaper products. From the eyes of customers, two things happen.
They see your product and other cheaper products, their first thought is to go to a cheaper product.
They see your product being displayed next to other cheaper products. This makes your brand look like more disposable brand not exclusive high-end band.
You don’t get full control in customer insights and data, or the process of sales, but Amazon will. Amazon is known for having its private level called Amazon Basic. If your product sells well on Amazon, they can collect your customer data and make their own to sell. Another thing to remember is that once they launch their private-labeled product, they'd of course have every reason to want to show their product first before yours.
Meeting fast turnaround time between orders and fulfillment, accepting free returns policy can be challenging with the downside of getting negative reputations for failing.
HBR said:
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.
The findings above can be especially interesting when we consider Japanese consumers' behaviors.
Japanese consumers' behaviors
Japanese consumers require a lot of information before they make a purchase
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. Therefore, businesses should expect that Japanese consumers are more suspicious against businesses that it takes extra long for companies to build a trusting relationship with customers.
Japanese is 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.
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 do.
In Japan, value for money is a dominant purchase driver. Customers love points & reward systems
All the above points shout one thing clearly and loudly.
One thing is to be discovered by customers from being on major marketplaces. Unless your sales strategy relies heavily on price point, what determines the sales factor depends on the trust you can build with your customers after the discovery. This is especially true for the Japanese consumers.
