In recent years, the word ‘drop shipping’ has become increasingly prominent in business articles, especially in the retail sector and amongst online sellers. For those who are scratching their heads, wondering what it’s all about – this article is for you.
With a degree of uncertainty hanging over cross-border business into EU markets, it may be time to cast your net wider. Japan may not be the first market that springs to mind for cross-border selling, but read on. There are many reasons why it is worth considering:
- An established e-commerce market, Japan came fourth globally for highest e-commerce turnover in 2015, with retail ecommerce sales amounting to around US$ 90bn.
- The country has a well-developed logistics and telecoms infrastructure.
- Some 91% of its population use the Internet.
- It has the highest digital buyer percentage in the Asia-Pacific region, with 77 million digital buyers in 2015 - expected to surpass 80 million by 2018.
- Product return rates by consumers tend to be extremely low.
But selling into Japan can be challenging and there are a number of hurdles you will have to cross to be successful there. We consider some of these – and look at how a marketplace like Rakuten Ichiba or Amazon Japan can help.
1. Overcome consumer reluctance to buy cross-border
Just 12% of Japanese shoppers purchased from overseas in 2015 - for a variety of reasons.
But don’t give up just yet! Many eventually do overcome these concerns to take advantage of better purchasing conditions (such as pricing, better availability or broader choice.
What this research shows, however, is that you will need to put that much more effort into the Japanese market if you are to gain consumer trust and business.
2. Meet the high expectations of Japanese consumers
These high expectations extend across the whole customer experience from browsing and product research through pre/post-purchase customer service and delivery.
You can’t, for example, just take content from your UK or US website or listing, translate it and use it for Japan. You need to recognise and provide for the different requirements of Japanese online shoppers; reflect the local culture in your approach; replace the ‘hard sell’ by ‘quiet persuasion’ for example.
UK and US shoppers tend to focus on price and convenience. They like price comparisons to show they are getting the best deal, combined with an easy purchase process. The Japanese consumer on the other hand expects much more, higher quality content: detailed product and company information, technical descriptions and user-generated reviews.
And when it comes to fulfilment, given Japan’s excellent transport and postal infrastructure, consumers expect fast, reliable delivery – increasingly same day (Amazon now offers same day delivery to just under 80% of the population). shipping cross-border, you must be sure to manage these expectations; make the delivery date absolutely clear to customers and then meet it.
Packaging and product presentation should be of the highest standard, with detailed instructions for use - in Japanese of course.
3. Speak Japanese or have access to Japanese language capability
A Japanese language capability is essential at all stages of the online selling process in Japan: website, product descriptions, labels and packaging, marketing and customer service.
And you can’t just rely on an app to do the translating. You need native-speaker Japanese language support - not just to act as translators and help with localisation for the Japanese audience, but also because marketplaces require email and telephone customer support to be available in Japanese.
4. Meet legal and tax requirements
Like any country, Japan has its own regulations, restrictions and taxation rules that you need to be aware of. Certain products may be subject to restrictions. You may need help with brand registrations, safety standards certification and company incorporation.
Market entry companies can usually provide this kind of help and give access to specialists for more complex issues.
5. Build your brand
International brands are popular in Japan and tend to dominate Rakuten. A well-known brand, along with quality and product features, drives the Japanese purchasing decision rather than price.
You will need to make sure you are noticed with effective marketing and social media programmes.
And you will need to build up a loyal customer base too.
Loyalty is valued in Japan and this is reflected by the loyalty programmes offered by online sellers, many of which incorporate promotions that are only available (or offer preferential terms) to the loyal customer.
6. Accept the importance of marketplaces
Marketplaces dominate Japanese ecommerce and are considered almost a prerequisite for cross-border sellers looking to get into the online market. Apart from facilitating the market entry process, they give reassurance to risk-averse Japanese consumers.
Japan has three established marketplaces: Rakuten Ichiba, the largest, with a market share of around 27%, Amazon Japan with 12% and Yahoo Japan with 6%.
Establish your business in Japan by selling on online marketplaces
Rakuten Ichiba and Amazon Japan can help you to address many of the challenges of cross-border selling into Japan - if not alone, then in conjunction with a network of specialist partners to guide you through the different steps in the process.
To set up on Rakuten Ichiba you need to provide a local business entity address and local bank account. You also have to undergo a rigorous screening and vetting process, designed to root out dubious sellers and potential fake items. This process is said to take around four weeks.
Amazon Japan reputedly offers a simpler registration and listing process, but still requires you to demonstrate the ability to provide customer service in Japanese by providing a local Japanese address and phone number (which will be verified by Amazon).
If your products fall into a ‘gated’ (restricted) category in Amazon terms, you may also have to be ‘approved’ by Amazon for ‘ungating’.
You have the option of shipping directly from your home warehouse or manufacturer or opt for an ‘in-Japan’ warehousing model.
If you opt for Fulfilment by Amazon (FBA), while this will solve your storage, shipping, customer service and returns problems, Amazon will not become an importer of your goods. You will additionally need a service supplier or a partner to be an ‘importer of record’, receive your shipment at the port of your choice, handle it, take your product through custom clearance and transfer it to the warehouse.
If you prefer merchant-fulfilled shipment support, you will need to find a local warehouse that also provides competitive picking, packing and labelling. You will probably need a partner to facilitate this.
Rakuten has third-party logistics (3PL) partners who can help - as well as Rakuten Super Logistics in Japan which provides similar services to FBA according to the company.
Translation and language services
As already noted, Japanese language capability is an essential part of selling in Japan - from product description right through to real-time support and customer service. Sellers often rely on working with partner companies to provide this capability.
Legal and Tax advice
While brand registrations, safety standards certification and company incorporation can usually be handled by market entry support firms, a network of specialists can be accessed for more complex issues.
The marketplaces can also provide assistance. Rakuten, for example, claims it can research the market and provide a competitive and regulatory analysis for specific products, flagging any restrictions to the seller and referring them to a partner with specialist expertise where necessary.
Payments from Amazon can only be received through a Japanese bank account, but you need to be a company registered in Japan in order to open a business bank account. The alternative has typically been that an established Japanese company operating an Amazon.co.jp store receives payments on your behalf and transfers them to your foreign account.
The simplest solution for international merchants is to use a specialist multi-currency account to repatriate revenue made in Japanese Yen. Foreign exchange specialists like Currencies Direct can help you open these accounts which are located in Japan and will receive disbursements from online marketplaces. Using Currencies Direct’s online platform or mobile app you can then manage balances in multiple currencies from all the markets that you sell into, and decide whether to hold or convert the fund back into your home currency.
 Source: ecommerce foundatio