With proper planning and the right partners, the Japanese digital marketplace is a prime one to enter: projected at $144 billion dollars, Japan is the fourth largest ecommerce marketplace, growing at an almost 15% annual growth rate. It boasts an internet penetration rate of 93%. Growth markets include food, personal care, fashion, beauty products, toys, electronics and furniture amongst many other categories. Japan’s cross-border ecommerce market is growing as well: today it’s a $2 billion (USD) market, estimated to reach over $5 billion in 2030, and may be your next major growth curve.

While there are quite a few cultural differences and nuances that companies and brands should be aware of, selling into Japanese marketplaces is not as difficult or challenging as one may think. Japanese consumers are extremely savvy, with purchases based on quality, value, packaging, style, reviews and of course, pricing. Brand reliability is important, as are after-sales care and fast response times.

Ads are everywhere and Japanese consumers are very receptive to advertising. Search advertising is a $17 billion business, dominated by LINE, Twitter, Facebook, Japan Google and Yahoo Japan. Yahoo Japan is Japan’s major internet service company with more than 100 different service offerings. Yahoo Japan also has a big reach for display ads. For PPC, sponsored search ads and display ads — both banner and video — Google and Yahoo Japan are the major players.

Japanese shoppers do tend to be skeptical of trusting businesses; therefore, businesses must show their value to the customer. Transparency is important in building trust. Japanese consumers are very loyal, and reward systems work very well. Japanese consumers are keen to buy cross-border, seeking greater selection and better pricing.

Music to the ears of every brand entering this market is the extremely low return rate. Compared to an ecommerce return rate of 25% to 40% in the U.S., Japan is around 4%! This figure truly underscores how Japanese consumers are brand loyalists who more closely examine the reliability and quality of products before they purchase, and once they purchase, they keep it.

Top-selling categories are electronics, apparel, fashion, beauty, furniture, leisure, hobby, baby products and home improvement, among others. Rakuten is huge, and other major players include Amazon Japan, but niche marketplaces are gaining share.

Rakuten is Japan’s largest online shopping marketplace; with 111 million registered users it’s embedded into the daily lives of 90% of the Japanese population. Rakuten businesses include marketing, data analytics, travel, food delivery, messaging, banking/credit life insurance and telecommunications. Japan is also a major luxury market, with brands like Louis Vuitton earning 50% of their global revenue from the Japanese market.

For brands that do it right, the Japanese digital marketplaces and cross-border sales are there for the taking. To successfully penetrate this market, here are seven steps to consider before moving forward:

1. Look at competitors: How many are out there, what do you know about them, how long have they been selling, and how much have they invested into setting up that marketplace correctly? Which of your products (if any) are up for purchase, and which party is selling them? Obviously, this can be tough as a seller name rarely matches the actual business name, but it will at least equip you to do some additional research.

Pro Tip:Evaluate how your competitors are presenting their brand experience. Do they supplement product info with compelling, enhanced content that drives loyalty and brand affinity? Do they sell via an official branded store or represented by third-party sellers? Do they control product reviews and feedback? Pricing? If your competitors are lacking in any of these areas, it represents an opportunity for your brand to bond with localized consumers.

2. How will you leverage where you house your stock? Is the product easy to warehouse? Who performs the fulfillment? Does your sales volume justify cross-border shipment? What aspects of your cost will you build into your pricing? What are your storage costs?

Pro Tip: If you don’t have the expertise there are many 3PL partners you can work with, and also marketplaces. For example, Rakuten provides its own fulfillment services called Rakuten Super Logistics.

3. Deployment options definitely matter! Closely examine the cost to ship, weights and dimensions. Also, total landed costs — what is the total cost of goods to get a product as sellable inventory within that marketplace? What are de minimis levels, which amount to sales tax levels for cross-border? Can you access a fulfilled-by distribution center or warehouse network? What are the existing relationships with retailers/distributors/wholesalers in that country/region and their capabilities to support you? All these things rely on a significant amount of trust.

Pro Tip: Take advantage of Rakuten-approved, localized partners in that region. If there is an issue you can then go directly to Rakuten, which owns the relationship and can mitigate any issues that may arise.

4. Leverage your stock position. In general, inventory allocation is critical to ascertain whether inventory is sufficiently available for a full launch; or when evaluating a market with a limited catalog of available products. The test option may be expensive to the point of not being profitable in the short term, but it can provide significant data/learning about what the demand is for the product and what it takes to successfully gain traction in that marketplace.

Pro Tip: Efficiencies generate more sales. A large consumer electronics company we work with used test runs to concurrently pre-determine the validity for not just launching but scaling up product availability in multiple international markets.

5. Appropriate localization, translation, and nuances are critical. In Japan, 99% of the population speaks only Japanese, and getting it right in how you promote and advertise, along with other complexities such as currency exchange and tax laws, will be critical for gaining success out of the gate.

Pro Tip: Don’t just rely on machine translation, talk to local experts who are well versed in that marketplace.

6. Run campaigns at the right time. Japan’s biggest spending holiday is New Year’s Day, when shoppers buy items like new clothes and home items to start the year fresh. Another ‘fresh start’ is April, as many Japanese corporations end their fiscal year in March. The school calendar year also starts in April.

Pro Tip: In Japan, there is a higher spending pattern during the summer because Japanese companies provide yearly summer bonuses that consumers spend on leisure, travel, and goods

7. Leverage technology wherever possible. Helium10, Jungle Scout and other marketplace intelligence tools offer some insight into unit sales/revenue and other quantifiable metrics for a historic period. Statista or Stackline offer some level of global marketplace intelligence.

Pro Tip: New AI solutions enable retailers to move stock in and out of selected countries/marketplaces seamlessly, with insights on inventory levels, sell-thru and even co-op marketing budgets for PPC advertising and other promotional tactics.

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