Introduction
Foreign entry into the Japanese mail-order industry began when Reader’s Digest, the
subscription-based magazine, launched operations in Japan in 1946. Many foreign retail companies
entered the market during the 1970s, when Japan was undergoing a gradual process of capital
liberalization. At the same time, general mail-order corporations such as Sears, Roebuck & Co. (U.S.)
and Neckermann Versand AG (Germany) entered the market by forming business alliances with
department stores, while specialized mail-order companies such as The Franklin Mint (U.S.) and
Damartex (France) entered the market using wholly owned subsidiaries. In the ’80s, Sumitomo
Corporation and Otto Versand GmbH & Co. (Germany) established a joint venture company called
Otto-Sumisho Inc., and in the ’90s the apparel direct-marketing corporations L.L.Bean, Inc. and
Lands’ End Inc. also entered the market. In the second half of the ’90s, mail order via new cable and
satellite networks was launched. Many Internet mail-order corporations also entered the market
around 2000, but companies that simply imported foreign business models without adjusting them to
the Japanese market often failed.
It is said that mail order has lower initial investment costs and is easier to enter than
brick-and mortar-industries, but that succeeding is not as easy. Those mail-order corporations that
have succeeded in Japan have differentiated themselves from brick-and-mortar retail and other
mail-order corporations by aggressively analyzing market data and customer segments to develop and
offer unique products, while also developing new retail methods that are easy for the customer to use.
Pricing must match the customer’s expectations and the system must be easy for the customer to
access. Those corporations that sell unique products via unique business models usually survive.
The economic stagnation and consumer sales slump that followed the economic bubble of
the 1980s hit bottom in the winter of 2003, after which household consumption began to recover. The
Japanese gross domestic product has been second only to the United States since 1968, and Japan has
remained an economic superpower. The Japanese market, which is also No. 2 behind the U.S. in size,
continues to attract foreign corporations.
Mail order differs from brick-and-mortar sales in that catalogs, television, the Internet,
flyers, direct marketing and other media are used for advertising, and telephone, postcards, fax, the
Internet and other communication methods are used for taking orders. Also, products are delivered
directly to the customer. This report focuses on mail-order companies that conduct
business-to-consumer electronic commerce to sell items and services mainly through catalogs, the
Internet and television. Reflecting a shift toward multichannel sales, however, the scope is not limited
to just corporations that specialize in mail order, but also includes brick-and-mortar stores, such as
department stores and boutiques, as well as manufacturers. Mail-order companies that focus on
business-to-business electronic commerce to sell materials or unfinished goods, or that deal in Via
insurance or finance, and those that use door-to-door sales or networking business sales, are excluded
(Fig. 1).
This report summarizes the current state of the mail-order market, related legal systems,
business models and business practices. It also provides recommendations concerning entry into the
Japanese mail-order market, drawing off lessons learned by foreign firms that are already in the
market.
The report data was developed by JTM Saison Life Research Institute and compiled by
JETRO.
Fig. 1
Scope of this Report
(dashed line shows area covered in report)
Mail-order Sales
Mail-order sales over mail, TV, and other correspondence methods.
Catalog
Television
Internet
Senshukai,
Nissen,
Cecile,
Fancl,
Askul,
etc.
Japanet Takata,
Jupiter Shop Channel,
Prime,
Nihon Bunka Center,
etc.
Rakuten,
Dell　Computer,
Vector,
Amazon.co.jp,
Xing, etc.
DM, Flyers, Other Types Side
of Advertisements
Business
Nippon Broadcasting
Projects (Radio),
Kodansha Famous Schools
(Magazine),
etc.
Mitsukoshi,
Takashima
ya, Uniqlo,
Sofmap,
etc.
Correspondence
Education, Finance,
Insurance
Benesse,
Nihon Tsushin Kyoiku
Renmei,
etc.
Sources: Compiled from various sources, including the “Illustrated Mail Order Industry Handbook,” Shop
System Study Society, “The Spread of Vending Machines and Annual Vending Machine Sales,” Japan
Vending Machine Manufacturers Association, and the website of the Japan Direct Marketing Association.
Table of Contents
SUMMARY ..........................................................................................................................................1
I.
,
MARKET OVERVIEW................................................................................................................2
,
A. MAIL-ORDER MARKET ................................................................................................................2
B. GENERAL CONSUMER MARKET ...................................................................................................8
C. MAIL-ORDER COMPANIES, BY BUSINESS SECTOR .....................................................................11
II.
LEGAL SYSTEMS ....................................................................................................................15
A. LIST OF MAJOR LAWS................................................................................................................15
B. MAIL-ORDER LAWS ...................................................................................................................17
C. COMPETITION LAWS ..................................................................................................................18
D. RETAIL SALES LAWS .................................................................................................................20
E. PENDING NEW LAW ...................................................................................................................22
III.
BUSINESS MODELS AND PRACTICES .............................................................................23
A. BASIC STRUCTURE OF MAIL-ORDER BUSINESS .........................................................................23
B. BUSINESS MODELS ....................................................................................................................27
C. JAPANESE BUSINESS PRACTICES ................................................................................................31
IV.
FOREIGN ENTRY INTO MARKET .....................................................................................34
A. HISTORY OF FOREIGN ENTRY ....................................................................................................34
B. EXAMPLES OF FOREIGN ENTRY .................................................................................................36
V. MARKET-ENTRY RECOMMENDATIONS.............................................................................52
A. PROMISING FIELDS ....................................................................................................................52
B. KEY POINTS ...............................................................................................................................52
C. RECOMMENDATIONS, BY BUSINESS CATEGORY ........................................................................57
VI.
REFERENCE INFORMATION .............................................................................................59
APPENDIX A. SALES RANKINGS IN FY2003 ...................................................................................59
APPENDIX B. TRADE SHOWS, EXHIBITIONS AND ORGANIZATIONS ................................................62
PROCEDURES FOR INVESTING IN JAPAN...............................................................................64
Summary
Market Overview
According to the Japan Direct Marketing Association (JADMA), the size of the Japanese
mail-order market in FY2003 (April 2003 to March 2004) was estimated to be ¥2.79 trillion
(approximately $25.39 billion). This was the largest amount since the survey began in 1983, and came
after a continuous four-year increase that started in FY1999. The mail-order industry has expanded
smoothly in spite of Japan’s stagnant retail market. According to the 2002 Census of Commerce, mail
order accounted for 1.8% of total retail sales in Japan, behind supermarkets, department stores and
convenience stores.
Business Models
This report divides business models into the following five categories: resale, direct sales
(build-to-order and make-to-stock), service sales, content business and platform business.
Foreign Entry to the Market
As examples of foreign corporations entering the market, first we examined Amazon Japan
K.K. and Dell Inc. Next we examined Lands’ End Japan, K.K. and Otto-Sumisho, two corporations
that have not been greatly affected by the rising popularity of brick-and-mortar stores offering
low-priced clothing and have thus succeeded by following their own business models. Jupiter Shop
Channel Co., Ltd., which introduced television shopping in Japan, and autobytel Japan K.K., which
acts as an intermediary for automobile sales, have succeeded as international joint ventures. Other key
points regarding market entry were derived from the case of eBay Japan K.K., which eventually
withdrew from the market.
Market Entry Recommendations
Japanese consumers are strict when it comes to quality and are extremely particular when it
comes to the design and quality of packaging and other such aspects of products. Japanese consumers
also demand a high level of service and are known as the most difficult consumers in the world. On
the other hand, Japan’s large market is attractive and Japan already has its own system of exacting
services in areas such as home delivery and payment. Japan has developed an advanced infrastructure
in home delivery, physical distribution, railways, communications and other areas. New entrants
should take advantage of these conditions and win the trust and support of consumers as shortcuts to
success. New entrants must also do more than offer attractive, unique products and services, and
create unique business models: other keys include strategic positioning of one’s company in the
Japanese market, selecting the best possible partner and sharing responsibilities appropriately,
delegating authority to the local management team, collecting detailed and accurate information
regarding Japanese consumers and the Japanese business environment, conducting marketing surveys
and feasibility studies before and after entering the market, and understanding and utilizing payment
and delivery systems.
1
I.
Market Overview
A.
Mail-Order Market
1.
Size and Total Sales
a.
Comparison of Japanese and Foreign Mail-Order Markets
Japan is an economic superpower, boasting the second largest economy in the world after
the United States, with approximately US$10 trillion in total retail sales (Fig. 2). Household
expenditures and food sales per person are also among the world’s highest, making Japan an attractive
market for foreign retail corporations.
Fig. 2
Country
World’s Top 10 Retail Markets
Population
Household
Expenditure
(millions)
(billions of dollars)
Retail Sales
Food Retail Sales
(billions of
(dollars per
(billions of
(dollars per
dollars)
person)
dollars)
person)
1
USA
284
6,937
2,330
8,204
605
2,131
2
Japan
127
2,373
1,040
8,183
428
3,367
3
China
1,272
556
445
350
233
183
4
Germany
82
1,096
385
4,684
140
1,703
5
UK
60
921
278
4,641
106.8
1,783
6
Italy
58
655
262
4,541
103
1,785
7
France
59
713
242
4,088
110.3
1,864
8
India
1,033
293
212
205
147
142
9
Canada
31
381
136
4,387
43.4
1,399
Spain
40
343
125
3,165
51.6
1,306
10
Source: Global Retailing 2003, IGD
JADMA1 estimates the Japanese mail-order market in FY2003 (April 2003 to March 2004)
was worth ¥2.79 trillion (approximately US$25.39 billion), up 6.1% from the previous year (Fig. 3).
This was the largest amount since the survey began in 1983, and came after a continuous four-year
increase that started in FY1999. Although this was far short of the U.S. mail-order market, which
1
Estimates are based on an annual survey of all full-member corporations of JADMA. The figures
basically represent total mail-order sales of physical products, although some distance learning courses and
finance products are also included. The Ministry of Economy, Trade and Industry’s Census of Commerce
survey includes all sales via methods other than brick-and-mortar stores, so JADMA’s figures are more
generally representative of the industry.
2
amounted to approximately US$1.85 trillion (Fig. 4)2, further growth is expected. The industry has
expanded smoothly in spite of Japan’s stagnant retail market. The share of the mail-order market in
the 2002 Census of Commerce was 1.8% of Japan’s total retail sales, behind supermarkets, department
stores and convenience stores.
Sections 2 and 3 in this chapter discuss the television and Internet mail-order markets,
which are currently driving the growth of the mail-order industry and are prime examples of how
retail channels are diversifying in Japan.
Fig. 3
Japanese Mail-Order Market Size
3,000
(billion yen)
2,500
1,910
2,000
2,000
2,110
2,230
2,200
2,180
1996
1997
1998
2,270
2,390
2,490
2,790
2,630
1,500
1,000
500
0
1993
1994
1995
1999
2000
2001
2002
2003
(FY)
Source: Direct Marketing in Japan No. 22, Japan Direct Marketing Association, 2004.
Fig.4
1,200,000
Mail-Order Markets in Developed Countries
1,084,800
(million dollars)
1,000,000
800,000
600,000
400,000
200,000
23,930
23,200
12,970
8,365
Japan ('02)
Germany ('98)
UK ('98)
France ('98)
0
USA ('02)
(FY)
Sources: American data is from DMA “Economic Impact 2002” in JADMA’s Fact Book on Direct
Marketing 2003; Japanese data is from JADMA’s Direct Marketing in Japan No. 21; and German,
British and French data are compiled from JADMA’s Fact Book on Direct Marketing 2001.
2
US$1 = ¥110.
3
b.
Overview of Mail-Order Sales
(1)
Sales by Product
According to a survey of 341 member companies of the JADMA3, the only trade organization in
the mail-order industry in Japan, sales share by product category4 in FY2002 included 23.2% for
clothing, 18.2% for furniture, electrical appliances and household goods, and 17.3% for food.
15.2
Others
10.3
Services
18.2
Food
9.2
Beauty,
Health and
Medicall
Devices
23.2
（N-222）
Hobbies and
Entertainment
Weighted Sales Share (%)5
Sales Shares by Product Category
Clothes
Accessories
and Precious
Metals
Furniture,
Electrical
Appliances,
and
Household
Goods
Clothing
Fig. 5
17.3
4.7
1.9
Source: Direct Marketing in Japan No. 21, Japan Direct Marketing Association, 2003.
(2)
Business Categories
Mail order is split into two categories: specialized businesses for which mail order is a core
business, and side businesses, such as department stores, specialty stores and manufacturers, for
which mail order is a non-core business. Although 50.9% of JADMA’s member companies fall in the
specialized category and 47.7% in the side business category, the trend towards multichannel
distribution is making it difficult to differentiate between the two categories. Thirty percent of all
mail-order corporations responded that some of their sales come from brick-and-mortar stores.
(3)
Companies by Sales
The FY20002 survey found that among JADMA member corporations, 44.1% had
mail-order sales of less than ¥1 billion, 26.6% had sales of ¥1 billion to less than ¥4 billion, 12.6%
has sales of ¥4 billion to less than ¥10 billion, and 15.3% had sales of ¥10 billion or more. In other
words, more than 40% had small or medium-sized mail-order operations. Regardless of the scale,
however, a majority saw sales increase over the previous year. Likewise, a majority expected sales to
rise in the coming year.
(4)
Marketing Channels
According to the JADMA, the most frequently used marketing channel used by its members
was the Internet, followed by direct mail (DM), catalogs and flyers (Fig. 6). Catalogs (31.3%) and
3
4
5
JADMA member companies account for 81.4% of total estimated mail-order sales.
Average is based on the number of member companies.
Data from the JADMA survey was weighted to estimate industry-wide sales shares.
4
DM (20.1%) together accounted for more than half. Also, catalogs (28.4%) and DM (21.4%)
accounted for the greatest marketing expenditures by type of channel. The average rate of response
from consumers was 11.7% for catalogs and 8.4% for DM. Among corporations that conducting
marketing through the Internet, 86.4% use it for taking orders. Monthly orders averaged 3,643 and
sales ¥35.08 million.
Fig. 6
80
Marketing Channels for Mail-Order Sales
74.8
65.8
58.1
51.4
38.3
40
36.5
30.2
28.4
16.7
20
14.9
Others
Newspaper
Special Feature
Advertisements
Radio
Membership
Magazines
TV
Magazines
Flyers
Catalog
DM
Internet
0
Newspapers
4.1
0.0
Unknown
(%)
60
Source: Direct Marketing in Japan No. 21, Japan Direct Marketing Association, 2003.
2.
Television Mail-order Market
Approximately 35 million households were receiving cable, broadcast satellite and/or
communications satellite TV in 2004 (Fig. 7). Moreover, the spread of broadband Internet has added
24-hour online shopping to the mix. Mail-order television sales is estimated to have increased 145.2%,
or from ¥90.1 billion to ¥220.9 billion, between FY1999 and FY2002 (Fig. 8).
Fig. 7
Subscribers of Non-Terrestrial TV Services
Subscribers
(thousands)
Proprietor
Cable
BS
"
CS
"
Total
Cable TV
NHK BS Broadcast
WOWOW
SKY PerfecTV
110 CS-digital broadcast
16,540
12,009
2,485
3,520
123
34,677
Source: 2004 White Paper: Information and Communications in Japan, Ministry of Internal Affairs and
Communications.
5
Fig. 8
Size of Television Mail-Order Market
250
220.9
(billion yen)
200
154.4
150
100
126.7
90.1
50
0
1999
2000
2001
2002
(FY)
Source: Compiled from Fact Book on Direct Marketing 2003, Japan Direct Marketing Association.
3.
Internet Mail-Order Market
According to estimates by the Ministry of Economy, Trade and Industry, the Electronic
Commerce Promotion Council of Japan (ECOM) and NTT Data Institute of Management Consulting,
Inc., the size of the business-to-consumer electronic commerce (B2C EC) market in 2003 was ¥4.42
trillion, up 64.8% from 2002, continuing a trend of expansion (Fig. 9).
According to the 2004 White Paper: Information and Communications in Japan by the
Ministry of Internal Affairs and Communications, 88.1% of households (or 60.6% of the population)
use the Internet. Broadband usage, including FTTH, DSL, cable, and FWA and other wireless
facilities, has been accelerating. More than one in every three Internet users has broadband and
further growth expected.
Companies that have traditionally used electronic commerce (including catalog sales
businesses, major shopping websites and portal businesses) are steadily increasing sales. This is due
to offering enhanced product lineups on websites (thanks to strategies such as the purchase of
specialized websites), the use of multiple marketing channels (including mobile phones and
brick-and-mortar stores), more advanced customer-relationship management6 and the use of e-mail
magazines and other tools to build customer bases.
Small and medium-sized stores accounted for ¥780 billion, or 17.6%, of B2C EC sales in
2003. These stores use strategies such as participation in major shopping mall websites to expand
recognition among consumers. In addition, companies are increasingly using sales strategies such as
6
Analysis of user preferences to recommend products that match the user’s specific needs.
6
guiding consumers from major websites to their own sites.
The size of the mobile B2C EC market was estimated to be ¥777 billion in 2003, an
increase of 240% from 2002. The mobile Internet is highly advanced in Japan, so mobile commerce
has spread fast, especially among young consumers, who use their mobile phones to search for
information and make purchases. Consumers, many of whom do not own personal computers, access
the Internet from their mobile devices to purchase products and services whenever they like.
Mobile-based services continued to grow in popularity, including entertainment-oriented
digital content such as mobile phone ring tones/songs and ring videos. In addition, the establishment
of mobile phones as a new marketing channel has contributed to the expansion of merchandise sales,
including books, music, hobby items, miscellaneous goods, furniture and so on.
Fig. 9
B2C EC Market Size
( ) Annual change
Automobiles and Real Estate
Others
5,000
(64.8%)
4,500
4,000
(billion yen)
3,500
(80.9%)
3,000
2908.5
2,500
(80.1%)
2,000
1187
(145.2%)
1,500
(420.9%)
673
1,000
500
0
1516
378
2
174
62.5
1998
162
1999
1498
811
466
2000
2001
2002
2003
(year)
Source: 2003 Survey into the Actual State and Market Size of Electronic Commerce, created jointly by the
Ministry of Economy, Trade and Industry, the Electronic Commerce Promotion Council of Japan and NTT
Data Institute of Management Consulting, Inc., 2004.
7
B.
1.
General Consumer Market
Expenditures
Real household consumption in FY2003 was ¥295.28 trillion, or 53% of Japan’s real GDP
of ¥553.85 trillion. Household expenditures, which had been stagnant since the economic bubble
burst in the early ’90s, started growing in the last quarter of 2003.
Household income also began
increasing in this same period and consumer preferences began to shift from low-priced items to
reasonably priced quality items.
The average amount of savings per household (excluding single-person households) exceeds ¥12.0
million, illustrating the continued potential for high consumption among Japanese households.
Japanese society, which previously was quite homogenous, began to experience widening
gaps in income and spending from the end of the ’90s. A Cabinet Office report found that the
recovery in consumption has been fueled by working households, especially households whose
breadwinner works for a large corporation. Meanwhile, the society continues to polarize into a
wealthy class with high income and savings, and another class with much less. As this stratification
continues, the former class consumes expensive products, such as luxury brand goods, housing and
automobiles, extravagant cruise vacations etc., while the latter class shops mainly at discount stores.
Although this polarization does have the advantage for retailers of making it easier to refine targets, it
has disadvantages as well, such as the need to conduct even more analysis of consumer segments
market when developing and selling products. Even with this stratification, however, there are still
few people in Japan who are very poor, so products will not necessarily sell simply because they are
inexpensive.
2.
Mail Order Versus Conventional Shopping
Japan has a high-density population in a small national territory served by highly developed
railway infrastructure. With the exception of certain regions, it is possible to shop in districts near
train stations and other areas simply by walking or riding a bicycle, and shop in department stores,
clothing boutiques and other shops in commercial avenues near rail stations. Also, increasing numbers
of people are shopping by automobile at roadside shops, supermarkets and large discount stores that
have been opening up in the suburbs since the ’80s. Japanese consumers are thus able to select from a
vast array of products provided by a large and diverse range of accessible brick-and-mortar shops.
The recent repeal of the Law Concerning the Adjustment of Retail Business Operations in
Large-Scale Retail Stores and implementation of the Law Concerning the Measures by Large-Scale
Retail Stores for Preservation of Living Environment have alleviated restrictions on store operating
hours and days, making shopping even more convenient. In addition to the small convenience stores
that operate next to stations and residential areas, supermarkets are now beginning to operate 24 hours
8
a day year round.
Since it is easy to purchase products from stores, Japanese consumers are accustomed to
seeing and holding products to verify their quality before purchasing. Japanese consumers have very
high expectations of quality, so they often choose quality over price. Brand consciousness is also high,
and consumers tend to trust leading brands. Also, preferences vary from region to region so, for
example, regional differences are apparent in food and flavorings.
Mail-order services do not allow consumers to see and try products before buying, which
makes some Japanese consumers hesitate. In addition, mail order services used to be considered
unreliable, since many businesses sold shoddy goods or used fraudulent business practices in the early
days of mail order in Japan. Moreover, mail order has tended to provide specialty products
unavailable in stores. Since many consumers prefer to purchase products that can be purchased from
nearby stores that they are familiar with and which they trust, mail order has not yet become a
mainstream purchasing style.
While mail order is still viewed by many as a channel for unique products, the spread of the
Internet has tempted highly trusted corporations, such as major retailers, to enter the field, which has
raised consumers’ level of trust in mail order. Also, the conveniences and other advantages of using
online computers or mobile devices have been recognized, so more people are starting to use mail
order if they live in places where shopping is inconvenient, or they cannot shop when stores are open,
or they are shopping for easily searched merchandise, such as books or music. At the same time, the
spread of cable TV, satellite broadcasts and other methods of communication has resulted in the new
shopping methods, including shopping channels and call centers that operate 24 hours. All of this is
making mail order more accessible to consumers.
3.
Mail-Order Consumers
According to a JADMA survey in 2003, 67.7% of the women and 47.6% of the men polled
used mail order (Fig. 10). For women, this included 82.0% for those between the ages of 30 and 39,
72.3% between 20 and 29, and 69.2% between 40 and 49. For men, the rates were 53.5% for those
between 30 and 39, and 53.2% between 40 and 49. Usage rates have been rising annually, particularly
sharp among men, which rose approximately 87% between 2000 and 2003.
The top three mail-order channels used by women were domestic catalogs (55.7%), the
Internet (23.8%) and newspaper inserts (22.6%). Men used the Internet (41.8%), domestic catalogs
(32.9%), DM (22.2%) and television shopping (22.2%).
Among the products purchased by women in 2003, 43.5% was women’s clothing, 37.5%
cosmetics or pharmaceuticals, 31.4% underwear, 25.2% health food and 19.7% other food. For men,
32.3% was hobby or entertainment products, 28.0% men’s clothing, 19.0% women’s clothing, 15.6%
food and 15.0% regional specialty goods or commodities. Average usage increased on an annual basis,
9
from 4.9 times to 5.6 for women and from 4.6 to 4.7 for men. Men spent ¥51,000 as opposed to
¥49,000 for women.
(%)
Fig. 10
80
70
60
50
40
30
20
10
0
Mail Order Usage by Men and Women
Women
63.6
66.9
38.8
41.5
52.5
Men
69.8
67.7
46.5
47.6
25.5
1999
2000
2001
2002
2003
(year)
Source: JADMA Survey on Direct Marketing Usage No. 11, Japan Direct Marketing Association, 2004.
The reasons why women used mail order were “products are difficult to obtain through
other means” (35.7%), “prices are good” (34.7%), “products are attractive” (34.2%), and “satisfaction
with previous purchase(s)” (33.4%). Those who said they had adequate time to select products
amounted to 26.1% of the women and 15.6% of the men. In many cases, prior experience with mail
order led to substantially increased usage later on. Men used mail order because “prices are good”
(41.8%) and “products are difficult to obtain through other means” (40.3%).
The benefits of mail order among all respondents, regardless of the level of experience,
included: “available regardless of time or place” (62.2%), “access to difficult-to-find products”
(56.7%) and “can take time when selecting products” (51.4%). Shortcomings included “cannot see
merchandise before purchasing” (78.2%), “insufficient descriptions of products” (24.8%), “fear of
privacy invasion” (24.2%), “stocking shortages” (24.2%) and “must wait for products to be
delivered” (24.2%).
Respondents were asked to indicate which payment methods they had used during 2003,
with multiple responses allowed. Women’s responses included postal transfer (54.9%), payment at
convenience stores (44.1%), and COD (38.3%), while men said COD (44.1%), postal transfer
(40.1%) and credit card (29.7%). Postal transfer became less common, dipping below 50% for the
first time ever in 2003, but it was still popular among women from age 60, while COD was used by
women of all ages. Payment at convenience stores was most popular among women in the first half of
their 30s and credit card was most popular among women in the second half of their 30s. COD was
popular among men in a wide range of ages and credit card was used often by men in their 20s and
30s. Traditional mail order, where customers, mostly middle-aged and older women, made orders
10
over the phone and paid via postal transfer, was being supplanted by new payment methods, such as
via computers or mobile devices (mostly young customers), convenience stores or credit card.
C.
Mail-Order Companies, by Business Sector
There are many ways to categorize mail-order companies, including 1) whether mail order
is a core or non-core business of the company, 2) the marketing channel used, 3) whether the product
lineup is general or specialized and the types of products handled, 4) whether products are supplied
directly or purchased from other companies for resale, and 5) whether the target customers are
consumers or businesses. In the past, the first three categories were primarily used, but the
diversification of advertising and marketing channels has complicated the classification process.
This survey mainly focuses on mail-order businesses targeting consumers, which are
categorized in Figure 11. In the retail store model, the store sells its products directly to customers,
whereas in the platform business model a company provides an online marketplace, such as an
Internet shopping mall or similar arrangement where parties can buy and sell products.
Mail-order businesses have traditionally depended on catalogs, which are still used by many
major mail-order corporations, but television and Internet shopping have been growing in recent years.
These channels are discussed below.
1.
Catalog Mail Order
Catalog mail order involves consumers placing orders after looking at product catalogs.
Representative corporations using this method include Cecile Co. Ltd., Senshukai Co., Ltd., Mutow
Corporation and Nissen Co., Ltd. Catalogs are widely used by large, general mail-order companies.
Naturally, the more catalogs a company distributes, the more orders it is likely to receive, but this also
increases catalog production fees and communication costs, so efficiency is crucial. Capital strength
is also necessary for cultivating and recording new customers, and then inducing them to make repeat
purchases.
Recently, many large corporations selling a wide variety of clothing, general merchandise,
food and other products through catalogs have been fighting an uphill battle. Like brick-and-mortar
general retailers, they have not been able to escape their traditional, standardized product, so their
lineups have gradually lost attractiveness.
Belluna Co., Ltd., however, saw profits increase for 12 consecutive years, beginning in
FY1992, by successfully targeting and segmenting regionally based women in their 40s and 50s.
Rather large, specialized mail-order corporations such as Otto-Sumisho and Lands’ End Japan K.K.
have also skillfully segmented their customers and published distinctive, fashionable specialty
catalogs to expand with the support of their female customers. By sales, the leading catalog
11
mail-order corporations in FY2003, as published by Tsuhan Shimbunsha7, were Senshukai, Nissen,
Askul Corporation, Belluna, DHC Corporation (estimated), Cecile, Japanet Takata Co., Misumi
Corporation and Fancl Corporation, in that order. The once-dominant general mail-order corporations
are giving way to B2B and cosmetic mail-order corporations, which began growing rapidly in the
second half of the 1990s.
2.
Internet Mail Order
The spread of the Internet has resulted in striking growth. Internet mail order includes 1)
traditional catalog mail-order or television sales that have added the Internet to their marketing mix,
2) “click-and-mortar” businesses that combine the Internet with physical stores to generate a
synergistic effect, and 3）businesses that only sell over the Internet, including those that sell general
products and services, and those that mainly sell ring tones/songs and games for downloading.
Catalog mail-order corporations have also added the Internet as another marketing channel,
for purposes such as taking orders online. Overall sales have gradually increased thanks to the
Internet. For instance, Senshukai and Nissen each exceeded ¥20 billion in Internet sales, which
accounted for about 16% of each company’s total sales in FY2003. Also, Internet reservations have
been on the increase, thanks to their convenience and the fact that hotel, airline and miscellaneous
ticket reservations can be picked up at the venue (eliminating the need for physical distribution). JTB
Corporation, a major travel agency that operates out of actual stores, generated just under ¥30 billion,
or more than 2% of its total takings, via the Internet in FY2003.
The personal computer shop Sofmap Co., Ltd. and the mass market electric appliance shop
Yodobashi Camera Co., Ltd. are some of the many companies offering point cards that earn points for
online shopping, which can be redeemed with subsequent purchases made online, as well as in stores.
Culture Convenience Club Co., Ltd., which rents and sells audiovisual content, entices consumers to
visit its Tsutaya shops by sending online coupons to customers’ mobile phones.
Amazon Japan K.K. sells books, music and electrical appliances only through its website.
Although the company does not announce results, its FY2003 sales were estimated at ¥34.2 billion8,
making it Japan’s largest Internet-only retailer.
Content downloads do not require physical distribution, since products are simply
downloaded over the Internet. The field has contributed to the extraordinary growth of mail order via
mobile phones, which is nearly unique to Japan. Web-capable mobile phones are driving up sales of
content, including games and ring tones/songs. Mobile mail-order corporations such as Xing Inc.,
Daiichikosho Co., Ltd., E-Net Japan Corporation and Xavel, Inc. were the leaders in mobile sales in
7
From Tsuhan Shimbunsha’s 42nd Mail Order and Correspondence Course Implementation Sales Volume
Ranking Corporation Survey, August 12th, 2004.
8
Estimate by Tsuhan Shimbunsha.
12
FY2002. Among the fast-growing corporations that handle mobile content, such as Dwango Co., Ltd.
and Bandai Networks Co., Ltd., some corporations achieved phone-based content sales of over ¥10
billion in FY2003.
3. Television Mail Order
Television shopping, the system whereby consumers view television broadcasts to order
products, has been boosted by the rapid increase in the number of households subscribing to cable
or satellite television services. According to the aforementioned Tsuhan Shimbun ranking survey,
sales of the top 30 television mail-order corporations exceeded ¥200 billion for the first time in
FY2003. The two leading specialized mail-order broadcast companies, Jupiter Shop Channel Co., Ltd.
and QVC Japan, Inc., now account for approximately one third of the market. Both companies have
benefited from the growth of cable and satellite services, the former of which accounts for the
majority of both companies’ sales.
In the past, television mail order relied on the sale of hit products through infomercials
(advertisements/information programs). “Abtronic” electronic muscle-stimulation exercise equipment
previously sold by Prime Network Inc. was a typical hit product. Since few customers buy more
products, however, the company has struggled. Dependence on hit products is a risky way to develop
a television mail-order business, since repeat customers are hard to nurture. This is notably different
from the successful television–Internet model, which has been driving the television mail-order
industry.
4. Diversification in Marketing Channels
Although many companies used to focus on a single marketing channel, in recent years
more corporations have diversified into multiple channels. Senshukai opened stores linked to its
catalog mail-order business in 2002, a “catalog-and-mortar” system, and Jupiter Shop Channel did
much the same thing with a mix of stores and television mail order in the same year. Almost all
catalog mail-order corporations these days are developing as catalog-and-click systems linking
catalogs with the Internet. The spread of broadband has led to Jupiter Shop Channel to combine
television and the Internet in a “television and click” system, while department stores, electronic
stores, CD shops and other stores have been linking stores with Internet sites in “click and mortar”
systems. Also, Senshukai, Jupiter Shop Channel and other corporations have diversified into three
other channel combinations.
In addition to telephone, fax and postcards, the Internet and mobile phone-based Websites are being
developed as ordering methods, just as payment methods have branched out from postal money
transfers to convenience store payments, COD, credit cards and others.
13
Fig. 11
Category
Medium
Type
General
Mail-Order Categories
Merchandise
or Service
Examples
Senshukai, Cecile, Nissen, Belluna, etc.
Clothing, etc. Otto-Sumisho, Lands' End Japan, etc.
Cosmetics &
Catalog
DHC, Fancl, Yazuya, etc.
Specialized health food
General
Catalog House, Steilar C.K.M, etc.
merchandise
Jupiter Shop Channel, QVC Japan, Nihon
General
Bunka Center, etc.
Electrical
Japanet Takata
Television
appliances
Specialized Food
Asahi Ryokuken
General
Prime Network
merchandise
Books, CDs,
General
Appliances, Amazon.co.jp
Principal
Etc.
Business
Electrical
Sony Style.com Japan
appliances
PCs
Dell Epson Direct
Toysrus.com
(Japan)
Toys
Shop
Food
Oisix
Specialized Fashion &
Internet
Index
general
merchandise
Content
Xing, Dwango, Bandai Networks, etc.
Travel
JTB
Tickets
Entertainment Plus
Portal site
Yahoo!
General
Rakuten
Platform
Platform
Automobiles autobytel Japan
Specialized
Travel
Rakuten Travel
Department Mitsukoshi, Takashimaya, Tokyu Department
General
store
Store, etc.
Electrical
Yodobashi Camera, Sofmap, Murauchi, etc.
Side Business
appliances
Specialized Books
Kinokuniya
Travel
JTB
Tickets
Pia
Sources: Compiled from survey by Tsuhan Shimbun [Mail-Order News] on August 12th, 2004.
14
15
Ministry of Economy, Trade and
Industry
Resolution of consumer contract problems
Protection of consumer rights in
installment sales
Consumer Contract Act
Retail Sales
Special exemption from anti-monopoly
law
Resale Price Maintenance
System for Copyrighted Works
(maintenance of resale pricing)
Fair Trade Commission of Japan
Regulate unjustifiable premiums and
misleading representation
Fair Trade Commission of Japan
Ministry of Economy, Trade and
Industry
Fair Trade Commission of Japan
Promote free, balanced competition
Protect intellectual property rights and
maintain orderly competition
Administration
Ministry of Economy, Trade and
Industry
Purpose
Unfair Competition Prevention
Law
Law
Act Concerning Prohibition of
Private Monopolization and
Maintenance of Fair Trade
Act Against Unjustifiable
Premiums and Misleading
Representations
2.
Installment Sales Law
Cabinet Office
Rectifying consumer problems with
electronic business transactions
Law Concerning Civil Code on
Electronic Consumer Contracts
and Electronic Consent and
Notification
Ministry of Economy, Trade and
Industry
Protection of consumers in specific
business transactions
Administration
Specified Commercial
Transactions Law
Mail Order
1.
Purpose
List of Major Laws
A.
Law
Legal Systems
II.
http://www.jftc.go.jp
http://www.jftc.go.jp/pressrelease/01.march
/010323.pdf
http://www.meti.go.jp
[email protected]
http://www.jftc.go.jp
[email protected]
http://www.jftc.go.jp
[email protected]
Info/Contact
http://www.meti.go.jp/english/index.html
http://www.consumer.go.jp/
http://www.meti.go.jp/english/index.html
http://www.meti.go.jp
[email protected]
Info/Contact
16
Quarantine imported and exported plants
Maintain fair transactions in the travel
industry, ensure safety of travel and
increase convenience of travel
Plant Protection Law
Travel Agency Law
Purpose
Protect personal information
Act for the Protection of
Personal Data
Pending New Law
Law
3.
Food Sanitation Law
Domestic Animal Infections
Disease Control Law
Administer imports and exports
Prevent and reduce food waste and
promote recycling
Purpose
Ensure the quality and safety of
pharmaceuticals, cosmetics and similar
products
Ensure the stable collection of liquor
taxes and prevent alcohol consumption
by minors
Standardize agricultural/forestry
commodities, and quality representation
Prevent occurrence of sanitation hazards
originating in food and beverages
Prevent infectious diseases in domestic
animals
Foreign Exchange and Foreign
Trade Law
Recycling Laws
・ Law for Promotion of Sorted
Collection and Recycling of
Containers and Packaging
・ Law for Recycling of
Specified Kinds of Home
Appliance
・ Food Recycling Law
Japanese Agricultural Standard
Liquor Tax Law
Pharmaceutical Affairs Law
Law
Prime Minister’s Office
Administration
Ministry of Land, Infrastructure
and Transport
Ministry of Health, Labour and
Welfare
Ministry of Agriculture, Forestry
and Fisheries
Ministry of Agriculture, Forestry
and Fisheries
Ministry of Economy, Trade and
Industry
http://www.kantei.go.jp/jp/it/privacy/housei
ka/hourituan/
Info
http://www.mlit.go.jp/english/index.html
http://www.mhlw.go.jp
[email protected]
http://www.maff.go.jp/
[email protected]
http://www.maff.go.jp/
[email protected]
http://www.meti.go.jp
[email protected]
http://www.maff.go.jp
http://www.meti.go.jp
http://www.env.go.jp
http://www.meti.go.jp/english/index.html
http://www.maff.go.jp/
Ministry of Agriculture, Forestry
and Fisheries
Ministry of the Environment
Ministry of Economy, Trade and
Industry
Ministry of Agriculture, Forestry
and Fisheries
http://www.nta.go.jp
http://www.mhlw.go.jp
[email protected]
Ministry of Health, Labour and
Welfare
National Tax Agency
Info/Contact
Administration
B.
1.
Mail-Order Laws
Specified Commercial Transactions Law
This law ensures the equity of specific commercial transactions and protects consumers as
sales methods diversify beyond stores and sales offices to include door-to-door sales, mail order and
others. It is based on the Law Concerning Door-to-Door Sales, etc., enacted in 1976, which was
revised to reflect the expansion of commercial transactions. The law’s name was changed to the
current name in November 2000.
The law specifically covers 1) door-to-door sales, 2) mail-order sales, 3) telephone sales, 4)
chain referral sales (multilevel marketing), 5) repeat services (beauty treatments, foreign language
courses, etc.), 6) employment (sales-related side jobs, monitoring , etc.), and others.
The main legal regulation related to mail order is the Specified Commercial Transactions
Law, which protects general consumers. This law does not apply to sales for the purpose of export, or
those conducted by the government or regional public bodies. Also, the Installment Sales Law takes
priority for purchases by installment.
Products covered by a “cooling-off” system include 55 food products and arts and crafts, as
well as viewing rights (tickets) for movies, plays, music, sports, etc., and services such as distance
learning courses. Mail-order advertisements must include: 1) the sales price (with the shipping
charges displayed as a monetary amount if the price depends on shipping options), 2) the timing and
method of making payments, 3) the timing of product delivery, 4) whether or not products can be
returned or exchanged (and any conditions if they can), 5) the name, address and telephone number,
6) the deadline for application, if any, 7) installation, packing and other costs, if applicable and 8) any
limits, such minimum/maximum quantities for purchase (Article 11).
Internet mail-order advertisements must also include the name of the company’s
representative and the person in charge, and easy-to-understand application procedures to prevent
problems such as those caused by operational errors when ordering online (Article 14). Furthermore,
to help eliminate unwanted ads being sent to mobile phones, merchants are obligated to: 1) display
their e-mail address, 2) a method for contacting the merchant if the consumer does not wish to receive
ads and 3) include the Japanese phrase meaning “Unsolicited advertisement” in the e-mail’s subject
line, and explain in the body of the message that the e-mail is an ad. Continued transmission of
commercial ads to those who do not want to receive them is forbidden.
2.
Law Concerning Special Provisions in the Civil Code on Electronic Consumer
Contracts and Electronic Consent and Notification
This law defines how a contract is formed between an online retailer and the customer. In
conventional (offline) transactions, contracts between parties in separate locations, such as mail order,
17
are generally established when the consumer confirms their acceptance or when the product is sent. In
the case of Internet mail order, however, the contract is formalized when the retailer’s confirmation
e-mail reaches the customer’s e-mail server (whether or not the customer actually reads the e-mail is
irrelevant). Also, the IT Comprehensive Law recognizes the use of e-mail for delivering required
documentation.
3.
Consumer Contract Act
This law was enacted in 2000 to resolve problems in contracts between consumers and
businesses. It covers all contracts between consumers and businesses, including mail-order sales over
the Internet and catalogs.
In cases where a consumer enters a contract due to improper actions on the part of the
business, due to misconception or confusion, it is possible to cancel the contract. Improper actions
include: 1) material misrepresentations that do not correspond with facts about important matters, 2)
judgmental statements made concerning uncertain future events, and 3) willful failure to report
detrimental facts.
It is also possible to partially or completely invalidate contractual articles that are
unilaterally unfair or disadvantageous to the consumer, including immunity or limitation of
responsibility for compensation for damage received by the business, exorbitantly high cancellation
fees, and exorbitantly high late-payment fees (which can be no higher than 14.6% annually).
4.
Installment Sales Law
This law protects the purchaser’s interests with respect to installment purchases. The seller
must give the customer clearly documented information regarding sales price of products, payment
methods, the timing of the transfer of rights, and contract cancellation. Although there is no special
cooling-off provision with respect to mail order, special clauses govern product acceptance and
returns equivalent to a cooling-off system. These regulations allow for the revocation of a contract
without charge, within eight days from the receipt of the aforementioned documentation (or
cancellation up to 20 days after receipt of documentation in the case of multilevel “pyramid”
marketing sales transactions). The Specified Commercial Transactions Law requires businesses to
display such clauses in mail-order ads, or to indicate if no such applicable clause exists.
C.
1.
Competition Laws
Antimonopoly Law
The Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade
(Antimonopoly Law), which was enacted in 1947 to promote free and fair competition and to
18
stimulate economic activity while ensuring consumer benefits, falls under the jurisdiction of the Fair
Trade Commission of Japan. It specifically prohibits private monopolies, improper restriction of
transactions and unfair methods of transaction.
For the retail industry, the major guidelines cover distribution and trade practices, dumping,
gratuitous returns and franchises.
2.
Premium Representation Law
The Act Against Unjustifiable Premiums and Misleading Representations (Premium
Representation Law) prevents improper premiums and sweepstakes, exaggerated advertisements or
improper representations of price. There are two types of sweepstakes: open sweepstakes (either not
concomitant with transactions or not conditional to purchase), and closed sweepstakes (conditional to
purchase of products/services). Closed sweepstakes come in three subcategories: general giveaways
to all entrants (such as product purchasers), joint sweepstakes held by multiple stores and tenants, and
sweepstakes that award entrants selected by lottery.
A 1996 revision increased the maximum values of premiums from ¥1 million to ¥10 million
for open sweepstakes, with a limit of 1/10th the value of the transaction for general giveaways (for
instance, a limit of ¥100 if the transaction value is less than ¥1,000), ¥50,000 to ¥100,000 for general
sweepstakes, or ¥200,000 to ¥300,000 for joint sweepstakes.
Prohibitions concerning misleading representations cover price, efficacy or benefits,
country of origin, and others. Misleading price representations include regulations on double price
representations, where a comparative price higher than the actual sales price is displayed. Prohibited
representations of discount rates may include cases where, in spite of the fact that only some products
are affected by the discount, rather than clarifying this fact, it is implied that all products are affected,
or cases where overall discount rates applied to specific product lines are represented in an
exaggerated fashion.
Recent revisions to the law regarding mail order involve misleading representations of
efficacy or benefits, including indications that the product is much better than it actually is. When it is
determined necessary to judge whether or not this prohibition has been violated, the business in
question is given a specific period of time to provide material that offers rational justification for the
claims. If this material is not provided, then the representation will be judged to be misleading.
3.
Unfair Competition Prevention Law
This law protects intellectual property rights, maintains competitive order and ensures
implementation of international norms. It has been revised countless times since its enactment in 1934,
currently listing 15 items as acts of unfair competition. In cases where such actions could (or possibly
could) infringe on business interests, the law provides for cessation and prevention (injunction and
19
indemnity), as well as other rights. It includes methods for protecting the trust that businesses have
worked to build, as well as information with intellectual property value. This law has become
increasingly important with the growth of proprietary brands and business models.
4.
Resale Price Maintenance System for Copyrighted Works
This law requires the producer and supplier to decide on their wholesale and retail sales
prices in advance, and to assign and conform to these prices. This restricts the right to freely set
product prices after ownership has been transferred and hinders price competition in a manner that is
prohibited by the Antimonopoly Law, with certain exceptions. At present, the Antimonopoly Law
stipulates six types of copyrighted works as exceptions from resale restrictions: books, magazines,
newspapers, records, music tapes, and music CDs (resale system for copyrighted works).
D.
1.
Retail Sales Laws
Pharmaceutical Affairs Law
This law was enacted in 1960 to ensure the quality, efficacy and safety of pharmaceuticals,
medicated cosmetics, cosmetics and medical devices. It regulates the approval of manufacturing and
import, the authorization of manufacturing, the opening of pharmacies and the approval of
pharmaceutical sales. It only recognizes the sale of pharmaceuticals at pharmacies and drugstores, and
restricts the pharmaceuticals that may be sold through mail order. It also places restrictions on ads.
A revision on March 31st, 2001 did away with prior approval and authorization for selling
manufactured or imported cosmetics, but all ingredients, other than in medicated cosmetics, must now
be displayed on the container and packaging.
Representations on health food and health food products have been divided into three
categories: food for specified health use, food with nutritional functions and health food. For instance,
although certain pharmaceutical effects and benefits can be displayed in the case of food for specified
health use, no effects or benefits at all may be displayed for generally-termed “health food.” For this
reason, representation of the effects and benefits of health food must be handled more carefully than
ever before.
2.
Liquor Tax Law
This law was enacted in 1953 to collect liquor taxes. A licensing system is used for the
manufacture and sale of liquor products to ensure collection of liquor taxes and to prevent the
consumption of alcoholic beverages by minors. The sale of liquor requires a general retail liquor sales
license, or a large-store liquor retail license, or a mail-order liquor retail license for selling liquor via
mail order. The latter license is focused on mail order that targets consumers in two or more
20
prefectures, while the general retail liquor sales license is required for mail-order sales within a single
prefecture. The mail-order liquor retail license is issued with restrictions on the range of liquor to be
sold via mail order, such as regional products that cannot be purchased at ordinary retail shops, or
imported liquor.
3．Japanese Agricultural Standards
The Law Concerning Standardization and Proper Labeling of Agricultural Products, enacted
on June 10th, 2000, requires labeling of genetically modified food, certification and labeling of
organically farmed processed food, and labeling of the country of origin on perishable food. Labeling
rules for organically farmed products, such as organic vegetables, requires organic products to bear
the JAS (Japanese Agricultural Standards) mark. Rice labeling must include the location of
production, variety, year of production and the ratio of rice varieties contained. Perishable goods also
must comply with a variety of labeling regulations.
Labeling methods differ slightly from item to item. Labels for domestically produced fruit,
vegetables and other such products must include the prefecture where they were produced, while
imported products must include the exporting country. Meat products must be labeled domestic or
indicate the country of origin.
4．Recycling Laws
The Law for Promotion of Sorted Collection and Recycling of Containers and Packaging
requires containers and packages to be recycled. Containers and packages used by a mail-order
business that manufactures or purchases products must comply with the law. Since mail-order
companies find it difficult to recycle containers and packages by themselves, they delegate recycling
to the Japan Containers and Packaging Recycling Association for a commission. Companies with five
or less employees, or with an annual sales volume of ¥70 million or less, are exempt from recycling.
The Law for Recycling of Specified Kinds of Home Appliances (Electric Appliance
Recycling Law) applies to air conditioners, televisions, refrigerators (including freezers), and washing
machines. The retailer accepts the appliance from consumers and returns them to the manufacturer,
who must receive and recycle the appliance. When the consumer asks for one of these appliances to
be taken away, they must pay a fee if the retailer or manufacturer so requests.
Mail-order companies that handle these appliances are obligated to accept them for
recycling. When a customer requests that a previously purchased product be accepted, or that a
product be accepted in case of purchasing a new model of the same product type, the seller must
return the product to a recycling shop or the manufacturer. The cost of managing and hauling these
appliances away must be published in the company’s website or catalog.
The Food Recycling Law seeks to eliminate or decrease the generation of unsold food and
21
food waste in manufacturing, and also promote the recycling of such waste for animal fodder or
fertilizer. The law, enacted in June 2000, stipulates that at least 20% of such waste must be recycled
by FY2006.
5.
Travel Agency Law
This law covers companies that arrange trips or sell package tours. To avoid problems
between agencies and travelers, explanations of the conditions of transactions and other information
must be made directly to the customer, even in the case of using the Internet. Companies not
registered as a travel business or agency are not allowed to offer travel services.
6.
Importing
Laws related to importing include the Foreign Exchange and Foreign Trade Law, the Food
Sanitation Law, the Domestic Animal Infections Disease Control Law, the Plant Protection Law, the
Pharmaceutical Affairs Law, and others.
E.
Pending New Law
1．Act for the Protection of Personal Data
To protect personal rights and interests, this act stipulates that companies handling personal
information must 1) specify purposes of use and establish related limits, 2) acquire the information
appropriately and provide notification of the purposes, 3) ensure the correctness of the data, 4)
implement information security measures, including related supervision of employees and contractors,
5) restrict provision of information to third parties, 6) provide a way for consumers to contact the
company in regard to the disclosure, correction and discontinued use of their personal information,
and 7) respond to complaints.
The act was fully enacted on April 1, 2005. The Japan Direct Marketing Association
(JADMA) publishes the Guidelines for Personal Data Protection in the Direct Marketing Business.
22
III.
A.
Business Models and Practices
Basic Structure of Mail-Order Business
Mail-order companies first advertise in specific media and then take orders generally
through call centers and the Internet. Products are delivered from vendors (which could even be the
company’s own manufacturing system) to a distribution center and then to the customer through a
home delivery company or other means. Payment collection services handle payments via post offices
or convenience stores. Customer data from the sale is carefully processed and analyzed for further
product development and marketing.
Fig. 12
Mail Order Basic Model
Payment
Payment Collection, etc.
Outsourcing
Product
Development
(Processing and
analysis of marketing
data)
Sales Channels
Catalogs and Flyers
Television
Web
Others
Order
(Telephone/Post/Internet)
Outsourcing
Delivery
Distribution
Center
Home Delivery
Source: Illustrated Mail Order Industry Handbook, Shop System Study Society, 2003.
23
Customer
Mail Order
Company
Product Supplier
(Own facilities,
manufacturer,
wholesaler, etc.)
Billing
1.
Overall Business
a.
Purchasing and Developing Products
A good product strategy is crucial for mail-order businesses, which cannot survive without
providing highly original products of acceptable quality and price in a timely fashion. Broadly
classified, sourcing includes 1) the direct model, where products are sourced from the company’s own
manufacturing system, 2) the resale model, where the company purchases products in Japan or
overseas, 3) the joint model, where the company teams with a manufacturer to jointly develop and
procure original products, and 4) a combination of these models. The resale model is the most
common.
b.
Distribution
Under the direct model, products are shipped from the company’s own manufacturing
facilities to its warehouse or distribution center. Under the direct and joint models, products are
delivered from suppliers, such as wholesalers or manufacturers, to the company’s distribution center.
Major mail-order companies often purchase products directly from manufacturers or go through
intermediate distributors who deliver to the customer.
c.
Warehouses and Distribution Facilities
Three common ways of warehousing and distribution facility management are 1) using an
in-house or rented warehouse and handling distribution directly, 2) outsourcing the management of
the warehouse and distribution space, usually to a home-delivery company or specialized distributor,
or 3) outsourcing to a specialized distributor that has its own warehouse and distribution facilities.
d.
Marketing Channels
Mail-order businesses use catalogs, television, the Internet, flyers and DM and many other
marketing channels, which are selected by segmenting customers to identify key targets and their
needs. According to a JADMA survey in FY2001, catalogs are the most costly (¥157 for production
and ¥95 for distribution). The ratio of consumer response to catalogs was approximately 10%. Direct
mail was less costly, with a production cost of ¥56 and distribution cost of ¥65.
2.
Order Processing
a.
Order Taking
Orders are received by telephone, post (postcard or sealed letter), the Internet and/or fax.
The most common means of receiving orders are telephone, post and the Internet, in that order. Many
24
companies have toll-free numbers. Orders via the Internet are growing, mostly among men and young
consumers.
b.
Delivery
Although some large corporations have their own distribution centers, mail-order
companies generally outsource this function to specialized delivery companies, predominantly
home-delivery businesses. Some also deliver via mail, or many delegate this function to the supplier,
which sends the product directly to the customer. Japan has a nationwide network of home delivery
services that deliver packages anywhere in the nation in just one to two days, and at specified delivery
times if desired, as well as the delivery of refrigerated or frozen goods. It is also possible to send
packages from convenience stores throughout the country. Home delivery is the shipping service with
which consumers are most familiar. The full-fledged delivery infrastructure makes it easy to enter the
mail-order market.
Many mail-order corporations differentiate their services by delivery, such as gift wrapping
and message cards, free shipping, overnight and express delivery, specified delivery day and time, and
assembly and installation of furniture and other large products. Although the main systems applied by
corporations offer free shipping throughout the country for purchases over a certain amount, or offer a
uniform shipping price for the entire country, some also charge consumers for the full cost of shipping,
whereas others include free shipping for all orders.
c.
Payment Collection
Commonly used payment collection systems include postal money transfers, convenience
store money transfers, bank money transfers and other lump-sum payments, as well as cash on
demand (COD). Cash before delivery (payment into a bank account), which used to be common, has
almost completely fallen out of favor.
Payment via convenience stores has seen especially rapid growth. Although consumer
payment defaults are rather rare, the Japanese dislike money moving in unseen ways and thus prefer
to use cash. The trend has also been supported by the increased participation of women in society and
the spread of 24/7 convenience stores that offer payment-collection services. As a result, even small
and medium-sized mail-order companies can easily use several tens of thousands of convenience
stores around the country as payment-collection points (Fig. 16). Although credit card payments have
increased along with the greater numbers of Internet shoppers, they are still not as common as in the
West. As lump payments after the delivery of Internet purchases are viewed as risky to consumers, it
is necessary to offer consumer-friendly payment methods to encourage increased usage of the Internet
for payments.
25
d.
Cost and Other Issues
The cost of completing mail-order transactions is high. According to a JADMA survey in
2003, the rates of bad loans (uncollectible payments) and returns do not change much from year to
year (Fig. 13). In recent years, mail-order companies have been working to hold costs down in the
face of price competition. The major issues faced by mail-order companies are acquiring new
customers, turning a profit, developing highly original products and building up product lineups.
Fig. 13
Mail Order Operating Costs
Bad Loans
0.4%
Returns
2.8%
Cost of Labor
12.6%
Cost of Sales
49.1%
Cost of Advertising
18.2%
Cost of Distribution
8.1%
Payment Collection Expense
2.4%
Ordinary Profit
9.6%
Note: Survey of 148 JADMA companies. Returns based on sales volume, others on sales value.
Source: 21st Mail Order Business Promotion Current State Survey Report, Japan Direct Marketing
Association
26
B.
1.
Business Models
Resale Model
In this model, buyers purchase original products directly from the manufacturer. This model
is used often in general catalog and television mail order. Since the speed and timing of product
supply is important for large television mail-order companies, many have their own resale capabilities
and even filming studio, call center, etc.
Fig. 14
Resale Model
Payment
Payment Collection,
etc.
Outsourcing
Intermediary
Distribution
Sales Channels
Mail Order
Company
Product Concept
& Development
Catalogs and Flyers
Manufacturer
(Processing and
analysis of marketing
data)
Web
Others
Information Provision
Order
Outsourcing
Delivery
Television
（ Telephone/Post/Internet）
Distribution
Center
Home Delivery
27
Customer
(Agents, etc.)
Billing
2.
Direct Model
In this business model, rather than using buyers to purchase products, companies promote their
own products in channels targeting specific customer segments, take orders and deliver products. This
model is often used by apparel manufacturers. The “build-to-order” model, which involves no
inventory, makes it possible to reduce costs and the time required for delivery, so it is a good method
for delivering products quickly and cheaply. Even in efficient industries such as PCs, however, few
companies are able to conduct direct marketing without any inventory at all.
Fig. 15
Direct Model (Build-to-Order/ Make-to-Stock)
Payment Collection
Services, etc.
Outsourcing
Billing
Home Country
HQ, etc.
Company’s
Own
Production
Base
Television
Web
Processing and
Analysis of Marketing
Data
Order Placement
Others
Order
Outsourcing
（ Telephone/Post/Internet）
Distribution Center
Delivery
Catalogs and Flyers
Home Delivery
(No Stock)
Market Stocking
Distribution Center
Inventory Clearance
(Made-to-Stock)
Outlets
28
Customer
Market Production
Sales Channels
Mail Order
Company
Product Proposal
and Approval
Product
Development
3.
Service Model
This model handles services that do not entail physical distribution, such as tickets for
travel and entertainment. Business models on the provision side include the internal-company
direct-marketing model, agency model and system-provision model. In the case of travel, the agency
model includes a payment mechanism whereby the supplier (hotel, etc.) is paid an amount from
which the commission has been subtracted. The system-provision model is a platform for providing
information and includes no payment mechanism. This model is almost always used for reservations
only and, since payment is often handled on site, the supplier bears the risk of cancellation and other
problems.
Fig. 16 Travel Agency’s Direct Marketing
Direct Marketing Model
Agency Model
Payment collected when service is rendered
Travel
Service
Provider
(hotel,
airline, etc.)
・Medium
Creation
W eb
Customer
・System
Provision
Reservation
（ Telephone/Post/Internet)
System Provision Model
Payment
Billing
Registration
Mail-Order
Company
Sales Channels
Catalogs and Flyers
Television
Commission
Payment
(Processing
and analysis
of marketing
data
Web
Others
Order
（ Telephone/Post/Internet）
Home　Delivery
29
Customer
Travel
Service
Provider
(hotel, airline,
etc.)
Payment collected when service is rendered
Contract/
Registration and
・Medium
Creation
Commission
Payment
・System
Provision
Reservation
Site
Notification of
Registration
Completion
Web
Customer
Travel
Service
Provider
(hotel,
airline, etc)
Reservation
4.
Content Business Model
This business model has grown in popularity in recent years, as it is applied to e-commerce
via personal computers and mobile devices. Orders are received, content is downloaded and payments
are made, all via the Internet. Profit is high because physical distribution is unnecessary, but since the
ease of entering the market quickly leads to competition, many companies try to create distinction
with original business models. This model is used for content such as software, games and ring
tones/songs.
Fig. 17
Content Mail Order Image
Payment
Payment Collection, etc.
Outsourcing
Billing
(Content Company)
・Medium
Creation
Customer
Mail-Order
Company
web
・ System
Provision
Order
Download
30
5.
Platform Business Model
In this business model, a core company provides the system and services as an intermediary
to facilitate mail order and other services. This is the model used for online shopping malls and other
such websites. A website’s ability to attract customers by providing a shopping location for suppliers
and consumers can determine its success with this model, so companies are always trying to come up
with innovative strategies.
Fig. 18
Payment
Collection
Services, etc.
Individual
Shop
Individual
Shop
Individual
Shop
Individual
Shop
Payment of
System
Usage Fees
and Others
Information,
Operational
Advice, etc
Platform
Operation
Company
Processing and
Analysis of
Marketing Data
Payment
・Medium
Creation
・ System
Provision
ＷＥＢ
Customer
Individual
Shop
Platform Mail Order Image
Order
Billing
Delivery
Home Delivery
C.
Receipt
Convenience Stores, Train
Stations
Japanese Business Practices
Japan’s distribution industry is distinguished by many unique business practices. In
particular, purchasing through wholesalers and other intermediary distributors requires a longer, more
complicated distribution pattern than in Western nations. Other practices are sometimes thought to be
complicated or closed. Ongoing internationalization and IT advances, however, are helping to bring
Japanese distribution more in line with international practices. Mail order, however, is not tied closely
to conventional Japanese business practices.
It is important to remember that there have been many instances of fraudulent business
practices in the history of Japanese mail order, so a certain amount of consumer prejudice still exists.
As in the American television mail-order industry, there are occasionally problems with resale, such
as difficulties in purchasing the products of top-level manufacturers and high-class brand products.
31
Recently, however, some mail-order companies have begun to break loose of such ties and actually
surpass the business volume of large mass merchandisers, as well as break loose of traditional
business practices.
1.
Direct Sales of Strong Products
When foreign corporations produce and sell their own products, as in the case of direct
marketing by the manufacturer, there is no need to purchase products for resale or to use a wholesaler
or other intermediate distributor when selling to the consumer. This is because it is possible to deliver
products to the customer by owning or renting a distribution center or warehouse and outsourcing
physical distribution to a home delivery company. This frees the company from the need to follow
conventional Japanese practices for purchasing and trade. In-house production of products thus
reduces the influence of such factors.
2.
Purchasing Products Inside Japan
Mail-order corporations that develop product lineups from existing routes, similar to retail
stores, are sometimes affected by the peculiarities of Japan’s multiple-stage distribution channels and
related business and trade practices. In some cases, this could make it difficult to achieve the desired
product lineup or prices. This is why it is necessary to pay close attention to business practices when
using intermediary companies to purchase products, or when selling products from industries with
unique business practices. For instance, the automobile sales industry already has deeply rooted
distribution networks comprised of sales subsidiaries affiliated directly with the manufacturers, so
entry is difficult. This is also true of the electric appliance and cosmetics industries.
a.
Complexity of Distribution Channels
General retailers, even large chain stores, almost never deal directly with manufacturers and
instead purchase from wholesalers (including manufacturers’ sales subsidiaries). The wholesale
industry is divided into primary wholesaling, secondary wholesaling and a number of other levels.
Also, depending on the physical size and location of the market, wholesaling can be divided in a
number of different ways, including local wholesaling, regional wholesaling, national wholesaling,
and so on. Primary wholesale often refers to a manufacturer’s specified agent, which is often a
nationwide operation. Direct transactions do take place between retailers and manufacturers in some
new fields of business, such as some large supermarkets, home centers and drugstores, but this is still
limited.
Since mail-order businesses look for originality in products, direct transactions with
manufacturers is the mainstream. But some manufacturers still sell through agents, in which case it
can be difficult to procure desired products or at desired prices.
32
b.
Trade Practices
Japan’s trade practices have been singled out as being complicated, closed, barriers to new
products or new capital entry, and the cause of high prices. For instance, manufacturers have
traditionally set suggested retail prices and determined both the wholesale and retail prices
(“quotation price system”) for affiliated sales agents under a system whereby agent contracts are used
to fence in sales outlets. Manufacturers have controlled distribution to strengthen the relationship
between wholesalers and retailers, paying rebates for the nominal purpose of promoting retail sales,
as well as a variety of support fees. Meanwhile, large-scale retailers have used the power of mass
merchandising to buy on consignment, to require the provision of in-store sales assistants,
“cooperation fees,” and more.
c.
Consignment Sales and Returns
Purchasing systems include ordinary buying, consignment buying and buying after
merchandise is sold, with ordinary buying being the mainstream system used in the mail-order
industry. Roughly speaking, ordinary buying transfers ownership at the time the transaction is made,
whereas in the case of consignment buying or buying after merchandise is sold, ownership remains
with the seller, although the buyer (retailer) holds the product and is charged with its sale. In
consignment buying, the retailer is responsible for managing the product at the store and pays a
commission when the product sells. In the case of buying after the merchandise is sold, the retailer is
not responsible for storage and the purchase is treated as having occurred simultaneously with the sale,
when ownership is transferred to the retailer. In either case, products that do not sell can be returned,
but the purchase price will be higher than in the case of ordinary buying.
d.
Price Setting and Guidance by Manufacturers
As a rule, restrictions on resale prices are prohibited by the Antimonopoly Law, other than
books, magazines and other copyrighted works. In actuality, however, under the quotation price
system there are many cases where prices set by manufacturers act as guidelines for retail and
wholesale prices. National brand products, which are particularly popular throughout Japan, generally
have their prices set by the manufacturer.
e.
Rebates and Financial Assistance
Rebates are usually paid as a redistribution of the transaction price or profit with each
transaction, or at the end of a quarter or after a certain period of time. Also, when the retail profit is
reduced due to bargaining or some other such process, the rebate may be adjusted after the fact. When
a retailer carries out a special sales promotion, the retailer may request financial assistance or some
other form of compensation from the wholesaler or manufacturer.
33
IV.
A.
Foreign Entry into Market
History of Foreign Entry
Foreign entry into the Japanese mail-order industry began with Reader’s Digest, the
subscription-based magazine, in 1946 (Fig. 24). Foreign companies entered the market in the ’70s in
the wake of Sears Roebuck, GUS and other general businesses by forming alliances with department
stores, but many subsequently withdrew. Increased importing and overseas traveling somewhat
reduced the Japanese’ infatuation with foreign products and reduced the sense of novelty. As a result,
products and catalogs that were distinguished merely by the international origin of their products
could no longer satisfy the diverse needs of Japanese consumers.
Around 1990, direct marketers of apparel with their own products entered Japan, either on
their own or as joint ventures, and many have flourished. Around 2000, Amazon and Dell established
original business models for Internet mail order and achieved great success based on their efficiently
globalized systems. But quite a large number of foreign corporations have opened Japanese online
shops with the expectation that this would be enough to sell products, sometimes due to
overconfidence in the power of their brands. These corporations have often failed to find customers
and have had to withdraw from the market.
34
35
UK
Germany
Linguaphone
CBS Sony Family Club
Franklin Mint
Sears Roebuck*
GUS*
Neckermann*
1961
1971
1972
1973
1974
Otto
L.L. Bean*
Lands’ End
Jupiter Shop Channel
Yahoo!
1986
1992
1993
1996
2001
USA
Joint Venture
General
Books, CDs, Others
Auctions
Books, CDs, Others
Automobile Sales
PCs
Office Supplies
Auctions
General
Apparel
Outdoor Goods
Clothing, Others
—
—
Underwear
—
—
—
Coins, Works of Art
Records
Language Education
Magazine
Line of Business
Mitsui & Co.
Later formed business alliance with NEC
Intec, Itochu Corp., Recruit, others (six companies)
Jusco (19%)
Softbank
Jupiter Programming, HSN, Sumitomo Corp.
Seiyu (70%), Matsushita Electric Industrial（30%)
Sumitomo Corp. (51%)
Uny
Uny
Midoriya
Daimaru
Seibu Group
Sony
—
Japanese Partner
* Withdrew from market.
Sources: Compiled from The Age of Global To and From Asia, written and edited by Ross Davis and Toshiyuki Yahagi, and translated by Yoko Togawa (2001);
the October 2000 issue of Seikatsu Kiten, Saison Research Institute, and others.
QVC
Wholly Owned Subsidiary
USA
USA
eBay*
Bertelsmann*
Wholly Owned Subsidiary
Wholly Owned Subsidiary
Joint Venture
Wholly Owned Subsidiary
Joint Venture
Joint Venture
Joint Venture
Wholly Owned Subsidiary
Business Alliance
Joint Venture
Business Alliance
Business Alliance
Wholly Owned Subsidiary
Business Alliance
Business Alliance
Business Alliance
Wholly Owned Subsidiary
Joint Venture
Joint Venture
Wholly Owned Subsidiary
Mode of Entry
USA
Amazon
2000
USA
USA
Dell
autobytel
USA
USA
USA
Germany
USA
OfficeMax*
1999
1997
USA
USA
CompuCard*
1985
France
1980
Netherlands
Damart
Dressman*
1979
USA
USA
USA
UK
USA
Reader’s Digest*
1946
Country
Major Foreign Mail Order Companies that Entered Japan
Corporation
Fig. 19
Year
36
Fig. 20
—
Sapporo City,
Hokkaido
None
Distribution Point
Studios, Etc.
Call/Customer
Service Center
Stores
Facilities near Narita
and Kansai
International Airports
(no warehouse)
—
Kawasaki City,
Kanagawa Prefecture
Dell Real Site*2
—
Yokohama City,
Kanagawa Prefecture
Outlets
Shizuoka
•Product strength
•Brand
•Customer service
•Globalization
Direct Marketing from
Company
Direct Marketing
from Company
•Direct mode
(build-to-order)
•Customer service
•Globalization
Clothing
Computers
Catalogs, Flyers, Internet
Chuo Ward, Tokyo
Chuo Ward, Tokyo, Osaka
Outlets
Hachioji City, Tokyo
Outlets & stores
Alltrans Corporation (part of Sumitomo group)
• Complementary expertise of partners
—
Hadano City, Kanagawa
Prefecture (Nippon Express)
•Product strength
•Complementary expertise of
partners
•Globalization
Resale
General
Clothing, General
Merchandise, Furniture
Direct Marketing from
Company and Resale
1996
(1996)
Joint Venture: 70% Jupiter Programming and 30% HSN
(Jupiter Programming itself is owned 50% by Sumitomo
Corp. and 50% by Liberty Media)
Cable TV, satellite TV, broadband broadcasts
Chuo Ward, Tokyo
Jupiter Shop Channel Co., Ltd
1986
(1987)
Joint Venture: 49％
Sumitomo Corp. and 51％
Otto
Catalogs, Flyers, Internet
Chuo Ward, Tokyo
Otto-Sumisho Inc.
—
—
—
—
•Proprietary system
•Used cars etc. are outsourced; only
company to organize new car dealers
through thorough intermediation
•Globalization
Intermediating
Automobiles
1999
(1999)
Joint Venture: autobytel, Intec, Itochu
Corp., transcosmos, Recruit, Orient
Corporation, and eSolutions*１)
Internet
Minato Ward, Tokyo
autobytel Japan K.K.
Note 1: Business alliances at the time of establishment.
Note 2: Dell Real Site was launched in 2002 by Dell’s Japanese subsidiary through alliances with mass merchandisers of personal computers around the country. These in-store corners exhibit Dell personal computers to allow
customers to actually use the products to place orders over the Internet via Dell’s online store.
Sources: Compiled from surveys.
Ichikawa City,
Chiba Prefecture
(Nippon Express)
Key Points of
Success in Japan
•Proprietary
Amazon system
•Brand
•Globalization
Resale
Product Sourcing
Products
Internet
Wholly Owned
Subsidiary
Wholly Owned
Subsidiary
Internet
Books, CDs/DVDs,
Electrical
Appliances, Others
Yokohama City,
Kanagawa Prefecture
1993
(1993)
Kawasaki City,
Kanagawa Prefecture
1989
(1993)
Wholly Owned
Subsidiary
Lands' End Japan, K.K.
Dell Inc.
Keys to Success for Foreign Mail-Order Corporations in Japan
Amazon Japan
K.K.
Shibuya Ward,
Tokyo
1999
(2000)
Channel(s)
Operations in Japan
Establishment
(Start of Services)
HQ
Corporation
Examples of Foreign Entry
1. Case Study Summaries
The following chart shows how the businesses were deployed and keys to their success with mail-order in the Japanese market.
B.
2.
Case Studies
a.
Amazon Japan K.K.
Corporate Overview
Amazon Japan K.K. is the Japanese subsidiary of the largest online shop in the world,
Amazon.com. Amazon sells books, music and video titles, apparel, household goods, garden goods,
and other products only over the Internet.
History and Form of Entry
Amazon Japan K.K. is a wholly owned subsidiary. Amazon.com was formed in the U.S. in
1995 for online sales of a wide variety of products, including books, music and video titles, games,
electrical applications, apparel, household goods, garden goods and other products. Amazon.co.jp
opened as a Japanese site offering books on November 1, 2000.
Target Market
General users of the Internet who are interested in books, music and video titles, electrical
appliances and other products.
Business Model
Amazon Japan K.K. uses a resale model. It started an associate program in May 2001 and
opened an online store for music, DVDs and videos in June. In October of the same year, it opened an
online store for software and TV games, and in November it added a system for paying COD. In
November 2002, Amazon established its Amazon marketplace as an online market for third parties to
buy and sell products, handling over 5.5 million items, including new, used and collector’s products.
Amazon.com began this service in the U.S. in November 2000 and it has been an extraordinary
success. Similar services were launched in the U.K. and Germany in March 2002.
Amazon Japan K.K. broke even for the first time in the fourth quarter of 2002, two years
after starting up, making this the company’s fastest growing market in the world. Annual sales in
calendar 2003 were estimated at ¥34.2 billion, a 71% increase over the previous year, ranking the
company 15th among mail-order corporations in Japan. At present, in addition to electrical appliances,
it sells household goods, kitchen and other products as a one-stop shopping site. The number of users
who made at least one purchase a year rose to one million in June 2002, two million in June 2003 and
continued increasing at a fast pace in the two years to June 2004.
Amazon Japan K.K. selected Osakaya, a midsized book subscription company, as its partner
and set up a distribution center in Ichikawa City, Chiba Prefecture, near Tokyo. Amazon Japan K.K.
and Nippon Express jointly manage the center. Product shipping is free for purchases of ¥1,500
(about $15) or more. Payment options include credit card, COD and Amazon gift certificates.
37
Key Points of Success
Original system: Amazon has an excellent business model, including selling products
through database searches, posting user evaluations and other information, making recommendations
to inform users of books in which they may be interested, and a one-click system for immediate
purchases after a one-time registration.
Brand building: While working to expand its business domain, such as building a safe,
efficient infrastructure for network transactions, the company has gained the trust of consumers and
established an overwhelmingly strong global brand. In the world of the Internet, where brand power
defines products, this has proven to be an effective method for attracting customers.
Globalization: COD payments, which were not offered at first, were added in 2001. COD
payments are more common than credit card payments for delivery in Japan, so the need for this kind
of system was high. This has enabled Amazon Japan K.K. to expand its market into the youth
segment. In addition to COD Amazon Japan K.K. added services via Web-enabled mobile phones in
2001.
Market-Entry Issues
Japan has a book resale price maintenance system (resale system), in contrast to the U.S.
system under which bestselling books are purchased in large quantities from the publisher for sale at
low cost. Amazon has succeeded in raising customer unit rates and maintaining a high expansion rate
by attracting customers with easy-to-use product searches and low prices, and by providing rapid
delivery, excellent customer service and a broad lineup that includes CDs, electrical appliances and
other products. In the future, Amazon.co.jp will add apparel, food, cosmetics, and other categories to
its lineup, like Amazon.com in the United States. Amazon.co.jp has also succeeded through effective
use of wholesale channels and outsourcing its distribution centers.
38
b.
Dell Inc.
Corporate Overview
Dell K.K. is the Japanese subsidiary of Texas-based American manufacturer Dell Inc.,
which boasts the No. 1 share of the global computer systems market based on its direct business
model and original “Dell Direct Model” products. The company launched sales, marketing and
support in Japan in January 1993.
History and Form of Entry
Dell K.K. is a wholly owned subsidiary. When it first entered the market, the Japanese staff
concentrated on building relationships with partner companies needed to operate from scratch, while
the American side participated in the process and gave approval as necessary.
Target Market
Dell has expanded rapidly, especially in corporate markets. The Japanese market is now the
third largest market overall for Dell, after the U.S. and the UK. In recent years, the company has also
expanded steadily into the personal computer market, raising its ratio of personal computer to
corporate computer sales to 2:8.
Business Model
Dell employs a direct model (build-to-order). As in the American and European markets, it
has pioneered the direct-marketing manufacturer approach in Japan. Dell has steadily improved its
share by pursuing customer satisfaction through custom-made, high-performance, high-quality
products, and strong customer service based on advanced management of customer data. Dell also is a
leading innovator in Internet utilization.
Almost 100% of the products sold in Japan are manufactured in Dell’s factory in Xiamen,
China. The company has a distribution center for eastern Japan near Narita International Airport and
another for western Japan near Kansai International Airport. Since Dell has no product inventory,
there are no warehouses.
Dell has not deployed stores, but it will take orders from individuals via the Internet and
telephone, as well as via its Dell Real Sites, which are product exhibition and sales corners located in
mass-merchandising personal computer stores and electronics stores in major cities around the
country. These corners exhibit Dell personal computers and peripherals so customers can actually see,
touch and try the products, as well as place orders directly over the Internet via online store terminals.
Payment, like in the U.S., is required in advance for individual customers (including credit
cards). Payment after delivery is possible for corporate customers.
Key Points of Success
Direct model (build-to-order): The direct model enables Dell to offer high-performance,
39
high-quality products at low prices and without the need for inventory. Dell has succeeded in reducing
the time from production to customer delivery, as well as reducing the cost of supplying products.
Other factors for success include strong customer support based on advanced management of
customer data.
Excellent customer service: Painstaking support is provided through advanced management
of customer data, which allows Dell to steadily increase its share as it pursues a high level of
customer satisfaction. Corporate customers are supported over the Internet and telephone, as well as
direct visits by salespersons. These methods all mirror those of the American head office.
Globalization and delegation of authority: Although product development is conducted
entirely by the development team at the head office, including the development of products aimed at
the Japanese market, Dell sees Japan as a strategically important market. In order to reflect the
demands of Japanese customers in product development as quickly as possible, information is
exchanged constantly between Japan’s marketing department and the development team. Sales and
marketing representatives routinely meet with customers so that they might understand their various
demands, and to convey the feedback obtained from customers to the development team as rapidly as
possible for consideration in product development.
Also, since Japanese customers are extremely particular when it comes to product design,
size and other aspects, members in charge of the head office’s development team visit to Japan
frequently and tour the electronics stores in Tokyo’s Akihabara district, mass-merchandising shops
and other locations to research trends and understand the needs of Japanese consumers.
Although the aforementioned Dell Real Site was developed in Japan, it was introduced to
the American head office and other offices as a “best practice” and is now being employed in the U.S.
and other Asian markets.
Operations in the Japanese market are left up to the local management team. There is
extremely close communication between management teams in Japan, the U.S. and other Asian
markets, which also promotes enhanced understanding of customer needs.
Market-Entry Issues
Customer service was the key to this once-unknown foreign manufacturer’s success in directly
marketing personal computers in Japan. Responsiveness to customer requests, low prices and
full-fledged customer support transformed initial users into opinion leaders. Although direct
marketing was thought to be difficult in the Japanese market, which had been characterized by
intervening wholesalers, special agents, rebates and other such trade practices, Dell proved that direct
marketing is possible by forming strategic partnerships with carefully selected partners. (Reference:
Naze Dell Computer wa Okyaku no Kokoro wo Tsukamunoka [How Does Dell Computer Capture the
Hearts of its Customers?] by Yo Ui, 2002.
40
c.
Lands’ End Japan, K.K.
Corporate Overview
Lands’ End Japan, K.K. is the wholly owned Japanese subsidiary of a prominent American
apparel mail-order company well known for its GUARANTEED.PERIOD.® policy for unconditional
returns. The company sells high-quality casual wear, tailor-made clothing, shoes and other products
from Lands’ End Inc., as well as original products developed in Japan. At present, it sells through
catalogs, flyers and the Internet, plus outlet stores.
History and Form of Entry
The Lands’ End international department coordinates entry into foreign markets through
wholly owned subsidiaries. The corporation’s first foreign entry was the UK in 1991, followed by
Japan (1994) and Germany (1996), with local offices set up in each country. When it entered the
Japanese market, the company employed Japanese professionals familiar with local operations and
marketing, although it essentially launched its Japanese mail-order business with five or six people.
Target Market
Lands’ End’s target market is women in their 40s and 50s, and slightly older men,
particularly people who are fashionable and have a young mind. Although the company’s customer
data includes no information about income, many of its customers have comparatively high household
incomes, according to surveys.
Business Model
Lands’ End utilizes a make-to-stock direct model, producing products for the entire world at
its own manufacturing base. The Japanese office procures 100% of its products from the U.S., so
there is no procuring in Japan and no intermediary distribution, which frees the company from
conventional business practices. Lands’ End employees in the U.S. communicate with Lands’ End
Japan to coordinate stock management and deliveries to Japan’s distribution center, which acts as a
warehouse. This single distribution center is located in Shizuoka, and uses Sagawa Express Co., Ltd.
to deliver products around the country in response to orders. Approximately 60% of orders are taken
over the phone, 15% over the Internet and 25% via fax, postcard and other methods. The call center in
Shin-Yokohama operates from 7 am to midnight year round, except for the first three days of the year.
The Lands’ End Live service, which has the same hours of operation, assistants customers with orders
via telephone. While chatting, the customer and assistant can view the same online screens. Payments
are around 50% cash (transfer via post offices, convenience stores and banks) and around 50% credit
card.
41
Key Points of Success
Product strength: Customers recognize the high-quality casual wear and original products
made for Japan by Lands’ End, which leads to repeat purchases.
Brand: Although purchases are generally by mail order only, the Lands’ End brand is strong
enough to attract substantial business.
Customer service: The 100% unconditional return guarantee has allowed Lands’ End to earn
the trust of customers who are somewhat resistant to the idea of purchasing foreign or mail-order
products, and to succeed in creating a strong base of loyal customers. This strategy seems to be
universally applicable to building a relationship based on trust with customers in mail order. Other
noteworthy services include initialing, embroidery, hemming and gift packaging. Although these
additional services are fee-based, they also help to increase the level of customer satisfaction.
Globalization: Lands’ End took advantage of Japanese booms in American casual and
outdoor clothing to achieve unexpectedly rapid growth up until around 1997. From 1998 to 2000,
however, business in Japan was sluggish. After current president Ms. Keiko Hayashi took office, the
company rebuilt its business through thorough globalization and sales have grown steadily since
2002 . Ever since the company entered the Japanese market, there was a problem with American sizes,
which were too large for Japanese consumers. So the company prepared Japanese sizes from the
beginning of 2003. Also, the Japanese office began planning products for sale in Japan, although they
are manufactured on the American side. Some products are sold only in Japan under the name “Japan
Unique,” but the company has also begun marketing some of the better-selling products in other
countries, beginning with the United States.
Market-Entry Issues
After Lands’ End first entered the market, success came so fast that the company could not
keep up. Sales began to slump, however, as consumer spending stagnated. When the Japan office
began shifting towards product development targeting Japan, initially it was difficult to obtain
approval from the American headquarters. But earnings were strong in 2002 and, along with growth
in the UK and Germany, the international department’s share rose to 15% of total earnings in 2003, so
headquarters could no longer ignore the requests of its foreign offices. Continued strong business in
Japan has won further acceptance of Japanese proposals, although globalization and delegation of
authority remain ongoing challenges.
42
d.
Otto-Sumisho Inc.
Corporate Overview
Otto-Sumisho is a joint venture between Sumitomo Corporation and Otto Versand (Otto),
the largest mail-order corporation in the world, which is based in Germany with more than 20 offices
in Europe, the U.S. and Asia. The joint venture has a well-established catalog for mail-order sales of
clothing, general merchandise and furniture. At present, Otto-Sumisho uses catalogs, flyers,
magazines and the Internet, and also sells through stores.
History and Form of Entry
Sumitomo Corp. entered the mail-order business in 1983 and began looking for an
experienced foreign mail-order partner. It approached Otto, which, at the time, was the second largest
mail-order corporation in the world, after Sears, but had not yet entered the Japanese market.
Otto-Sumisho Inc. was established in 1986 with 49% ownership by Sumitomo and 51% ownership by
Otto. Sumitomo was interested in Otto’s mail-order know-how and Otto was interested in Sumitomo’s
knowledge of the Japanese market. The two built a cooperative relationship without intruding on each
other’s areas of specialty. Their senior managers meet to form policies, but operations in Japan are
under the complete control of Otto-Sumisho.
Target Market
Otto-Sumisho’s target customers are women aged 35 or above, with an income slightly
higher than average.
Business Model
The company uses an integrated model that combines the resale model and the direct model
(make-to-stock). When the company was established, it selected Otto products matched to the
Japanese market. Catalogs and manufacturing were left up to Otto, and Otto would manufacture
low-cost products in sizes designed for Japanese consumers. Products were then sent to a distribution
center in Japan, which delivered to customer homes.
Today, however, Otto-Sumisho develops about 40% of the clothes it handles, which
accounts for slightly less than 80% of the company’s total number of clothing items. The remaining
20% (fashion and home goods) is procured from Japanese suppliers. Although some of these products
are procured through intermediary distributors, such as wholesalers or agents, others are produced and
purchased on consignment by the manufacturer. Otto-Sumisho originally opened three stores as
outlets for clearing inventory, but then subsequently opened a store in Ebisu as a test-marketing shop.
Physical distribution and home delivery are outsourced to Nippon Express Co., Ltd. and
Pelican Bin (part of the same company), respectively. A call center in Minami Ohsawa takes orders,
with more than 50% of orders taken over the phone and approximately 10% taken over the Internet.
43
Key Points of Success
Product strength: The company aims to satisfy the customer with fashion and lifestyle
products, targeting somewhat high-income, middle-aged and elderly consumers. Otto-Sumisho
products cannot be purchased from other stores, but the brand enjoys recognition.
Delineation of partners’ roles: The joint venture closely studies the products and mail-order
know-how of Otto, while Sumitomo concentrates on operations in Japan. There is no initiative or
intervention by the home country, and business is run on the basis of cooperation.
Globalization: Although strategies and management policies are set at meetings held
biannually between top members of Sumitomo and Otto, specific operations in the Japanese market
are left up to Otto-Sumisho, which enjoys complete authority. As a result, it became possible to
provide products and services that suit Japanese consumers.
Market-Entry Issues
Although Otto has perhaps the world’s largest mail-order delivery system and excellent
operational know-how, it outsources distribution and home delivery in the Japanese market. As a
result, the service level is quite high and this has contributed to the firm’s success. Also, operations
were left up to the Japanese corporation, so there were no major issues involving the market.
44
e.
Jupiter Shop Channel Co., Ltd.
Corporate Overview
Jupiter Shop Channel Co., Ltd., uses satellite broadcasting, cable television, broadband and
other channels to sell jewelry, clothing, general merchandise, food and other products. It handles
products that are unique and rare, carefully selecting domestic and foreign products based on high
standards of quality, cost performance and fashion. Orders can be placed over the Internet and from
mobile phones. Stores (outlet shops) are also used.
History and Form of Entry
Jupiter Shop Channel, Japan’s largest television mail-order corporation, is a joint venture
corporation. It was formed in November 1996 with the goal of becoming Japan’s first major television
shopping channel, known as the Shop Channel. Jupiter Programming Co., Ltd.9, which is owned 50%
by Sumitomo Corporation and 50% by Liberty Media International, Inc.10, owns 70% of Jupiter Shop
Channel and the Home Shopping Network (HSN) owns the other 30%.
As already evident from television mail order in the U.S., the secret of success is providing
attractive content rather than merely functioning as a sales medium. Shop Channel, the first sales
company on cable TV, was backed up by HSN’s experience in television marketing and mail order
and experienced personnel from Liberty. The company still has several foreign employees, as well as
seven employees from Sumitomo. Jupiter retained the know-how of its initial personnel, but it
subsequently built the Shop Channel independently, under the management of employees hired in
Japan. The U.S. has high expectations for the future growth of the Japanese cable TV market, and
both companies are committed to applying the business model that Liberty has used successfully in
the U.S. and UK.
Target Market
Jupiter’s customer base is overwhelmingly females, who account for 85% of all customers.
The central age brackets are customers from their 30s to 50s, and more than half of the customers are
housewives. According to a survey by Jupiter, its customers tend to be active and curious consumers
interested in fashion, beauty, health and diet, enjoy shopping as a form of recreation and like to watch
television and travel. As the company’s customers come from homes that can receive cable TV or
satellite broadcasts, they tend to have comparatively high incomes.
9
One of the corporations in the Liberty Media group, which conducts multiple businesses including the
supply of programs for satellite broadcasting and cable television channels, Internet distribution, mail
order, and others.
10 A TV shopping-only channel that boasts the longest history and greatest popularity in the United States.
45
Business Model
Jupiter uses a resale model. At first, the company lacked its own facilities, so it started with
a small, low-risk investment. Today, however, with the exception of distribution facilities, the
company owns its own call centers, studios and program-production facilities. The company believes
it is important to manage its own program production to be able to respond quickly to customer needs.
Jupiter’s personnel are almost all Japanese. Its merchandising group of more than 20
people procures products from Japan and overseas for the Shop Channel. Jupiter has developed
private brands over the past two years, including apparel and cosmetics, and 60% of the products are
handled only by the Shop Channel. Whether privately produced or procured, products offered by
Jupiter cannot be purchased elsewhere. Most procured goods are purchased directly from
manufacturers, but agents and distributors (wholesalers) still supply top-brand products. When the
company goes through these intermediaries, however, it loses profit and sometimes cannot even
obtain approval to introduce the products on television due to some sellers’ prejudice against the
image of television shopping. It has taken a long time to combat this attitude in the U.S., so the
problem is not unique to Japan.
Jupiter also works to satisfy Japanese consumers’ demand for the world’s highest level of
quality in product packaging.
Thanks to its highly developed home-delivery infrastructure, Jupiter is able to deliver
products extremely fast. As a rule, Jupiter uses Sagawa Express for its home-delivery services. At
present, Jupiter only offers COD (55%) and credit card payments (45%). Its call centers operate 24
hours a day, 365 days a year.
Key Points of Success
Original system: Jupiter started out by using the strengths of HSN for program production,
but then it switched operations to a small production studio in Tokyo. Since this was a completely
new business model in Japan, it started with a small, low-risk investment, rather than using its own
facilities. This turned out to be a successful strategy.
Delegation of authority and responsibility: Jupiter carefully cultivated the systems and
business model of the U.S., but the joint company operates as an independent entity, with authority
regarding products and marketing left up to the Japanese side. This clear delegation of responsibilities
was also a secret of Jupiter’s success. According to Steve Hoffman, Jupiter’s COO, “Long-term
success depends on recognizing the importance of excellent employees.” Liberty and HSN only
involve themselves with strategic decisions at quarterly board meetings. Day-to-day operations are
left up to the Japanese office.
Market-Entry Issues
Since Jupiter was introducing television shopping systems that did not yet exist in Japan, it
46
carefully considered how it would deploy. It selected partners carefully and started at a low-risk level.
To purchase unique products, its Japanese buyers generally purchase directly from manufacturers.
Intermediary distribution still follows conventional Japanese trade practices, which can hinder market
entry. By interacting directly, the company minimized the influence of business practices followed by
wholesalers and other intermediary distributors.
47
f.
autobytel Japan K.K.
Corporate Overview
Autobytel Japan K.K. uses the Internet to serve as an intermediary for new automobile
sales. It is the only company with an organization of new car dealers transcending the traditional
manufacturer groups. Autobytel provides consumers with a wide range of information about new and
used cars, insurance and aftercare service. The company has organized an e-mail membership
organization (AUTOC) with 170,000 members who are especially interested in automobile purchases.
History and Form of Entry
Ever since it was established in the U.S. in 1994, autobytel.com has been successfully using
the Internet to act as an intermediary for automobile sales. The Japanese arm, autobytel Japan, was
formed as an office in June 1999, following current president Yoshikuni Kato’s visit to the U.S. head
office in the summer of 1998.
Autobytel searched for a joint venture partner with financial power and a history of
innovative expansion, as opposed to a partner that would simply provide capital. Although autobytel
Japan customized its business model for Japan, many parts of its website were based on the American
model.
Following the bursting of the Internet bubble, however, many people in Japan resisted the
idea of the Internet as a platform for intermediaries. Automobile distribution groups in Japan are
conventionally centered on the sales subsidiaries of the manufacturers, a practice that made it difficult
for autobytel Japan to attract member corporations.
But since Japan had no business model for an Internet company operating between users
and all dealers, and since automobiles are a large, core industry, the company found a niche. Even
today, however, the market has considerable barriers, so autobytel Japan continues to evolve through
trial and error.
Target Market
The company’s target market is consumers who are willing to purchase automobiles over
the Internet. Eighty percent of AUTOC’s members are men in their 30s or 40s, are interested in
purchasing cars, are active consumers, and have families. The majority of the members have an
annual income of at least ¥5 million (nearly US$50,000).
Business Model
Autobytel follows a platform model, connecting consumers with dealers for the purchase of
new automobiles. Although autobytel Japan started as a a joint venture with Japanese corporations
and retains automobile sales as its base, it has joined up with other partners as it enters other new
businesses. Kato is the top shareholder as the result of a management buyout. Other major
48
shareholders include automobile distributors Apple International Co., Ltd. and VT Holdings Co., Ltd.,
as well as Itochu Corporation (an original shareholder), transcosmos Inc, GE Capital Corporation and
Autobytel Inc.
The company has accelerated dealer support services through Internet marketing. As for
businesses other than new automobiles (used cars, insurance, etc.), autobytel Japan decided to stop
handling these businesses in-house and began outsourcing to the largest player in each industry. This
has enabled the company to continue focusing on new cars. As a result, autobytel Japan is the first
company in Japan to organize independent dealers for new car sales that are officially recognized by
auto manufacturers. The company’s network has grown to approximately 540 members, covering
almost all domestic and imported brands. Users registered on the company’s e-mail list total 170,000.
Autobytel has constructed a three-level model for fees from dealers. The first level includes
user introductions, application service provider (ASP) system usage and memberships; the second
level covers sales promotion and computer/mobile direct mailings; and the third level covers website
advertising space. Since autobytel Japan wishes to remain completely neutral as an intermediary
between users and dealers, it is focusing on Web marketing measures and generating more requests
for estimates.
Key Points of Success
Original system: Web-based intermediary system for new auto sales developed by the U.S.
parent.
Global system: Autobytel Inc., the parent, delegates authority for operations to the Japanese
side and simply receives reports without adding its own input, as in the case of other countries. The
business model, although it has a good niche in the U.S. market, does not necessarily work without
modification in other markets, such as Japan, where business practices are different. Even though the
core model is basically universal, operational details — such as methods of associating with dealers
and supporting consumers — are almost 100% localized for Japanese practices.
Flexible organization to overcome barriers: After five years of hard work, the company has
overcome the domination of well-established automotive business groups to create its own network of
dealers.
Market-Entry Issues
The increased accessibility of broadband services in Japan opened up opportunities for an
intermediary company to handle new car sales via the Internet, a niche in which autobytel Japan has
flourished. But because distribution control was firmly in the hands of the automobile manufacturers,
the company has had to work long and hard to explain the system to dealers and encourage them to
join its sales network.
49
g.
eBay Japan K.K. (Withdrawal Case Study)
Corporate Overview
The American company eBay Inc., the creator of Internet auctions, established a
consumer-to-consumer (C2C) business model that has enjoyed tremendous success. In FY2003, it
reported sales of US$2.17 billion, up 78% from the previous year. The company established a wholly
owned Japanese subsidiary, eBay Japan K.K., in 1999, but subsequently withdrew from the market in
2002.
History and Form of Entry
After eBay Japan was established, it selected NEC’s Biglobe Internet service provider as its
partner. The company reasoned that Biglobe gave it instant access to 2.85 million users and
know-how concerning the local content business. The strategy was to focus on C2C electronic
commerce.
Target Market
All Internet users.
Business Model
EBay used a platform model to provide reliable C2C transactions in which consumers used
the eBay site to sell used items by auction. The company received a commission when items were
listed and another commission if a transaction was made.
Background of Withdrawal
Four months before eBay began services in Japan, Yahoo Japan Corporation beat it to the
punch by launching its own auction site. What’s more, the service was free. Although eBay’s system
was seen by consumers to be trustworthy, the company failed to attract customers because it strictly
adhered to the fee-based model it had been using in the United States. It also limited advertising and
publicity, since the American head office preferred passive advertising because of its previous success
in the U.S. of expanding membership through word of mouth. The American head office insisted on
the same low-cost operation in its Japanese office. Ironically, as Yahoo’s auction service was
switching to a fee-based system, eBay Japan attempted to switch to a free service in April 2001. But
performance lagged and the company withdrew from the Japanese market. The Japanese site ended up
registering only 25,000 items for auction.
According to the first president of eBay Japan, Merle Aiko Okawara, “eBay’s basic strategy
for expanding internationally is either to be the first participant, or to purchase the corporation with
the top share. In Japan, however, Yahoo was already the top player, so neither strategy applied. The
brand power of eBay was overestimated, and it was unable to introduce services in Japan as fast as it
50
had in the United States. Although it considered purchasing another company in the field, it could not
find an appropriate target.”11
Issues for Entry into the Japanese Market
Although this is not a problem unique to Japan, Internet businesses in particular cannot
improve business performance without attracting customers, regardless of the excellence of the
business model. It is necessary to carefully consider the positioning of one’s company when entering
the market, and to quickly execute painstakingly thorough strategies that differentiate one’s company
from the competitors.
11
Nikkei Net Business, June 10th, 2001.
51
V. Market-Entry Recommendations
A.
Promising Fields
Catalog mail-order is expected to expand gradually, with the fastest growth seen among
companies handling highly specialized products and those using 24-hour television and the Internet.
Since business is affected by the practices and laws applying to specific fields and products, the
factors determining success can vary.
B.
Key Points
Succesful entry into the Japanese market requires an objective understanding of current
conditions and careful positioning of one’s company. It is also necessary to assess your consumer
segment in relation to your strong points and what you can provide these consumers. Figure 26 shows
the positioning of major corporations.
1.
Quality, Packaging and Price
Product quality, packaging and pricing must be studied carefully before entering the market.
Japanese consumers have little social stratification, so they are not attracted to low-priced products as
much as consumers in other developed countries. Even if the price is high, they tend to give
meticulous priority to factors such as quality and packaging. There must be no flaws in the package or
container, because even a scratched container can diminish the product’s value in the eyes of Japanese
consumers. Although efforts to upgrade packaging for the Japanese market can be costly, mail-order
companies place great emphasis on this aspect.
It is true, however, that low prices can be more important than quality or design in certain
fields, so the situation must be examined closely.
2.
Product Uniqueness and Channel Selection
Since neighborhoods are filled with shops offering wide varieties of products, mail-order companies
typically focus on products that cannot be found in shops. It is important for mail-order products not
to be available elsewhere, because unless the products are unique, it is difficult to convince consumers
to use mail order instead of visiting a nearby store. Moreover, the Japanese market has become quite
internationalized, so products are no longer considered unique simply because they originate
overseas.
An effective marketing channel can help to call attention to products. To increase customer
response, the channels should be suited to the target consumer. Mail-order corporations are now
diversifying their marketing channels to generate a synergistic effect for increased sales. Examples
include corporations that have combined catalogs with the Internet, television with newspaper flyers,
52
and catalogs with stores.
Japanese consumers generally are responsive to information and trust the mass media.
When companies are mentioned by the mass media, they often experience a boom in orders.
Conversely, negative press can sharply reduce orders.
Innovative or unrivaled customer services, such as unconditional returns, name
embroidering, etc., can be important factors in motivating consumers and building trustworthy
relationships with them.
Fig.
21
Major Corporations in Mail Order Industry
Television
Jupiter Shop Channel
Catalogs
and Flyers
Oisix
Lands’ End
Japan, etc.
DHC,
etc.
JTB
Dell
Shopping Malls
(Rakuten Ichiba)
YAHOO! Japan
autobytel
Japan
(Intermediary)
Rakuten Xing,
Dwango,
Travel
etc.
Amazon.co.jp
Source: Compiled from surveys by JTM Saison Life Research Institute and other reports.
53
Content
Travel
Automobiles
Books and
CDs
General
Merchandise
Clothing
Cosmetics
Health
Food
Food
Stores
Personal
Computers
Bic Camera,
Yodobashi
Camera, etc.
Electric
Appliances
Internet
and
Mobile
Phones
OttoSumisho,
Senshukai,
Cecile,
Mutow,
Belluna, etc.
Japanet
Takata
3.
Data Analysis and List Creation
The operation of a successful mail-order business requires the means for repeated analysis
of the market, much more so than ordinary retail businesses. This includes capabilities to quickly
process and analyze large amounts of market data and then apply the findings as the business evolves.
Compared with other retailers, mail-order businesses generally develop their marketing strategies in
more systematic fashions. For example, successful mail-order companies carefully analyze data for
each customer segment and strictly adhere to the scientific process of hypothesis, implementation,
verification and then new hypothesis. These companies also advertise aggressively and place a
priority on providing customers with the right products at the right time.
To implement this kind of data testing and analysis, customer lists are absolutely essential,
although they require time and cost to create. In terms of simplicity, television mail order reaches a
very wide audience and thus makes it relatively easier than other methods to build customer lists.
4.
Understanding Business Practices
Although business practices in Japan are gradually approaching global standards, unique
methods still remain. The emphasis in Japanese business is still human relationships and trust. This is
why, for example, if conditions change unforeseeably, partners might be asked to “voluntarily” adjust
the terms of the relationship in a flexible manner.
In the case of the mail-order industry, niche products are often purchased directly from the
manufacturer, or jointly developed with a manufacturer. This is why conventional business practices
often have less of an effect than they do in the case of shop-based retailers. However, a product with a
particularly strong brand might require a warehouse, wholesaler or distributor to act as intermediary,
obliging the mail-order company to follow the intermediary’s established business practices. Also, as
was seen in the case of television mail order in the U.S., the industry still suffers from the deeply
entrenched image of selling lower-quality products and not being trustable.
Once a business relationship has been established in Japan, it often can be maintained for a
long period of time, which promotes stable business. It is crucial to understand that profit should be
view in terms of mutual, long-term benefit rather than quick, short-term gain.
5.
Outsourcing Collections, Distribution, Delivery, Etc.
Many Japanese mail-order companies seek to raise their efficiency by outsourcing sales
activities, such as receipt of orders, delivery of goods and collection of payment. Although a
comparatively small number of companies outsource the taking of orders itself, outsourced call
centers have become increasingly important. Real estate, gasoline, road transport and other
distribution costs are high in Japan, and it is difficult to distribute via large vehicles due to urban
density, so companies generally outsource to specialized contractors with advanced home-delivery
54
systems. Some companies offer enhanced delivery services, such as home delivery of refrigerated
goods, the specification of time for delivery, COD payments and order tracking. Also, some
companies allow customers to pick up and pay for products at convenience stores and train stations,.
In summary, there is no need for a mail-order company to possess its own means for
delivering merchandise to customers, since warehousing and delivery can be easily outsourced in
Japan. Moreover, most mail-order companies outsource the collection of payments.
6.
Consumer Preferences Regarding Payments
In general, Japanese consumers prefer to make cash payments. Although a key benefit of
mail order is the ability to shop without having to visit a store, many Japanese consumers prefer to
select products and place orders at home, but to make actual payment in person. This is because many
people feel apprehensive about payments being made to places they cannot see. In spite of the fact
that many Japanese consumers possess credit cards, not many use their cards to pay for mail-order
purchases. COD payments and money transfers at post offices are common, but convenience store
money transfers, which began in 2000, are expected to increase.
When viewed in terms of gender and age, the bulk of mail-order users are middle-aged and
older women who tend to place orders over the telephone and pay by postal transfer. Young
consumers use the Internet every day, so they generally does not resist the idea of placing orders over
the Internet and paying by credit card. Male customers, who are also on the rise, tend to use online
mail order and payment by credit card, as well as COD and convenience store.
Mail-order companies must thoroughly understand how their particular customers prefer to
make payments, or run the risk of losing them to a competitor.
7.
Partner Selection
Another key to a successful entry is selecting a partner that can coordinate the business and
handle matters such as the formation of relationships with business associates. The partner should also
be familiar with international sales and be able to advise when problems occur with business
associates or consumers.
a.
Entry Methods and Partner Selection
There are three different types of market entry: 1) wholly owned subsidiary, 2) joint venture
company and 3) business alliance. Regardless of the method used, experienced personnel are
necessary in areas including 1) proprietary systems for mail-order channels, 2) marketing and data
analysis, 3) product merchandising and 4) maintaining flexible customer support.
In particular, foreign mail-order companies that need to procure merchandise in Japan must
select a partner company that is very familiar with the Japanese market and possesses superior buying
55
skills. Possible partners include 1) wholesalers and distributors that deal with a large number of
retailers and possess superior distribution capabilities, 2) general traders that possess strong financial
muscle, an international network, know-how in areas such as importing, a wide range of domestic
business connections (retail contacts) and extensive experience with downstream retail, and 3)
retailers that understand consumer preferences, offer a wide range of goods and provide superior
service.
b.
Importance of Globalization
Many foreign mail-order companies have delegated substantial authority to their Japanese
operations. They also give priority to creating management systems that can deal flexibly with key
issues, such as product procurement/development and the establishment of systems appropriate for the
Japanese market.
If a company has a strong style of leadership in its home country and initially attempts to
apply this model in Japan, if business goes poorly it should be prepared to adapt flexibly to local
needs. Many successful joint ventures have leveraged each partner’s expertise, with the parent only
providing input with respect to major strategies. Developing managers with a deep understanding of
the mail-order business and then delegating them the necessary authority is crucial.
8.
Labor Customs and Employment Cost Issues
Although Japan has an abundance of highly experienced and talented people, the high cost
of labor can be a problem. Japan’s aging population is placing a heavy burden on the nation’s
employers, because age-based salaries and the concept of lifetime employment are still deeply
entrenched, and increasingly more people are entering the jobs market with degrees in higher
education.
But due to an ongoing diversification of working styles, increasingly more young Japanese
workers are not adhering to traditional practices such as lifetime employment. Moreover, Japan has an
abundance of excellent part-time employees, including highly skilled and educated housewives.
Companies that are serious about the quality of their customer service usually put
employees through about two full weeks of training before they are allowed to interface with
customers.
9.
Regulations and Systems
Mail order sales are governed by the Specified Commercial Transactions Law, which
stipulates obligations such as the provision of certain kinds of information to consumers. The Law
Concerning Special Provisions in Civil Code on Electronic Consumer Contracts, Electronics Consent
and Notification also applies, as does the Consumer Contract Act. When selling or importing
56
pharmaceuticals, food, cosmetics or similar merchandise, the Pharmaceutical Affairs Law, Food
Sanitation Law and other such laws apply. The government bodies administering these laws are
available for advice and consultation. JETRO, industry groups and other organizations in a variety of
fields can also provide a wealth of helpful information.
C.
Recommendations, by Business Category
1. General Product Lines
Mail-order companies with general product lines are currently fighting a tough battle
because of their lack of focus on specific markets and products. Compared to more general retailers,
such as department stores and other shops, mail-order businesses are more dependent on targeting
specific customer segments with specialized products sold through carefully selected channels. The
creation of customer lists offering maximum potential for catalog and other mail-order sales, except
television, is another crucial task.
2. Specialized Product Lines
If the product lineup is specialized, customers often respond if the company can present
attractive products. But this first requires accurate identification of the company’s target consumer
segment and the best channel(s) for reaching them.
3. Catalogs
The Act for the Protection of Personal Data was fully enforced in the spring of 2005,
making it more difficult to obtain and use customer lists. The creation of a good customer list has
always been a major challenge, and the new law now places additional requirements on prospective
mail-order companies. This is why either buying an existing company or teaming up with a local
partner is often the most practical way to enter the market.
4. Television
Television mail-order sales are growing, although much of this is due to top-ranking
corporations. When entering the market, newcomers need to have exceptionally competitive systems
of their own, as well as very attractive products. Furthermore, rapid deployment is crucial in
television mail order, so many companies choose to own their own studio or call center, which
requires a large initial investment. In this sector as well, it is important to position your company
carefully and accurately evaluate your financial capabilities, the strength of your products, the
effectiveness of your system, and so on.
57
5. Internet
Internet mail order is another sector of the market that is expanding fast, especially for large
firms that have begun to use the Internet as an alternative to existing catalogs, flyers and stores. At the
same time, the Internet presents users with new options due to the convenience it offers in searching
for and ordering products. But because this sector is so easy to enter, only a few corporations are
profitable. Excessive competition makes success very difficult for newcomers without their own
products and business models. In this sector as well, market entry is often best accomplished by
acquiring an existing firm or entering into an alliance with a local partner.
58
59
97,715
Nissen
Belluna
3
2
4
5
38,492
339,133
Fancl
Felissimo
Mutow
Mitsukoshi
Catalog
House
Orbis
Kaunet
9
11
12
14
16
19
20
0.4
32.9
21.7
- 2.6
- 7.5
0.0
-
- 6.1
- 7.1
0.0
6.0
6.3
40,000
37,000
32,500
38,500
48,000
-
72,000
102,600
101,000
108,500
149,000
149,680
(¥ million)
39.4
17.6
- 4.2
0.0
8.0
-
8.3
7.0
3.4
9.6
8.8
2.9
(%)
3
12
3
2
3
2
3
12
7
3
12
12
Last Month of
Fiscal Year
Tokyo
Tokyo
Tokyo
Tokyo
Shizuoka
Hyogo
Kanagawa
Kagawa
Tokyo
Saitama
Kyoto
Osaka
Location of Head Office
2
Rankings are based on surveys by Tsuhan Shimbun.
Estimates by Tsuhan Shimbunsha.
3 Various channels, including TV & newspaper ads, and newspaper flyers.
1
Specialized/Catalog/General
Specialized/Catalog/General
Specialized/Catalog/General
Type of Business/Main Channel/Main Products
Specialized (BtoB)/Catalog/Office Products
Specialized/Mass Media & Catalog/Cosmetics & Health Food
Specialized/Catalog/General Merchandise
Side Business (Department Store)/Catalog & Television/General
Specialized/Catalog/General
Specialized/Catalog/General
Specialized/Mass Media& Catalog/Cosmetics & Health Food
Specialized/Catalog/General
Specialized/Mass Media2 & Catalog/Cosmetics & Health Food
Source: References 1 through 3 are compiled from “Tsuhan Shimbun” [Mail-order Newspaper],” August 12, 2004.
28,700
31,456
45,385
48,494
66,448
Cecille
95,863
136,926
6
DHC
98,991
Senshukai
1
145,410
Corporation
Rank1
Sales in FY2004
Annual
Projection
Change
Catalog Mail-Order Corporations
Reference 1.
Sales in FY2003
Annual
Actual
Change
Results
(¥ million)
(%)
Sales Rankings in FY2003
Reference Information
Appendix A.
VI.
60
Japanet
Takata
Fujisankei
Living
Service
Jupiter
Shop
Channel
Co., Ltd.
QVC
Japan3
Nihon
Bunka
Center
Prime
Corporation
165.3
26,000
17,339
- 31.5
- 15.9
41.2
39,006
19,100
9.7
13.0
63,744
70,548
Sales in FY2003
Annual
Actual
Change
Results
(¥ million)
(%)
13,680
-
-
-
64,823
-
(¥ million)
- 21.1
-
-
-
1.7
-
(%)
Sales in FY2004
Annual
Projection
Change
Television Mail-Order Corporations
Note: Rankings are based on surveys by Tsuhan Shimbun.
39
36
23
13
10
7
Rank1
Reference 2.
6
5
12
12
3
12
Last Month of
Fiscal Year
Aichi
Tokyo
Chiba
Tokyo
Tokyo
Nagasaki
Location of Head Office
Specialized/Television/General
Specialized/Television/General Merchandise
Specialized/Satellite & Cable TV/General
Specialized/Satellite & Cable TV/General
Specialized/Television & Catalog/General
Specialized/Television & Catalog/Electric Appliances
Type of Business/Main Channel/Main Products
61
Epson Direct
18
Murauchi
Tsutaya Online
Index
92
95
96
Xavel
152
2,550
3,000
3,331
4,336
4,583
4,700
5,271
5,273
5,414
211.0
50.0
30.1
167.6
25.2
8.0
278.1
17.4
54.1
-28.2
-
2.8
12.5
-
45.0
- 7.0
71.0
Annual
Change
(%)
5000
-
-
6827
-
-
8857
-
6380
-
6500
-
-
-
-
-
-
(¥ million)
Projection
Note: Rankings are based on surveys by Tsuhan Shimbun.
Laox3
133
129
109
106
Kinokuniya
Book Store
e-Shopping!
Books
Webprice
Toysrus.com
(Japan)
5,588
Sotec3
90
104
6,460
Unitcom
81
8,946
Sofmap
63
13,500
22,000
23,200
Sony Style Dot
Com & Japan3
Entertainment
Plus
Yodobashi
Camera*3
33,000
34,200
Actual
Results
(¥ million)
47
28
27
Amazon
K.K.3
15
Japan
Corporation
Internet Mail-Order Corporations
Rank1
Reference 3.
96.1
-
-
57.4
-
-
68.0
-
17.8
-
0.6
-
-
-
-
-
-
Annual
Change
(%)
9
3
1
9
3
8
8
3
3
3
3
2
3
3
3
3
12
Last Month of
Fiscal Year
Tokyo
Tokyo
Kanagawa
Tokyo
Tokyo
Tokyo
Tokyo
Tokyo
Tokyo
Kanagawa
Tokyo
Tokyo
Tokyo
Tokyo
Tokyo
Nagano
Tokyo
Location of Head Office
Specialized/Mobile Telephone/Clothing & General Merchandise &
Beauty-Related
Side Business (Mass Merchandiser)/Web/Electric Appliances
Specialized/Web/Toys
Specialized/Web/General Merchandise & Beauty-Related
Specialized/Web/Books
Side Business (Retailer)/Web/Books
Side Business (Communications)/Mobile Telephone/Fashion &
General Merchandise
Specialized/Web/CDs & DVDs
Side Business (Mass Merchandiser)/Web/Electric Appliances
Side Business (Manufacturer)/Web/PCs
Specialized/Web/PCs
Side Business (Specialty Store)/Web/Electric Appliances
Specialized/Web/PCs & Electric Appliances
Side Business (Mass Merchandiser)/Web/Electric Appliances
Specialized/Web/Tickets
Specialized/Magazines & Web/PCs
Specialized/Web/Books & Music
Type of Business /Main Channel/Main Products
62
Trade Shows, Exhibitions and Organizations
Tel:
E-mai:
URL:
b. Retailtech Japan
Sponsor:
When:
Location:
Exhibitors:
Contact:
Nihon Keizai Shimbun, Inc.
March (annually)
Tokyo/ Tokyo International Exhibition Center (Tokyo Big Sight)
Approximately 230
RETAILTECH JAPAN Head Office
1-9-5 Otemachi, Chiyoda-ku, Tokyo, Japan 100-8066
03-5255-2847
[email protected]
http://www.shopbiz.jp/contents/RT_E/1_051.phtml
a. Direct Marketing Fair
Nihon Ryutsu Sangyo Shimbunsha K.K.
Sponsor:
When:
November (annually)
Location:
Tokyo/Tokyo International Exhibition Center (Tokyo Big Sight)
Exhibitors:
Approximately 110
Contact:
Nihon Ryutsu Sangyo Shimbunsha K.K. (Japan Distribution Industry
Newspaper Co)
Kabutomachi 11-11, Nisshin 2nd Floor, Nihonbashi, Chuo-ku, Tokyo,
Japan 103-0026
Tel:
03-3661-5898
E-mail:
[email protected]
URL:
http://www.bci.co.jp/dm2004/
1. Trade Shows and Exhibitions
Appendix B.
d. IC Card World
Sponsor: Nihon Keizai Shimbun, Inc.
When: March (annually)
Location:
Tokyo/ Tokyo International Exhibition Center (Tokyo Big Sight)
Exhibitors:
70
Contact:
IC CARD WORLD Head Office, Nihon Keizai Shimbun, Inc.
Tel:
03-5255-2847
E-mail:
[email protected]
URL:
http://www.shopbiz.jp/pages/t_index_e.phtml?PID=0004&TCD=IC
c. Tokyo Business Summit
Sponsor:
Nihon Keizai Shimbun, Inc.
When:
November (annually)
Location:
Tokyo/ Tokyo International Exhibition Center (Tokyo Big Sight)
Exhibitors:
350
Contact:
Tokyo Business & Summit Operations Office, Venture Link Co., Ltd.
1-13, Kotobuki 2-chome, Taito-ku, Tokyo, Japan 111-8608
Tel:
03-5827-7343 / FAX: 03-5827-7360
E-mail:
[email protected]
URL:
http://www.business-summit.jp/
63
Name
Name
Nishi-Shimbashi 2-8-6, Minato-ku, Tokyo
8F Fujisumi Bldg., Edobori 2-2-1, Osaka-shi, Osaka-fu
13F Shinagawa Center Bldg., Takanawa 3-23-17, Minato-ku, Tokyo
Twoway System Inc.
Bellsystem 24, Inc.
Location/Telephone
Shinsuna 2-1-1, Koutou-ku, Tokyo
Sotokanda 3-12-9, Chiyoda-ku, Tokyo
Ginza 2-16-10, Chuo-ku, Tokyo
Location/Telephone
2F Libra Bldg., 3-2 Nihonbashi, Kobunacho, Chuo-ku, Tokyo
Tel: 03-5651-1155
1F KRT Aoyama Bldg., Kita-Aoyama 2-12-5, Minato-ku, Tokyo
2-12-5 Tel: 03-3401-4021
3F Kikai Sinko Kaikan Bldg., 3-5-8 Shibakoen, Minato-ku,
Tokyo 105-0011 Tel: 03-3436-7500
Location/Telephone
NTT Solco Corporation
Name
d. Telemarketing Corporations
Sagawa Co., Ltd.
Nippon Express Co., Ltd.
Yamato Transport Co., Ltd.
Name
Location/Telephone
Kasumigaseki 1-3-1, Chiyoda-ku, Tokyo
Tel: 03-3501-1511
Kasumigaseki 2-1-2, Chiyoda-ku, Tokyo
Tel: 03-5253-5709
Kasumigaseki 1-1-1, Chiyoda-ku, Tokyo
Tel: 03-3581-5471
c. Transportation and Distribution System Corporations
Electronic Commerce Promotion Council of
Japan (ECOM)
Shop System Study Society
Japan Direct Marketing Association (JADMA)
b. Industry Groups
Fair Trade Commission of Japan
Information and Communications Policy Bureau,
Ministry of Internal Affairs and Communications
Ministry of Economy, Trade and Industry
a. Ministries
2. Organizations
http://www.bell24.co.jp
http://www.twoway-system.co.jp
http://www.solco.co.jp
URL
http://www.sagawa-exp.co.jp
http://www.nittsu.co.jp
http://www.kuronekoyamato.co.jp
URL
http://www.ecom.or.jp/index.html
http://www.ssss.or.jp
http://www.jadma.org
URL
http://www.jftc.go.jp/
http://www.soumu.go.jp/joho_tsusin/joho
_tsusin.html
http://www.meti.go.jp/
URL
Procedures for Investing in Japan
I. Summary and Procedures for Establishing a Base in Japan
Figure 1 shows the steps a company must take to establish a base in Japan, from the initial
planning stage to the actual establishment of a company. It focuses in detail on the procedures for
establishing a company.
More information on each of the necessary procedures (such as documents to be submitted and
where to submit them) can be obtained by consulting with a specialist, contacting the appropriate
authorities listed in Section II, or checking JETRO publications and the “Investing in Japan” page on
the JETRO Web site <http://www.jetro.go.jp/investjapan/index.html>.
A. Establishing a Base in Japan
1. Start-up Types
Table 1 shows each start-up type and the associated requirements. Generally, foreign
companies use one of three business structures when establishing a base in Japan: a joint-stock
company (kabushiki gaisha), a limited liability company (yugen gaisha), or a branch (shiten) of the
parent company.
Of these three, the joint-stock company is most often chosen because of the limited
liability to investors, the higher credibility in society, and the advantages in financing, but it also
requires a minimum capitalization of ¥10 million. Thus, small-to-medium-size enterprises
sometimes choose to establish a limited liability company, with a minimum capital requirement of
¥3 million, or even a branch office, which does not have a minimum capital requirement (see the
next section for exceptions to the minimum capitalization requirements).
There are two ways to create a joint-stock company: promotive incorporation (hokki
setsuritsu), in which the promoters of the company hold all the issued shares, and subscriptive
incorporation (boshu setsuritsu), in which a public offer is made to attract outside investors. Each
method has its own procedures and documents to be submitted. Figure 1 covers only promotive
incorporation as it is more common for foreign businesses directly investing in Japan.
64
Table 1. Start-up Types and Requirements
Start-up type
Representative
office
Branch
Business
activity
Minimum
Registration
capital
requirement
Internal
Directors
auditors
required
required
Not allowed
No
None
No
No
Allowed
Required
None
No
No
Overseas
remittance
－
No tax is
imposed
Taxed at the
Joint-stock
company
source on
Allowed
Required
¥10 million
At least three
At least one
profits,
dividends, and
royalties
Limited liability
company
Allowed
Required
¥3 million
At least one
No
Same as above
2. Exceptions to the Minimum Capital Requirements
As an exceptional measure for minimum capital requirements, the government revised a
portion of the Law for Facilitating the Creation of New Business on 1 February 2003 and practically
abolished the regulations of minimum capital requirements under certain conditions
<http://www.meti.go.jp/english/information/data/cMinimumCapitale.html>.
Both a joint-stock company and a limited liability company can be established with
capitalization of more than ¥1 under the following conditions: (1) The company must first prepare
and get certified the articles of incorporation, after which it must get the approval of the Bureau of
Economy, Trade, and Industry located in the area where the company will be established, (2) if the
company cannot fulfill the minimum capital requirements within five years of incorporation, the
company status will be changed or the company liquidated, (3) corporate dividends are not allowed
while the company has not fulfilled the minimum capital requirements, (4) the company must make
its financial status available to the public. The most important point to keep in mind is that the
company must fulfill the minimum capital requirements (¥10 million for a joint-stock company and
¥3 million for a limited liability company) within five years of incorporation.
Since this law expires on March 31, 2008, the company must get approval from the Bureau
of Economy, Trade, and Industry before this date. This law is under the jurisdiction of Office for
New Business, Economic and Industrial Policy Bureau, Ministry of Economy, Trade, and Industry.
3. Important Points Concerning Incorporation
Since the company registration and residency application processes are very complicated
and require specialized knowledge, foreign companies investing in Japan normally hire Japanese
specialists (such as lawyers or public accountants) who can do business in English.1 It should be
1 For contact information of qualified specialists and support services, see “Directory for Doing Business in Japan”
on JETRO’s “Investing in Japan” Web site <http://www.investjapan.org>.
65
noted that in Japan there are very few joint legal and accounting practices that can provide one-stop
service, and that some work may be subcontracted to other qualified specialists that do not exist in
Europe or North America, such as judicial scriveners and administrative scriveners.
When a company registration is filed at a registry office, a Certificate of Seal Registration for a
representative director is required. Promoters or representative directors of a joint-stock company
who are not Japanese and do not have an alien registration certificate will not be able to obtain a
Certificate of Seal Registration, and in this case documents may be endorsed with a signature instead.
However, each time a signature is used it must be notarized by a notary public of the home country
of the non-Japanese promoter or representative director.
B. Investment-Related Laws and Regulations
Major investment-related laws and regulations include the Foreign Exchange and Foreign
Trade Control Law, the Commercial Code (Corporate Law), and the Antimonopoly Act. There are
also regulations under the Labour Law and the Intellectual Property Rights Law that apply to starting
and running a business in Japan. Depending on the type of business, it may also be necessary to
obtain a license or approval from a competent authority in accordance with applicable laws and
regulations.
1. Foreign Exchange and Foreign Trade Control Law (The Foreign Exchange Law)
The Foreign Exchange and Foreign Trade Control Law stipulates rules for proper
management of foreign trade based on the principle of freedom of foreign trade. When a foreign
company directly invests in Japan, it must follow the procedures for “ex post facto notification in
principle, prior permission or notification in part” based on this law.
2. Commercial Code (Corporate Law)
The Commercial Code (Corporate Law) in Japan defines three types of companies,
excluding the limited liability company (yugen gaisha).2 In recent years, many revisions and
modifications have been made to the law to promote more flexible restructuring of companies.
Specifically, these have included simplification and rationalization of M&A laws and regulations,
introduction of legislation on stock-swap and stock-transfer systems, establishment of legislation on
company split-offs, revision of Corporate Reorganization Law, and the adoption of a system
complying with internationally accepted accounting standards.
3. The Act Concerning Prohibition of Private Monopolization and Maintenance of Fair Trade
(Antimonopoly Act)
2
Rules and regulations related to limited liability companies (yugen gaisha) are stipulated in the Limited Liability
Company Law (Yugen Gaisha Hou).
66
The Antimonopoly Act promotes free and fair competition by restricting private monopoly
and unfair trade. In recent years, however, deregulation is underway that essentially lifts the ban on
establishing holding companies and simplifies the M&A reporting system, among other things.
C. Preferential Treatment for Investment in Japan
1. Law on Extraordinary Measures Related to the Promotion of Imports and the Facilitation of
Inward Investment Activities (Import and Inward Investment Promotion Law, FAZ Law)
Foreign companies that invest in the areas designated as Foreign Access Zones (FAZ) and
can also meet the requirements for specific investors in Japan can receive the following preferential
treatment. The effective period of this law has been extended to May 2006.
(1) Although the carry-forward period of operating losses is usually five years from the start of
business, this law allows investors to carry forward losses up to seven years.
(2) The Organization for Small & Medium Enterprises and Regional Innovation, JAPAN (SMRJ)
guarantees loans for capital investment and working capital for businesses.
(3) When a small- or medium-size foreign private company obtains loans, the Japan Small and
Medium Enterprise Corporation (JASMEC) guarantees the loans.
(4) The Development Bank of Japan (DBJ) and the Japan Finance Corporation for Small and
Medium Enterprise (JASME) offer low-interest loans.
As of December 2004, there are 22 areas designated as FAZs. For further information on
each FAZ, see the JETRO Web site <http://www.jetro.go.jp/en/jetro/activities/region/faz>.
2. Low-Interest Loans from the Development Bank of Japan (DBJ)
The DBJ offers low-interest, long-term loans to foreign companies making serious
investment in Japan for the first time, or to those whose investment is expected to contribute to
advances in Japan’s industrial structure, create new industries, or increase employment.3
3. Subsidies, Tax Exemptions, and Low-Interest Loans from Prefectural Governments
Prefectural governments also offer various forms of support to foreign businesses
investing in Japan. The type and degree of support differs between prefectures. Interested companies
can obtain more information by contacting each prefecture directly, reading the Regional
Information on JETRO’s Web site <http://www.jetro.go.jp/en/invest/region>, or visiting a local
JETRO Trade Information Center. See <http://www.jetro.go.jp/en/jetro/network> for information on
JETRO Trade Information Centers.
3
To inquire about the DBJ’s low-interest loan program, see the Development Bank of Japan in Section II-A for
contact information.
67
Figure 1. Procedures for Setting Up a Base in Japan
Temporary office
premises
Securing an office (contract)
Incorporation of company
( promotive incorporation of a joint-stock company )
Search for similar corporate names
Checking requirements to obtain
governmental permits, etc.
Selection of
representative to
be based in Japan
Checking if a prior notification
required under the Foreign
Exchange Law is required
Preparation of the articles of
incorporation
Notarization of the
articles of
incorporation
Notary
Public
Securing staff
Entry into Japan
on a short-term
stay visa
Studying matters related to
incorporation
Prior notification
under the Foreign
Exchange Law
(if required)
The Bank
of Japan
Subscription by the promoter(s) of all the shares
Consummation of
contribution in kind
Payment of
subscription money
Election of directors and
statutory auditors
Board of directors
Investigation by the directors and statutory auditors
Legal Affairs
Bureau
Competent
authorities
Temporary
housing
(hotel or weekly
apartment)
Registration of incorporation
Filing of required
documents
status options
The Bank
of Japan
Securing a residence (contract)
Obtaining a visa
Research of visa
Reporting under
the Foreign
Exchange Law
Re-entry permit
Certificate of eligibility
for status of residence
Obtain
a visa
Alien registration
Note 1: Application for certificate of eligibility for status of residence and opening of a bank account should be made after establishing an office
and a residence (i.e. after signing lease contracts for an office or residence).
Note 2: For inquiries about incorporation procedures and visa applications, please refer to Section II of this reference.
Source: “Setting Up Enterprises in Japan” by JETRO (2003) and “The Japan Start-up Handbook: Procedures and Costs for Foreign
Companies Establishing a Japanese Base” by JETRO (1999)
68
69
12
11
Ministry of Land,
Infrastructure and
Transport
Ministry of the
Policy Bureau,
International Planning Division, International
Transport Policy Office
Environmental Policy Bureau, Environment
03-5521-8324 (direct)
03-5253-8313 (direct)
[email protected]
A. Governmental Offices for the Invest Japan Program
Organization
Division
Contact
1 Cabinet Office
Office of Foreign Direct Investment Promotion 03-3581-8950 (direct)
[email protected]
2 Financial Service
Planning and Coordination Bureau,
03-3506-6049 (direct)
Agency
International Affairs Division
[email protected]
3 Ministry of Internal
Minister’s Secretariat, Policy Planning
03-5253-5156 (direct)
Affairs and
Division
[email protected]
Communications
4 Ministry of Justice
Minister’s Secretariat, Secretarial Division
03-3580-4111 ext. 2087
[email protected]
5 Ministry of Foreign
Economic Affairs Bureau, Second International 03-3580-3311 ext. 5055
Affairs
Economic Affairs Division
[email protected]
6 Ministry of Finance
International Bureau, Research Division
03-3581-8015 (direct)
[email protected]
7 Ministry of Education, Minister’s Secretariat,
03-5253-4111 ext. 3472
Culture, Sports, Science Policy Division
[email protected]
and Technology
8 Ministry of Health,
Counsellor’s Office (Labour Policy) to
03-5253-1111 ext. 7718
Labour and Welfare
Director-General for Policy Planning and
[email protected]
Evaluation
9 Ministry of
General Food Policy Bureau, Food Industry
03-3502-8111 ext. 3222,3194
Agriculture, Forestry Policy Division
[email protected]
and Fishery
10 Ministry of Economy, The Invest Japan Office
03-3501-1774 (direct)
Trade and Industry
[email protected]
II. Sources of Information on Investment in Japan
http://www.env.go.jp/policy/invest_j (Japanese)
http://www.meti.go.jp/policy/investment (Japanese)
For English, please click “English page” of the above
URL.
http://www.mlit.go.jp/sogoseisaku/invest/index_.html
(Japanese)
http://www.maff.go.jp/sogo_shokuryo/toushi.htm
(Japanese)
http://www.mhlw.go.jp/general/seido/toukatsu/tousi/
(Japanese)
http://www.moj.go.jp/KANBOU/TAINICHI/tainichi0
1.html (Japanese)
http://www.mofa.go.jp/mofaj/gaiko/tn_toshi/madoguc
hi/ (Japanese)
http://www.mof.go.jp/invest_japan (Japanese)
http://www.mof.go.jp/invest_japan/index_e.htm (English)
http://www.mext.go.jp/a_menu/tainichi/main.htm
(Japanese)
Web site
http://www.investment-japan.net/jp/index.htm (Japanese)
http://www.investment-japan.net/index.htm (English)
http://www.fsa.go.jp/invest/20030603.html (Japanese)
http://www.fsa.go.jp/invest/20030603e.html (English)
http://www.soumu.go.jp/kyoutsuu/tainiti.html
(Japanese)
70
Development Bank of International Department, Center for the
Japan
Promotion of Direct Investment in Japan
03-3244-1770 (direct)
[email protected]
Environment
and Economy Division
[email protected]
Japan External Trade Invest Japan Business Support Center (IBSC)*1 03-3582 4685 (direct)
Organization (JETRO)
[email protected]
http://www.jetro.go.jp/invest/services/ibsc.html
(Japanese)
http://www.jetro.go.jp/en/invest/investmentservices/facility
.html (English)
http://www.dbj.go.jp (Japanese)
http://www.dbj.go.jp/english/index.html (English)
Same as above
The Organization for
Small & Medium
Enterprises and
Regional
5 Law on Extraordinary Measures for the
Promotion of Import and the Facilitation
of Foreign Direct Investment in Japan
(FAZ Law)
Balance of Payment
Division, International
Department
Commercial and
Corporation Registration
and Deposit Division,
Civil Affairs Bureau
Division
Regional Bureaus of
Economy, Trade and
Industry
Web site
http://www.jftc.go.jp/dokusen/index.htm
(Japanese)
http://www.meti.go.jp/policy/mincap/index.htm
l (Japanese)
http://www.meti.go.jp/english/information/data/
cMinimumCapitale.html (English)
[email protected]
http://www.meti.go.jp/policy/mincap/index.ht
(main)
ml (information on regional bureaus, in
Japanese)
03-3433-8811 (main) http://www.smrj.go.jp/keiei/saimu/law/000288.
[email protected] html
(main)
(Japanese)
03-3581-5471 (main)
03-3580-4111 (main) http://www.moj.go.jp/MINJI/index.html
[email protected] (Japanese)
(main)
03-3277-2107 (direct) http://www.boj.or.jp/about/tame/tameindex.htm
[email protected]
(Japanese)
Contact
Ministry of
Office for New Business, 03-3501-1569 (main)
Economy, Trade and Economic and Industrial
Industry
Policy Bureau
Japan Fair Trade
Commission
Ministry of Justice
Preferential Treatment for Investors in Japan
4 Law for Facilitating the Creation of New
Business, Law for Supporting for the
Challenge of SMEs (Chusho kigyou
Chosen Sien Hou)
Same as above
3 Antimonopoly Act
2 Commercial Code
B. Sources of Information in Investment in Japan
Information
Organization
Applicable Laws and Regulations
1 Foreign Exchange and Foreign Trade Law Bank of Japan
Note 1: JETRO IBSC provides comprehensive information on the administrative procedures for foreign companies looking to invest in a business in Japan.
14
13
71
8 Procedures after incorporation
- Notification of establishment of
corporation
- Notification of consumption tax payer
etc.
9 Filing of notifications related to the
corporation (within Tokyo’s 23 wards)
Filing of notifications related to the corporation
(outside of Tokyo’s 23 wards)
Procedures after Incorporation
Procedures for Incorporation
7 Procedures for Incorporation
- Registration of joint-stock company
- Obtaining a certified copy of company
registration
- Certificate of Seal Registration for a
representative director
- Notification of articles of incorporation
03-3270-1266
(General Affairs
Department)
[email protected]
(main)
http://www.tax.metro.tokyo.jp/jimusho
(a list of tax offices in Tokyo)
http://www.soumu.go.jp/czaisei/czaisei_seido/i
chiran07.html (a list of local tax offices in each
area is available, in Japanese)
- For information on city offices see the Web
Local Tax Office in
Tokyo
Local Tax Office or
City Office in the
relevant area
http://www.koshonin.gr.jp/address.htm
(a list of notary offices in each area is available,
in Japanese)
http://www.moj.go.jp/MINJI/minji10.html
(a list of Legal Affairs Bureaus in each area is
available, in Japanese)
http://www.dbj.go.jp (Japanese)
http://www.dbj.go.jp/english/index.html
(English)
http://www.meti.go.jp/network/data/b100001j.h
tml
(information on regional bureaus, in Japanese)
http://www.jasme.go.jp (Japanese)
http://www.jasme.go.jp/indexe.html
(English)
http://www.nta.go.jp/category/syoukai/syozaiti.
htm
(a list of tax offices in each area is available, in
Japanese)
International Department 03-3244-1900
(General Affairs
Department)
Regional Bureaus of
Economy, Trade and
Industry
Tax Office in the
relevant area*2
Notary Office in the
relevant area
Regional Legal
Affairs Bureau and
Registry Office in
the relevant area
Innovation, JAPAN
Ministry of
Economy, Trade and
Industry
Same as above
Japan Finance
Corporation for
Small and Medium
Enterprise
6 Special loan program for the promotion of Development Bank
direct investment in Japan
of Japan
Same as above
72
Town Page (Japan’s
telephone directory)
Japan External Trade
Organization (JETRO)
http://itp.ne.jp (Japanese)
http://english.itp.ne.jp/ (English)
http://www.jetro.go.jp/
http://www.sia.go.jp/seido/index.htm
(Web site on health insurance and social
security pension provided by the Social
Insurance Agency, in Japanese)
Same as above
Public Employment
Security Office in
the relevant area
Social Insurance
Office in the
relevant area
http://www.mhlw.go.jp/general/sosiki/chihou/
(a list of Labor Standards Bureaus in each area
is available, in Japanese)
03-3505-1854 (main)
[email protected]
(main)
site for the prefecture where the city is located
General Affairs Division, 03-5388-2927 (direct) http://www.tax.metro.tokyo.jp/oshirase/2003/20
General Affairs
0309a.htm (information in English, Chinese,
Department
and Korean on distribution of the 2003
guidebook)
Labor Standards
Bureau in the
relevant area
Bureau of Taxation,
Tokyo Metropolitan
Government
Note 2: Only the Tokyo Taxation Bureau has set up a dedicated counter for non-Japanese people. Telephone: 03-3821-9070.
Other Useful Sources of Information
14 Search for telephone numbers and
addresses
15 Information on investment in Japan
Procedures for Social Insurance
11 Procedures related to industrial insurance
- Business report
- Employment policy
- Labor insurance- related notifications
12 Notification of establishment of
relationship between an insurer and the
insured under the industrial insurance and
employment insurance system
- Notification of establishment of
relationship between an insurer and
the insured under the employment
insurance system
13 Procedures related to health insurance and
social security pension
10 Distribution of a free guidebook on
metropolitan taxes in English, Chinese, and
Korean (postage paid by the recipient)
III. JETRO Services
A. JETRO Invest Japan Business Support Center (IBSC)
JETRO IBSC provides foreign companies with information necessary for investment in Japan.
<http://www.jetro.go.jp/en/invest/investmentservices/facility.html>
IBSC provides office space free of charge to foreign companies, and the advisors and JETRO staff
provide useful information and consultation.
For further information or to submit an application, please contact the nearest JETRO office.
<http://www.jetro.go.jp/en/jetro/network>
1. Providing Office Space
IBSC has office space free of charge for foreigners hoping to enter the Japanese market or develop
business operations in Japan. The Center’s office space is equipped with all the tools necessary to
immediately launch business activities in Japan.
2. Consultation with Investment Advisors
IBSC has highly specialized resident advisors (market- and industry-specific advisors, and
corporate management advisors) who can help you with the market information and investment
consulting necessary to enter the market. Investment advisors are also available at some JETRO
overseas offices to provide information and consultation regarding direct investment in Japan to
potential investors.
3. Information on Government Forms and Procedures
Backed by the Japanese government, the IBSC serves as a centralized contact point for the
administrative procedures required of foreign companies looking to do business in Japan.
4. Introducing Support Companies and Arranging Visits to Potential Properties
IBSC can introduce agents, recruiting companies, real estate companies, and other companies that
can help foreign companies investing in Japan. Through its contacts with local governments, IBSC
also gathers information on real estate in specific regions, arranges visits to potential properties, and
sets up meetings with local government representatives.
B. Providing Information on Investment in Japan
1. The “Investing in Japan” Web Site
For foreign businesses interested in investing in Japan, The JETRO Web site ”Investing in Japan”
73
provides comprehensive information and data on Japan’s investment environment. This includes
macro economic data, related laws and regulations, and examples of foreign companies that have
been successful in establishing their business in Japan. <http://www.investjapan.org>
2. Publications
JETRO publishes many books that summarize laws and procedures concerning investment in
Japan.
For information on JETRO publications, see the JETRO Web page below.
<http://www.jnews.jetro.go.jp/en/index.html>
3. Seminars on Investment in Japan
JETRO organizes seminars and individual consultations in various countries to provide
information on a variety of themes, such as trends in the Japanese market, investment climate, and
laws and procedures concerning investment in Japan.
4. Library
At the JETRO Business Library, visitors can look through JETRO publications and trade and
investment-related information from other countries as well.
<http://www.jetro.go.jp/en/jetro/facilities/library>
74
List of Published Reports
JETRO Japanese Market Report series is designed to give an outline of the Japanese market and
thereby assist foreign companies in promoting the investment to Japan.
The following is a list of titles with publication dates of the market studies that have been conducted.
These reports are available on our website at <http://www.jetro.go.jp/en/market/reports/ >.
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
Building Stones and Ceramic Tiles (1997)
Metal Building Fixtures (1997)
Nonprescription (OTC) Drugs (1997)
Optical Communication Products (1997)
Knitted Articles (1997)
Generation-Related Equipment (1997)
Waste Water Treatment Equipment (1997)
Recycling Equipment (1997)
Nutritional Dietary Supplement Products (1997)
Seafood Products (1997)
Jewelry (1998)
Wooden Furniture (1998)
Automotive Parts and Accessories Focus on the Aftermarket (1998)
Home Textiles (1998)
Wine (1998)
Coffee (1998)
Sportswear (1998)
Waste Treatment Equipment (1998)
In-home Health Care Services (1998)
Medical Equipment (1998)
Communication Equipment (1998)
Personal Computer Software (1998)
Beer (1998)
Fruit Drinks (1998)
Gardening Products (1999)
Environmental Measurement and Analysis Instrument (1999)
Glassware (1999)
Internet Service Providers (1999)
Mail Order Market (1999)
Cheese (1999)
Fresh Vegetables
Jam & Canned Fruit (1999)
Cosmetic (2000)
Wooden Building Materials (2000)
Children’s Wear (2000)
Electronic Commerce (2000)
Franchise Business (2000)
Swim Wears (2000)
Mineral Water (2000)
Black Tea (2000)
Processed Meat (2000)
Frozen Vegetables (2000)
Natural Honey (2000)
Mushrooms (2000)
Language Instructional Materials (2000)
Down - Filled “Futon” Bedding (2000)
Biotechnology - related Products (2000)
Retail Business (2000)
Business-to-Business Electronic Commerce (2000)
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
Senior Citizen - related Businesses (2000)
Herbal Products (2001)
Confectioneries and Snack Foods (2001)
Electronic Commerce ; Books and Music CDs (2001)
Wine (2001)
Household Products (2001)
Spices (2001)
Nuts (2001)
Cut flowers (2001)
Businesses Related to the Defined Contribution Pension (2001)
Wind Power Generation - related Products (2002)
Electronic Component (2002)
Oral care Products (2002)
Canned Fish and Seafood Products (2002)
Seeds and Seedlings (2002)
Software Products-Business Packages- (2003)
The Staffing and Placement Business (2003)
Food Service Industry (2003)
Assistive Technology Devices (2003)
Medical Equipment (2004)
Japan’s Investment Environment: Facility Services (2004)
Biomedical (2004)
Retail Business (2004)
Engineering Software Products (2004)
Mail-Order Sales (2005)
Hotels (2005)
Automobile Assembly Parts (2005)
(For U.S.circulation.) This material is disseminated by JETRO offices at 1221 Avenue of the
Americas, New York, NY; 401 North Michigan Avenue, Chicago, IL; 777 S. Figueroa Street, Los
Angeles, CA; 1221 McKinney, Houston, TX; 245 Peachtree Center Avenue, Atlanta, GA; and 1200
17th Street, Denver, CO, which are all registered under the Foreign Agents Registration Act as agents
of Japan External Trade Organization, Tokyo, Japan.
This material is filed with the Department of Justice, where the required registration
statement is available for public inspection. Registration does not indicate approval of the contents of
the material by the United States Government.