10 Things to Know About Selling in the Japanese Market

Kevin Lamb

April 22, 2020

Japan is no small fish in the economic pond: it has the third-largest economy and the fourth-largest ecommerce market in the world.

Japan’s GDP is almost four times the global average, and the Japanese ecommerce market, which is worth over USD 160 billion, has grown at an impressive 9% every year. Research shows that 70% of Japanese consumers are shopping online, making it an attractive market for online merchants.

So why is Japan so frequently overlooked by sellers?

Historically, the Japanese market has been surrounded by misconceptions and pessimism in western countries because, while having a big economy, it also has relatively low-growth rates and low inflation, as many economies do. The online market in Japan is a unique one with different barriers for entry and different rules than those most sellers are used to playing by. While there are some challenges, however, there are also many opportunities for merchants.

Here are ten things you should know about the Japanese ecommerce market.

1. Over one-third of all online retail transactions in Japan happen on three platforms: Rakuten, Amazon, and Yahoo! Shopping.

Nearly 100 million users in Japan use these three sites to do their online shopping. This is great for U.S. merchants because these sites are easy to access and a great low-risk way to enter the Japanese market.

Rakuten on its own has over 100 million members and very strong fashion and food categories. Just like on Amazon, sellers can set up a storefront, advertise product listings, and use coupons to sell products.

2. The clothing category leads the market in Japan.

Over 52% of the total ecommerce expenditure in Japan is for goods, and clothing is the most popular category. The market size for clothing grew by 7.6% between 2016 and 2017 alone.

Food and beverages are also growing steadily in the country.

3. Japanese consumers spend more on luxury goods, leisure, and travel during the summertime.

Japanese firms are known to give yearly summer bonuses, and the average bonus in Japan is $3,000. As a result, spending on leisure, travel, and other luxury goods in the country goes up.

4. Japan has one of the lowest cross-border shopping rates.

While 54% of U.S. consumers shop overseas, only 10% of Japanese consumers do. That makes the Japanese market tricky to break into but also a market with low competition and therefore lots of opportunity.

5. Transparency and loyalty matter to Japanese consumers.

Japanese consumers are careful to purchase products that they have plenty of information about beforehand. That means the way your website and listings are displayed is very important.

One challenge with Japan is that consumers are also very loyal to the platform they most frequently purchase things from. That may make it hard to cement your brand in the market initially, but pay off in the long game with the right strategy.

6. The Japanese ecommerce market favors American merchants.

If you’re a U.S. merchant, it will be much easier to set up an account on Rakuten and Yahoo! Shopping than if you operate outside of the U.S.

7. Japan’s sales tax has increased from 8 to 10 percent in 2019, creating some challenges for sellers.

The latest data shows that Japan’s GDP has been rapidly contracting due to the boost in the sales tax: it’s contracted by 6 percent. Concerns about the coronavirus have also made it difficult in recent weeks to sell there.

Ecommerce has seen some boons as a result, however: consumers who make electronic payments for smaller retailers can get a 5 percent rebate that compensates for the 2 percent tax hike.

8. Automation is one of the easier ways to get your products into Japan.

It can be tricky and time-consuming to set up an ecommerce site because you have to set up your store on a Japanese domain with a local payment gateway. Managing returns and shipping directly is also more difficult.

Attaching your store to Amazon’s FBA automates the fulfillment process for you and makes it easier. Through Amazon’s FBA, brands can cut the time and cost of shipping to Japan.

Using Amazon FBA in Japan can help your Japanese ecommerce business

Note that if you fulfill through Amazon, you must have a Japanese importer of record (IoR) to handle customs as well as provide customer support in Japanese.

9. Language matters a lot in the Japanese market.

In addition to the Roman alphabet, the Japanese language has three different writing systems. That means there are a variety of different ways keywords can be used by brands selling to Japanese consumers on ecommerce platforms.

To operate well in the Japanese market, it’s important to work with native speakers with a deep understanding of the language so that the keywords you use are appropriate and used correctly, and so you can establish trust.

10. Japan has its challenges, but it’s a great place to do business.

Japan ranks higher than countries like France, China, Spain, and Switzerland on the World Bank’s Ease of Doing Business Index, and it does well in categories like starting a new business.

While there’s a learning curve for operating in the Japanese market and some obstacles, it has just the kind of consumers you’d want for your ecommerce business. Pattern’s international ecommerce consultants can help get you there.

Interested in learning more about selling internationally and on more ecommerce platforms? Contact us today.

Explore Our Ecommerce Resource Library

Find relevant content to accelerate your ecommerce business. Stay on top of industry trends and best practices.

Improve Your Amazon Advertising Strategy With One Simple Metric: True RoAS
Blog

Improve Your Amazon Advertising Strategy With One Simple Metric: True RoAS

The purpose of advertising on Amazon is simple: increase traffic and conversions. But the approach to get those conversions is not always so simple. Your Amazon advertising strategy is based on current ad data and performance results such as your return on ad spend (RoAS). 

At a minimum, your RoAS number tells you how well you’re maximizing your ad spend. The problem is the RoAS you’re getting from Amazon or an advertising agency isn’t always accurate. 

As a top 3P seller on Amazon, Pattern helps brands improve their Amazon advertising strategy and results by providing them with one simple metric: true RoAS.

Understanding True RoAS

To understand why true RoAS is helpful to brands, you need to understand how Amazon and other agencies calculate and present your RoAS.

The key to growing your brand and maximizing your ad spend is to drive incremental traffic, rather than cannibalizing what has already taken place. For example, if you are selling probiotics, and paying for sponsored ads to win the keyword “probiotics for women”, but also organically ranked in the top results with the same keyword, that’s cannibalization. The RoAS score you would receive from Amazon includes that level of cannibalism, which inflates the number, causing you to pay more on ad spend. The best ads drive incremental growth instead of cannibalizing organic sales. 

At Pattern, we’ve created the acceleration software to make sure brands are getting their “true RoAS”. Pattern’s patented tool applies artificial intelligence to advertising to maximize incremental growth or true return on investment. 

Our software helps brands optimize their efforts by providing live and updated information on where your brand is not organically ranking, and what you should be paying for. If your ranking improves in one area, the ad spend will automatically decrease for those words or phrases until the software detects a drop in ranking, signaling that your ad spend should go up again. This dynamic monitoring of ad spend will help you maximize incremental growth and improve your RoAS.

Improve Your Amazon Ad Strategy with Pattern

Knowing your true RoAS is key to improving your Amazon performance. Advertising agencies and marketplace account managers often give you an inaccurate RoAS ratio or value, which only incentivizes you to spend more on advertising, ultimately increasing revenue for the agencies and/or marketplaces.

At Pattern, a 3P partner on Amazon and other marketplaces, we view our brands just as that: a partnership. When you win, we win. You succeed on Amazon by maximizing your ad spend and we have the data and resources to help you do just that. Accurate, transparent data and reporting will help improve your advertising strategy to drive more traffic to and conversions on your products. 

Ready to finally get your true RoAS? Contact us.   

Slowing Inflation is Music to Consumers’ Ears
Blog

Slowing Inflation is Music to Consumers’ Ears

**Instrument Pricing Changes Tune Amid Record Inflation** Compared to 2022, consumers should expect to pay more for musical instruments, but the rate of inflation shows signs of slowing. **The backstory:** America’s most popular musical instruments saw a notable price increase in 2022 compared to 2021, but the rate of inflation eased in Q4 ’22. **Why it matters:** Slowing inflation within this product category could indicate economic pressures like increased demand, rising labor costs, and supply chain disruptions are easing across the consumer landscape. **What we’re seeing:** The average cost of musical instruments increased 7.5% from 2021 – 2022; however, when analyzing individual increases year over year, some instruments saw price increases as high as 21%. <iframe title="YOY Price Change for Instruments — 2022 vs. 2021" aria-label="Bar Chart" id="datawrapper-chart-02Lwk" src="https://datawrapper.dwcdn.net/02Lwk/2/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="379" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}(); </script> * Trombones experienced a 21.73% increase compared to 2021 * Trumpets +20.08% * Flutes +18.6% * Recorders +16.13% * Saxophones +13.63% * Clarinets +10.55% * Drums +5.41% * Ukuleles +5.17% **However:** Inflation among these same instruments was significantly less in Q4 ’22 compared to Q4 ’21. In some cases, prices decreased from Q4 ’21 – Q4 ‘22: <iframe title="Price Change for Instruments — Q4 2022 vs. Q4 2021" aria-label="Bar Chart" id="datawrapper-chart-6X6GZ" src="https://datawrapper.dwcdn.net/6X6GZ/2/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="379" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}(); </script> * Trombones +11.23% * Flutes +10.41% * Saxophones +5.94% * Clarinets +5.59% * Trumpets +3.10% * Recorders +2.85% * Drums -2.59% * Ukuleles -8.46% **Moreover:** Certain instruments saw inflation reverse in 2022. On average, prices for melodicas, guitars, and violas saw their prices decrease by 4.41%, 3.19%, and 0.97%, respectively. <iframe title="YOY Price Change for Instruments — 2022 vs. 2021" aria-label="Bar Chart" id="datawrapper-chart-0Tefk" src="https://datawrapper.dwcdn.net/0Tefk/3/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="259" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}(); </script> **Diving Deeper:** Inflation was more significant when comparing Q4 ’21 to Q4 ’20 than when comparing Q4 ’22 to Q4 ’21, indicating a slowing down of price increases for consumers. <iframe title="YOY Q4 Price Change for Instruments — 2020 – 2022" aria-label="Stacked Bars" id="datawrapper-chart-p6iqt" src="https://datawrapper.dwcdn.net/p6iqt/1/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="206" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}(); </script> * In Q4 ’21, average prices for all instruments were up 8.89% compared to Q4 ’20. * When comparing Q4 ’22 to Q4 ’21, the average price for all instruments only increased by 2.65%. **The takeaway:** While consumers should expect to pay higher prices for instruments this year, overall inflation impact within this product category appears to be slowing down. With National Ukulele Day coming up on February 2, now is a great time for ecommerce brands to take advantage of slowing economic worries and reach new consumers. * Want Pattern’s data science team to power your brand with consumer insights like these? Contact us to [request more information](https://pattern.com/contact-us/) today.

Slowing Inflation? What Musical Instrument Pricing Tells Us
Blog

Slowing Inflation? What Musical Instrument Pricing Tells Us

It’s safe to say consumers and brands alike are eager for a change to the pattern of rising inflation, steadily increasing in many ecommerce categories . Pattern’s internal team’s data scientists analysis of instrument pricing shows a glimmer of hope that inflation may be slowing, which would be great news for brands selling online.

At Pattern, we’re interested in and monitoring trends and news related to pricing since price is a key factor in a brand’s profitability (as explained in the Ecommerce Equation). When brands are able to optimize their price, conversions, and traffic, they can optimize their profitability. And profitability leads to better allocation of resources, better brand control, and gives leaders the ability to expand their presence to new markets worldwide.

YoY Instrument Pricing Increased at a Slower Pace

When analyzing the pricing changes of instruments from 2021 to 2022, our teams found that prices increased, but at a slower rate than from 2020 to 2021.

As shown below, the year over year Q4 changes show quite a lower rate of increase.

Inflation Improvements Raise Profitability

Because inflation impacts online shopping behaviors, lower inflation can lead to better overall profitability for brands. This idea, of course, is nuanced, but Pattern’s Ecommerce Equation can help illustrate the general principle.

When inflation rises, consumers change their spending habits. Shoppers spend more time researching products, forego premium, higher-priced brands, and buy more in bulk. Brands tend to see a loss of loyalty as they’re forced to raise prices.

Price is a key variable in the Ecommerce Equation: price x conversion x traffic = profitability. As inflation lowers, brands can expect better performance in all of these areas—more traffic as spending habits return to normal, higher conversion from returning customers, and price that better fits consumer demand. As inflation lowers and these variables stabilize, brands will see profitability increase.

Raise Your Profitability with Pattern

As an ecommerce accelerator, Pattern is obsessed with gathering data that helps our brand partners succeed. We’ve created best-in-class technology, models, and analytics to understand changes on the horizon and inform our decisions. With an incredible team of data obsessed Pattern employees, we see what makes the difference in truly great ecommerce performance and apply those learnings for brand partners. 

Ready to improve your profitability? Contact us here.