The emerging possibilities of e-commerce in Japan
[Editor's note: Online sales in Japan and China were a topic of discussion in the June 23 SeafoodSource webinar, “Asia Rising: Discovering Seafood Trends and Opportunities Beyond the Headlines," which is available in its entirety for no charge to all SeafoodSource readers. This commentary expands on Japan’s online market for seafood.]
The story of seafood in Japan is intertwined with the history of the country itself, and perhaps more so than many other places, seafood holds a sacred and highly traditional role in Japanese society. The importance of that role is seen in its consumption totals. Japan, as a country, eats more seafood than any other country on Earth besides China, which is more than 10 times Japan’s size.
Perhaps due to that tradition, Japan was slow to adopt the concept of buying and selling seafood online. A 2001 study, “The Impact of e-Commerce on the Japanese Raw Fish Supply Chain” (Watanabe and Shuster), found that at that time, Japan’s high hopes for e-commerce had not yet been realized, and that there were obstacles to rapid growth.
In the study, two groups of internet retailers selling seafood were identified. The first group, small e-commerce companies, were not innovative entrepreneurs as the researchers had expected. Instead, they were small- to medium-sized seafood distributors that were being displaced as supermarkets began cutting out middlemen and buying direct. They suffered channel conflict, in that they could not price aggressively online for fear of alienating their remaining retailer customers. Further, their internet sales were only about one percent of their total sales, or USD 80,000 (EUR 71,649) on average. Most products were expensive. Rakuten Ichiba, an online web-mall, which opened in 1997, was their main portal and delivery was within two days, mainly using Yamato Transport Co., Ltd., a nationwide parcel delivery company based in Tokyo, offering both chilled and frozen service.
Large supermarket chains, on the other hand, had free-standing websites and offered local delivery using their own trucks of foods sourced from their brick-and-mortar stores. However, these shops found that their online sales were cannibalizing their store business. They entered the market hoping to find new young tech-savvy customers, but found that most were existing customers who switched to online purchasing – busy working women without time to shop, and the elderly, who have difficulty carrying bags of rice or other heavy or bulky goods.
This older research suggested that e-commerce seafood sales had not lived up to expectations, and were not likely to do so soon. Total online sales in 2000 amounted to USD 6.6 billion (EUR 5.91 billion). While that may seem like a large sum of money, it is a paltry sum compared to the present.
Fast forward to 2015, and according to “Ecommerce in Japan: Marketplaces Dominate” (Gagan Mehra, 2016), Japan’s e-commerce market generated USD 80 billion (EUR 71.65 billion) in sales in 2015.
The three big e-commerce sites in Japan, in order of market share, are Rakuten Ichiba, Amazon Japan, and Yahoo Japan Shopping. These three sites account for roughly half of all Japanese annual e-commerce revenue. However, Rakuten Ichiba appears to be much stronger in the food sector, especially as compared with Amazon, which seems to shy away from refrigerated and frozen products. Rakuten is still, as in 2001, dominant. Mehra writes that seven of 10 Japanese consumers – approximately 95 million users – are registered on Rakuten’s site.
Payment methods in Japan differ somewhat from those in the U.S.A. While credit cards and cash-on-delivery are available, bank transfers (typically done at a bank ATM in Japan) and convenience store counter payment are also popular. Shipping is still largely by Yamato within two days, with an extra day (and typically extra charge) for Hokkaido and Okinawa. Free delivery for larger orders is typical, and loyalty point programs and promotions are popular. While returns are rare, Japanese-speaking customer service is a requirement.
A 2014 report by the U.S. Agricultural Trade Office in Osaka, “E-Commerce for Foods in Japan” says that to enter the e-commerce market, imported products generally must be represented by an importer first. It suggests that U.S. exporters should partner with an existing online retailer. The market share for food vendors on Rakuten, out of all online food sales, was as much as 49.2 percent in 2012.
The most popular Rakuten items are crab, squid, sea urchin, salmon roe, shrimp and prawns, eels, shellfish, bonito, herring roe, globefish, octopus, sea bream, cod roe, salmon, tuna, conger eel and spicy cod roe. Less expensive items like mackerel, Pacific saury, smelt, codfish, whitebait, horse mackerel, sardines, Okhostk Atka mackerel, may be differentiated by special processing or high quality.
An advantage of Rakuten’s site is that vendors can use several webpages to explain their products in detail. For example, Kobe Crab Co., explains the difference between bairdi and opilio crabs.