Advice for Market Entry > Trade Show in Japan

Advice for Market Entry

(1) Surveys on Market and Consumer Orientation

Compared with other countries, Japanese consumers tend to pay more attention to details such as the quality of products, stores and service, as well as design, rather than focusing solely on price. They tend to demand perfect products, and this can result in mounting costs for the required quality management. However, Japanese consumers can be not pleased without paying attention to quality. However, depending on the product or industry, there are cases where low prices are focused on more than quality and design, and when entering the market, full and detailed market research can not be forgone.

In general, real estate costs are high in Japan, as are freight costs such as fuel and highway charges. As people and buildings are highly concentrated within a small land area, it is difficult to make deliveries efficiently using container vehicles, and efficiency is limited. Further, space is limited at retail stores and stockyards, meaning that stores can not hold much stock.

This means that establishing a just-in-time delivery system capable of making small and frequent deliveries is an important task. When entering the market, it is important to understand these market conditions and take measures to account for them.

(2) Importance of Selecting Good Partners

Retail is a business where the needs of both the consumer and trade partners must be met flexibly. Further, attention must also be paid to the surrounding environment.

When entering the Japanese market, it is important to choose a partner with a good knowledge of Japanese market conditions and trade practices, etc., and one that display leadership qualities in business and negotiations with trade partners. It is also critical to select a partner with knowledge of international product procurement and one that can give advice when problems arise with consumers or partners.

Possible partners in the Japanese market include: retailers with their understanding of consumer preferences and superior ability to create product lineups and provide detailed services; wholesalers with their wide dealings with retailers and superior distribution capabilities; and general trading firms with their financial muscle and global network, know-how of import restrictions, and wide dealing domestically. Also management from other industries such as consulting firms with their vast experience and well-developed networks, or firms and individuals from the restaurant and service industries should be considered.

However, there is the possibility that expansion in Japan will be restricted by the partner. For example, doing business with firms that can be viewed as rivals of your partner firm would be difficult. It must also be well noted that there is the possibility that distribution channels themselves may be restricted.

For example, if partnering with a retailer, store space at existing stores can be used, and consumers may accept your products more based on the reputation of the retailer, but products can not be sold to rival retailers and stores can not be opened in rival commercial facilities. When partnering with wholesalers, it is not often possible to sell products or open stores that would be in direct competition with the wholesaler’s business partners (both manufacturers and retailers). In the case of general trading firms, while they have superior financial power and wider retail outlets can be secured in comparison with retailers and wholesalers, they can at times be not as adept at managing product lineups and dealing with consumers as firms from other industries.

Understanding the various merits and demerits of different partners and finding a partner that matches your form of market entry and business models is not easy, but there is a wealth of information available including statistical data and company information created by national and local government, other public bodies and various research organizations. In addition to published material, in recent years a great deal of information is also available on the Internet. It is important to select a partner based on this type of information and expert opinion.

(3) Meeting Legal Requirements

When selling or importing pharmaceutical, cosmetics or foods, standards laid down by the Pharmaceutical Affairs Law and the Food Sanitation Law must be met. Also, meeting legal restrictions established to protect consumers including provisions for fair competition and the Consumer Contract Act is also important.

In the retail business with its large horizons, there can be many legal restrictions and systems that impact on business, and meeting all these requirements can become complex. It can be necessary to employ the services of advisors with a wide knowledge of procedures, and consultant specializing in certain areas.

It is possible to seek advice from government offices on these issues. Further, it can be effective to utilize information from public organizations such as JETRO and industry organizations in relevant fields.

(4) Understanding Trade and Business Practices

While trade practices in Japan are steadily beginning to conform to global standards, there are still certain aspects particular to Japan.

In business deals, there is a general trend for understanding and trust between partners to be emphasized. Further, depending on changes in conditions, it is characteristic for the conditions laid out in transactions to change.

Further, while new entry can be difficult, once a relationship has been established, it is normal for such a relationship to be kept going for a long time, and stable business relationships can be expected. It is also necessary to understand that deals are based not on the profitability of one deal, but on securing advantages for both parties from a much longer point of view.

(5) How to Approach Japanese Consumers

Many points can be given pertaining to the high standards and level of detail demanded by Japanese consumers. It is imperative that prospective market entrants understand and deal with the points outlined below.

1. Freshness
   Japanese consumers place high demands on freshness of products not only for fresh
   foods. They place emphasis the freshness and cleanliness of products based on how they look.
   Consumers tend to dislike fashion and miscellaneous goods that are slightly out of fashion, and older products that have been in stores for a long time. It is important to make efforts to keep a fresh lineup of products in stores at all times.
   Also, Japanese consumers often look for variations on products, and require different styles, sizes, brands and grades even for the same product. This point must also be noted.
   
   
2. Quality
   Another characteristic of Japanese consumers is the emphasis they place on product
   quality. It is necessary that not only products, but also their packaging be perfect. If containers are scratched or damaged then the product loses its value. To ensure that packing and containers for all products is free of defects requires considerable cost, but even if costs mount, quality must be put first in Japan.
   
   
3. Brand Consciousness
   Japanese consumers have high opinions, as well as high expectations of brand
   products. In particular national brands of well-known manufacturers are highly trusted, and often prices can not be freely set, and sales methods and retail channels are limited for these products. Further, consumers’ tendency to buy manufacturers branded products is one factor that can present the development and spread of retailers’ own private brands.
   
   
4. Emphasis on Non-Price Factors
   Overwhelming low prices alone are not enough to be accepted by Japanese consumers.
   In addition to the quality and freshness factors mentioned above, other factors such as the hopping environment (store interior), diverse product lineup and services are also important.
   
   
5. Information, Media Sensitivity
   On a whole, Japanese consumers can act very sensitively on information. In current
   conditions where information sources are diversifying, they have the ability to utilize information from different sources appropriately, but they also place a high level of trust in mass media. While they of course do not take everything the media says on faith, they have a tendency to evaluate and select products, brands and stores based on media information. In order to be accepted by consumers, it is necessary to carry out a timely and focused marketing campaign that leverages media qualities.